SUBJECT TO COMPLETION, DATED DECEMBER 5, 2000
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated May 13, 1999)
Structured Products Corp., the Depositor
1,200,000 Credit-Enhanced Corporate-Backed Trust Securities
(Credit-Enhanced CorTS(sm)) Certificates
(principal amount $25 per Certificate)
issued by
Credit-Enhanced CorTS(sm) Trust For Aon Capital A, the Trust
relating to
Aon Capital A 8.205% Capital Securities
---------------------
The information in this prospectus supplement is not complete and may be
changed. A registration statement relating to these securities has been filed
with the Securities and Exchange Commission and declared effective. This
preliminary prospectus supplement and the accompanying prospectus are not an
offer to sell these securities and are not a solicitation to buy these
securities in any state where the offer or sale is not permitted.
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
assets of the Trust will consist of (i) $30,000,000 8.205% Capital Securities
issued by Aon Capital A and all future payments of interest, (ii) a single
payment of principal due on the underlying Capital Securities and (iii) for the
period from the Closing Date to and including December 31, 2001 (or an earlier
date as described in this Prospectus Supplement), $600,000,000 in cash or
eligible investments. The sole assets of Aon Capital A are the 8.205% Junior
Subordinated Deferrable Interest Debentures issued by Aon Corporation.
The Certificates will evidence the right to receive semi-annual interest
payments on the principal amount of your Certificates at an interest rate of
8.205% per annum, the right to receive your pro rata amount of a single payment
of principal of $30,000,000 due on January 1, 2027 or on such earlier date as
described in this Prospectus Supplement and the right to receive an additional
one-time payment of $0.50 per Certificate in the event the rating of the
underlying Capital Securities is downgraded below "A-" by Standard & Poor's
Ratings Services or below "a3" (if the underlying Capital Securities continue to
be rated by Moody's "preferred" ratings scale) or below "Baa1" (if the
underlying Capital Securities are then rated on Moody's "debt" ratings scale) by
Moody's Investors Service, Inc., in each case on or prior to December 31, 2001.
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 Capital Securities.
You should fully consider the risk factors on page S-7 in this Prospectus
Supplement prior to investing in the Certificates.
It is anticipated that by the Closing Date, the Certificates will have
been 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.
---------------------
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.
Per
Certificate Total
Public offering price...................... $25 $30,000,000
Underwriting discount...................... $0.7875 $945,000
Proceeds to Trust (before expenses)........ $24.2125 $29,055,000
The Underwriters expect to deliver your Certificates in book-entry form
only through The Depository Trust Company on or about December __, 2000.
SM "CorTS" is a service mark of Salomon Smith Barney Inc.
---------------------
Salomon Smith Barney
First Union Securities, Inc.
Prudential Securities
---------------------
December __, 2000
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement or the Prospectus in connection with the offer made by
this Prospectus Supplement and the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Underwriters. This Prospectus Supplement and the Prospectus do not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus
Supplement or the accompanying Prospectus nor any sale made hereunder and
thereunder shall, under any circumstances, create any implication that the
information contained herein and in the accompanying Prospectus is correct as of
any time subsequent to the date hereof; however, if any material change occurs
while this Prospectus Supplement or the accompanying Prospectus is required by
law to be delivered, this Prospectus Supplement or the accompanying Prospectus
will be amended or supplemented accordingly.
TABLE OF CONTENTS
Prospectus Supplement
Page
Information About Certificates..................................S-2
Summary.........................................................S-3
Risk Factors....................................................S-7
Formation of the Trust..........................................S-9
Use of Proceeds.................................................S-9
The Underlying Issuer...........................................S-9
Description of the Underlying Capital Securities...............S-10
Description of the Certificates................................S-11
Description of the Trust Agreement.............................S-15
Certain Federal Income Tax Considerations......................S-18
Certain ERISA Considerations...................................S-18
Underwriting...................................................S-20
Ratings........................................................S-21
Legal Opinions.................................................S-21
Index of Terms.................................................S-22
Appendix A--Description of the Underlying Capital Securities....A-1
Prospectus
Prospectus Supplement.............................................1
Available Information.............................................1
Incorporation of Certain Documents by Reference...................1
Reports to Certificateholders.....................................2
Important Currency Information....................................2
Risk Factors......................................................3
The Company.......................................................8
Use of Proceeds...................................................8
Formation of the Trust............................................8
Maturity and Yield Considerations.................................9
Description of Certificates......................................10
Description of Deposited Assets and Credit Support...............28
Description of Trust Agreement..................................35
Limitations on Issuance of Bearer Certificates...................46
Currency Risks...................................................47
Certain Federal Income Tax Considerations........................50
Plan of Distribution.............................................53
Legal Opinions...................................................55
Index of Terms...................................................56
S-1
<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 accompanying 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 accompanying Prospectus, you should rely on the information contained in
this Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The Table of Contents for this Prospectus
Supplement and the accompanying 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-22 in this document and beginning
on page 56 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 accompanying 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 Securities and Exchange 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 accompanying Prospectus. Neither the Depositor nor the
Underwriters have 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 Underwriters are 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 accompanying 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 Credit-Enhanced CorTS(sm) Trust
For Aon Capital A. The assets of the Trust will consist of the Underlying
Capital Securities, which are $30,000,000 8.205% Capital Securities due
January 1, 2027 issued by Aon Capital A, the Underlying Issuer, payments of
principal and interest made on the Underlying Capital Securities as
discussed in more detail under "Description of the Certificates" herein
and, for the period from the Closing Date to December 31, 2001 (or an
earlier date as described in this Prospectus Supplement), $600,000 in cash
or eligible investments. The Underlying Issuer is a Delaware business trust
formed for the exclusive purposes of issuing the Underlying Capital
Securities and investing the proceeds thereof in the 8.205% Junior
Subordinated Deferrable Interest Debentures issued by Aon Corporation. Aon
Corporation has guaranteed the payment of distributions on the Underlying
Capital Securities but only to the extent that the Underlying Issuer has
funds legally and immediately available therefor.
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:
o periodic payments of interest on the principal amount of your
Certificates accruing from the closing date at a rate of 8.205% per
annum, on each January 1 and July 1 (absent the occurrence of a
deferral of interest payments by the Underlying Issuer), commencing on
January 1, 2001, until the principal amount of your Certificates is
paid in full as described below;
o the pro rata share for your Certificates of a single payment of
principal of $30,000,000. It is expected that you will receive your
pro rata
S-3
<PAGE>
share of the principal payment on January 1, 2027, the maturity date
of the Underlying Capital Securities, or on such earlier date on which
the Trust redeems your Certificates as described under "Description of
the Certificates-Redemption of Certificates Upon Redemption of
Underlying Capital Securities" herein; and
o an additional one-time payment of $0.50 per Certificate in the event
the rating of the Underlying Capital Securities is downgraded below
"A-" by Standard & Poor's Ratings Services or below "a3" (if the
Underlying Capital Securities continue to be rated on Moody's
"preferred" ratings scale) or below "Baa1" (if the Underlying Capital
Securities are then rated on Moody's "debt" ratings scale) by Moody's
Investors Service, Inc., in each case on or prior to December 31,
2001.
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.
Redemption of the Certificates............ The Underlying Issuer has the
right to redeem the Underlying Capital Securities in whole but not in
part at any time if there is more than an insubstantial risk that
certain adverse tax events may occur with respect to the Underlying
Issuer and Aon Corporation or that a determination could be made that
the Underlying Issuer is an Investment Company under the Investment
Company Act of 1940, as amended, at an amount equal to the Event
Redemption Price (as defined herein).
If the Underlying Capital Securities are redeemed, all of the
Certificates will be redeemed for an amount equal to the Event
Redemption Price (which will be at least equal to the principal amount
of the Certificates plus accrued interest to the date of redemption).
See "Description of the Certificates--Redemption of Certificates Upon
Redemption of Underlying Capital Securities."
S-4
<PAGE>
The Underlying Issuer is not required to redeem o the Underlying
Capital Securities. Therefore, there can be no assurance that the
Trust will repurchase your Certificates prior to January 1, 2027.
Should the Trust redeem your Certificates prior to January 1, 2027,
the Trustee will notify you by mail at least 15 days before such
redemption date.
Deferral of Interest............ Interest payments on the Certificates will
be deferred if, and during the period that, Aon Corporation elects to
defer interest payments on the 8.205% Junior Subordinated Deferrable
Interest Debentures.
Underlying Capital Securities......... Aon Capital A 8.205% Capital
Securities.
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, New York 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....... For information reporting purposes, absent the
occurrence of a deferral of interest payments by the Underlying
Issuer, interest payments on the Underlying Capital Securities 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). A Credit Event Payment
(as defined herein) will not be taxable but will reduce a holder's
basis in the Certificates. See "Certain Federal Income Tax
Considerations" in this Prospectus Supplement and in the accompanying
Prospectus.
ERISAConsiderations..... An "employee benefit plan" subject to the
Employee Retirement Income Security Act of 1974,
S-5
<PAGE>
as amended, or a "plan" subject to Section 4975 of the Internal
Revenue Code of 1986, as amended, 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.
Listing........... It is anticipated that by the Closing Date the
Certificates will have been 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 Capital Securities by each
of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services. As of the date of this Prospectus Supplement, the Underlying
Capital Securities are rated "a3" and "A-" by Moody's Investors
Service, Inc. and Standard & Poor's Ratings Services, respectively.
S-6
<PAGE>
RISK FACTORS
You should consider the following factors in deciding whether to purchase the
Certificates:
1. No Investigation of the Underlying Capital Securities, the Underlying
Issuer or Aon Corporation has been made by the Depositor, Underwriters
or Trustee. None of the Depositor, the Underwriters or the Trustee has
made, or will make, any investigation of the business condition,
financial or otherwise, of the Underlying Issuer or Aon Corporation,
or verify any reports or information filed by the Underlying Issuer or
Aon Corporation 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 and Aon Corporation. See "The Underlying Issuer," "Description
of the Underlying Capital Securities," and "Appendix A-Description of
Underlying Capital Securities" herein.
2. Underlying Issuer is the Only Payment Source. The payments made by the
Underlying Issuer on the Underlying Capital Securities are the only
source of payment for your Certificates. Aon Corporation is subject to
laws permitting bankruptcy, moratorium, reorganization or other
actions; should Aon Corporation 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
Capital Securities by the Underlying Issuer, you will bear the risk of
such nonpayment. See "Description of the Certificates--Recovery on
Underlying Capital Securities Following Payment Default or
Acceleration" herein.
3. Certain Payments to the Depositor. On January 1, 2001, as payment of
the balance of the purchase price for the Underlying Capital
Securities, the Trustee will pay to the Depositor the amount of the
interest accrued on the Underlying Capital Securities from July 1,
2000 to but not including the closing date. In the event a payment
default or acceleration on the Underlying Capital Securities occurs on
or prior to January 1, 2001 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 Capital Securities. See "Description of the
Certificates--Recovery on Underlying Capital Securities Following
Payment Default or Acceleration" herein.
4. Distributions on the Underlying Capital Securities, and Consequently
the Certificates, may be Deferred. Distributions on the Underlying
Capital Securities, and consequently the Certificates, may be deferred
by the Underlying Issuer in the event Aon Corporation defers payments
on its 8.205% Junior Subordinated Deferrable Interest Debentures. The
deferral may be for up to ten (10) consecutive semiannual interest
distribution dates provided that such extension period may not extend
beyond January 1, 2027. During any extension period, interest on the
8.205% Junior Subordinated Deferrable Interest Debentures, and
consequently the Certificates, will continue to accrue (and the amount
of distributions to which holders of such debentures, and consequently
the Certificateholders, will continue to accumulate) at the rate of
8.205% per annum, compounded semi-annually. See "Description of the
Certificates--Distributions" herein.
5. Possible Tax and Market Price Consequences of a Deferral of
Distributions. Should Aon Corporation exercise its right to defer
payments of interest on the 8.205% Junior
S-7
<PAGE>
Subordinated Deferrable Interest Debentures, each holder of the
Underlying Capital Securities, and thus each holder of the
Certificates, will be required to accrue income (as original issue
discount) in respect of the deferred interest allocable to its
Underlying Capital Securities or Certificates, as the case may be, for
United States federal income tax purposes, which will be allocated but
not distributed to it. As a result, each such holder of a Certificate
will recognize income for United States federal income tax purposes in
advance of the receipt of cash and will not receive the cash related
to such income from the Underlying Issuer if the holder disposes of
its Certificates prior to the record date for the payment of
distributions thereafter. See "Certain Federal Income Tax
Consequences" herein.
Should Aon Corporation elect to exercise its right to defer payments
of interest on the 8.205% Junior Subordinated Deferrable Interest
Debentures in the future, the market price of the Underlying Capital
Securities, and consequently the Certificates, is likely to be
adversely affected. A holder that disposes of its Certificates during
a deferral period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Certificates. In
addition, merely as a result of the existence of Aon Corporation's
right to defer payments of interest on the 8.205% Junior Subordinated
Deferrable Interest Debentures, the market price of the Underlying
Capital Securities, and consequently the Certificates, may be more
volatile than the market prices of other securities that are not
subject to such deferrals.
6. The 8.205% Junior Subordinated Deferrable Interest Debentures are
Subordinated to other Obligations of Aon Corporation, and Aon
Corporation's Guarantee of Payments due on the Underlying Capital
Securities is Subordinated to other Obligations of Aon Corporation.
The obligations of Aon Corporation under the 8.205% Junior
Subordinated Deferrable Interest Debentures will be unsecured and rank
subordinate and junior in right of payment to all senior indebtedness
of Aon Corporation. Aon Corporation's guarantee of the payments due on
the Underlying Capital Securities will be unsecured and rank
subordinate and junior in right of payment to all senior indebtedness
of Aon Corporation. There is no limitation on the amount of secured or
unsecured debt, including senior indebtedness, that may be incurred by
Aon Corporation or by any of its subsidiaries. The ability of the
Underlying Issuer to pay amounts due on the Underlying Capital
Securities is solely dependent upon Aon Corporation making payments on
the 8.205% Junior Subordinated Deferrable Interest Debentures as and
when required. See "Description of the Underlying Capital Securities"
herein.
7. The Underlying Capital Securities may be Redeemed by the Underlying
Issuer in the Event Certain Adverse Tax Events or an Investment
Company Event occur. If a Tax Event or an Investment Company Event
(each as defined herein) occurs and is continuing, then within 90 days
following the occurrence of such Tax Event or Investment Company
Event, Aon Corporation will have the right to prepay the 8.205% Junior
Subordinated Deferrable Interest Debentures in whole but not in part
and therefore cause a mandatory redemption of the Underlying Capital
Securities, and consequently the Certificates, at the Event Redemption
Price (as defined herein). See "Description of the
Certificates--Redemption of Certificates Upon Redemption of Underlying
Capital Securities" herein.
8. Moody's Investors Service, Inc. may Change its Ratings Criteria which
Could Result in a Reassignment of Moody's Rating of the Underlying
Capital Securities. Moody's Investors Service, Inc. is contemplating a
change in its ratings criteria, which could result in a
S-8
<PAGE>
reassignment of the rating of the Underlying Capital Securities (and a
corresponding reassignment of the rating of the Certificates) by
Moody's Investors Service, Inc. If the ratings of the Underlying
Capital Securities are reassigned based on Moody's "debt" ratings
scale, holders of the Certificates will receive the Credit Event
Payment only if the Underlying Capital Securities are rated below
"Baa1" (by reason of such reassignment or any downgrade) by Moody's
Investors Service, Inc. on or prior to December 31, 2001.
FORMATION OF THE TRUST
Structured Products Corp. (the "Depositor" or the "Company") will
establish a Trust, to be designated as Credit-Enhanced CorTS(sm) Trust For Aon
Capital A (the "Trust") under New York law pursuant to the Trust Agreement dated
May 21, 1999 (the "Trust Agreement"), as supplemented by the CorTS(sm)
Supplement 2000-1 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 $30,000,000 8.205% Capital Securities due January 1, 2027 (the
"Underlying Capital Securities" or, as referred to in the accompanying
Prospectus, the "Term Assets") issued by Aon Capital A (the "Underlying Issuer"
or, as referred to in the accompanying Prospectus, the "Term Assets Issuer"),
payments of principal and interest made by the Underlying Issuer on the
Underlying Capital Securities as discussed in more detail under "Description of
the Certificates" herein and $600,000 in cash or eligible investments. If
Standard & Poor's Ratings Services lowers its rating of the Underlying Capital
Securities below "A-" on or before December 31, 2001, then the Trustee will,
within 15 Business Days of the downgrade, make a one-time pro rata distribution
of $600,000 to the holders of the Certificates. If no such downgrade occurs on
or prior to December 31, 2001, the Trustee will promptly deliver such amount to
the Depositor as part of the deferred purchase price for the Underlying Capital
Securities. The sole asset of the Underlying Issuer is $30,000,000 principal
amount of the 8.205% Junior Subordinated Deferrable Interest Debentures (the
"Junior Subordinated Debentures") issued by Aon Corporation ("AON"). 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 Capital Securities and the Trustee, on behalf of the Trust, will
accept such Underlying Capital Securities and deliver the Certificates to or
upon the order of the Company. The Trustee will hold the Underlying Capital
Securities 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 Capital Securities, 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 accompanying Prospectus) of
the Trust.
THE UNDERLYING ISSUER
This Prospectus Supplement does not provide information with respect to
the Underlying Issuer or AON. No investigation has been made of the financial
condition or creditworthiness of the Underlying Issuer or AON in connection with
the issuance of the Certificates. The Company is not an affiliate of the
Underlying Issuer or AON.
The Underlying Issuer is a Delaware business trust formed for the
exclusive purposes of issuing the Underlying Capital Securities and investing
the proceeds thereof in the Junior
S-9
<PAGE>
Subordinated Debentures. AON is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act" 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 AON 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 AON's securities
are listed.
This Prospectus Supplement, the accompanying Prospectus, the Underlying
Capital Securities Prospectus and the Underlying Capital Securities Registration
Statement describe the material terms of the Underlying Capital Securities. This
Prospectus Supplement is qualified in its entirety by, and should be read in
conjunction with, (i) the accompanying Prospectus, (ii) the Underlying Capital
Securities Prospectus and (iii) the Underlying Capital Securities Registration
Statement of which such Underlying Capital Securities Prospectus is a part. No
representation is made by the Trust, the Trustee, the Underwriters or the
Company as to the accuracy or completeness of the information contained in the
Underlying Capital Securities Registration Statement.
DESCRIPTION OF THE UNDERLYING CAPITAL SECURITIES
The Underlying Capital Securities of the Trust will consist solely of
$30,000,000 aggregate principal amount of Aon Capital A 8.205% Capital
Securities issued by the Underlying Issuer, having the characteristics described
in a Prospectus dated March 28, 1997 (the "Underlying Capital Securities
Prospectus"). The Underlying Capital Securities originally were issued by the
Underlying Issuer as part of an underwritten public offering of $799,400,000
aggregate principal amount of such securities, pursuant to registration
statement no. 333-21237 (together with all amendments and exhibits thereto, the
"Underlying Capital Securities Registration Statement"), filed by the Underlying
Issuer with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). Distributions of interest are required to be made on the
Underlying Capital Securities semiannually on the 1st of each January and July,
or if such day is not a Business Day, on the next succeeding Business Day, and a
single payment of principal of $30,000,000 is payable on January 1, 2027 (the
"Maturity Date") or upon earlier redemption. The payments of interest on the
Junior Subordinated Debentures, and thus the Underlying Capital Securities and
the Certificates, may be deferred by AON at any time or from time to time for up
to ten (10) consecutive semiannual interest periods. During any such period, AON
will not be permitted to make a payment on its capital stock or any debt
securities that rank equal to or junior to, the Junior Subordinated Debentures
or AON's guarantees, respectively. The Junior Subordinated Debentures, and
consequently the Underlying Capital Securities, rank subordinate and junior to
all senior indebtedness of AON. AON has guaranteed the payment of distributions
on the Underlying Capital Securities but only to the extent that the Underlying
Issuer has funds legally and immediately available therefor. AON has also
S-10
<PAGE>
guaranteed the due and punctual payment of principal and interest on the Junior
Subordinated Debentures when and as the same become due and payable, whether at
maturity, upon redemption or otherwise. AON's guarantee, however, is an
unsecured obligation of AON and ranks subordinate and junior to all senior
indebtedness of AON.
This Prospectus Supplement sets forth material terms with respect to the
Underlying Capital Securities, 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 Capital
Securities. All disclosure contained herein with respect to the Underlying
Capital Securities is derived from publicly available documents described above.
The Underlying Issuer and AON are subject to the information reporting
requirements of the Exchange Act. Accordingly, the Underlying Issuer and AON are
obligated to file reports and other information with the Commission. Although
the Company has no reason to believe the information concerning the Underlying
Capital Securities or the Underlying Issuer set forth in the Underlying Capital
Securities Prospectus or any report filed under the Exchange Act is not
reliable, neither the Company nor any of the Underwriters 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 any of the
Underwriters 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 Capital Securities, the Underlying Issuer or AON 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 Capital Securities have been rated "a3" by Moody's
Investors Service, Inc. ("Moody's") and "A-" by Standard & Poor's Ratings
Services ("S&P"). Any rating of the Underlying Capital Securities is not a
recommendation to purchase, hold or sell such Underlying Capital Securities 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.
The Underwriters and the Underlying Issuer
From time to time, Salomon Smith Barney Inc., First Union Securities, Inc.
and Prudential Securities Incorporated (collectively, the "Underwriters") may be
engaged by the Underlying Issuer or AON as underwriters or placement agents, in
an advisory capacity or in other business arrangements. In addition, the
Underwriters or an affiliate of the Depositor may make a market in other
outstanding securities of the Underlying Issuer or AON.
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 accompanying 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
S-11
<PAGE>
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 accompanying 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 accompanying 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
Capital Securities, (ii) all payments on or collections in respect of the
Underlying Capital Securities accrued on or after the Closing Date, together
with any proceeds thereof and (iii) as more fully described in this Prospectus
Supplement, $600,000 in cash or eligible investments. 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 Capital Securities that the holder of
such Certificate is entitled to receive on January 1, 2027.
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, AON, the
Trustee, the Underwriters, or any affiliate of any thereof.
Distributions
Each Certificate evidences the right to receive, to the extent received on
the Underlying Capital Securities, (i) a semiannual distribution of interest on
January 1 and July 1 of each year, commencing January 1, 2001, (ii) a
distribution of principal on January 1, 2027, or if any such day is not a
Business Day, the next succeeding Business Day, or upon early redemption, and
(iii) upon certain downgrades of the Underlying Capital Securities by S&P or
Moody's, a Credit Event Payment (as defined and described herein). With respect
to any distribution date, the record date is the day immediately prior to such
distribution date. 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. Distributions of interest on the Certificates, however, may be deferred
as a result in the deferral of payment on the Junior Subordinated Debentures
held by the Underlying Issuer. Distributions on the Junior Subordinated
Debentures may be deferred by AON for up to ten (10) consecutive semiannual
interest periods (such deferral period, the "Extension Period") provided that no
Extension Period extends beyond January 1, 2027. During any Extension Period,
interest on the Junior Subordinated Debentures, and consequently the
Certificates, will continue to accrue (and the amount of distributions to which
holders of the Junior Subordinated Debentures, and consequently the
Certificateholders, will continue to accumulate) at the rate of 8.205% per
annum, compounded semi-annually.
Credit Event Payment
If the rating of the Underlying Capital Securities is downgraded below
"A-" by S&P or below "a3" (if the Underlying Capital Securities continue to be
rated on Moody's "preferred" ratings scale) or below "Baa1" (if the Underlying
Capital Securities are then rated on Moody's "debt" ratings scale) by Moody's,
in each case on or prior to December 31, 2001, then holders of the Certificates
will receive an additional one-time payment of $0.50 per Certificate (such
S-12
<PAGE>
payment, the "Credit Event Payment"). The Credit Event Payment will be made
within 15 Business Days after such downgrade by S&P or Moody's.
Additional Underlying Capital Securities and Certificates
From time to time hereafter, additional Underlying Capital Securities 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 Capital Securities
so sold to the Trustee. Any such additional Certificates issued will rank pari
passu with the Certificates issued on the date hereof.
Redemption of Certificates Upon Redemption of Underlying Capital Securities
Upon receipt by the Trustee of a notice that all or a portion of the
Underlying Capital Securities are to be redeemed, the Trustee will select by lot
an equal principal amount of Certificates for redemption and establish the date
such Certificates are to be redeemed. Notice of such redemption will be given by
the Trustee to the registered Certificateholders not less than 15 days prior to
the redemption date by mail to each registered Certificateholder at such
registered Certificateholder's last address on the register maintained by the
Trustee; provided, however, that the Trustee will not be required to give any
notice of redemption prior to the third business day after the date it receives
notice of such redemption.
If a Tax Event or Investment Company Event (each as defined below) occurs
and is continuing, within 90 days following the occurrence of such Tax Event or
Investment Company Event, AON will have the right to prepay the 8.205% Junior
Subordinated Deferrable Interest Debentures in whole but not in part and
therefore cause a mandatory redemption of the Underlying Capital Securities, and
consequently the Certificates (such redemption, a "Tax Event Redemption" or
"Investment Company Event Redemption," respectively). The redemption price in
the case of a Tax Event Redemption or an Investment Company Event Redemption
(the "Event Redemption Price") will equal the greater of (i) 100% of the
principal amount of the Underlying Capital Securities or (ii) the sum of the
present value of 100% of the principal amount that would be payable on January
1, 2027, together with the present values of scheduled payments of interest from
the redemption date to January 1, 2027, in each case discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at a certain treasury rate plus 50 basis points, plus, in
each case, accrued interest on the Underlying Capital Securities to the date of
redemption.
"Tax Event" means the receipt by AON and the Underlying Issuer of an
opinion of a nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of any amendment to or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
January 13, 1997, there is more than an insubstantial risk that (a) the
Underlying Issuer is, or will be within 90 days of the date thereof, subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (b) interest payable by AON on the Junior
Subordinated Debentures is not, or within 90 days of the date thereof will not
be, deductible by AON for United States federal income tax purposes, or (c) the
Underlying Issuer is, or will be within 90 days of the date thereof, subject to
more than a de minimis amount of other taxes, duties, assessments or other
governmental charges.
S-13
<PAGE>
"Investment Company Event" means the receipt by the Underlying Issuer of
an opinion of counsel experienced in such matters to the effect that, as a
result of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, the Underlying Issuer is or will be considered
an investment company that is required to be registered under the Investment
Company Act of 1940, as amended, which change becomes effective on or after
January 13, 1997.
The holder of a Certificate which is redeemed will receive, on the
redemption date, a payment equal to its pro rata share of the distributions made
on the Underlying Capital Securities pursuant to a Tax Event Redemption or an
Investment Company Event Redemption as set forth above.
Recovery on Underlying Capital Securities 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 will set forth (i)
the identity of the issue of Underlying Capital Securities, (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, the Trustee is required to proceed
against the Underlying Issuer or AON on behalf of the Certificateholders to
enforce the Underlying Capital 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 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 Capital Securities, subject to the Trustee's receipt of
satisfactory indemnity. In the event of an Acceleration and a corresponding
payment on the Underlying Capital Securities, the Trustee will distribute the
proceeds to the Certificateholders no later than two Business Days after the
receipt of immediately available funds.
A "Payment Default" means a default in the payment of any amount due on
the Underlying Capital Securities after the same becomes due and payable (and
the expiration of any applicable grace period on the Underlying Capital
Securities). An "Acceleration" means the acceleration of the maturity of the
Underlying Capital Securities after the occurrence of any default on the
Underlying Capital Securities other than a Payment Default.
In the event that the Trustee receives money or other property in respect
of the Underlying Capital Securities (other than a scheduled payment on or with
respect to an interest payment date) as a result of a Payment Default on the
Underlying Capital Securities (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
S-14
<PAGE>
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 Capital
Securities 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
Capital Securities 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 Capital Securities are
payable solely by the Underlying Issuer. AON is subject to laws permitting
bankruptcy, liquidation, moratorium, reorganization or other actions which, in
the event of financial difficulties of AON, could result in delays in payment,
partial payment or non-payment of the Certificates relating to the Underlying
Capital Securities.
Liquidation of Underlying Issuer
AON has the right to liquidate the Underlying Issuer at any time and,
after satisfaction of liabilities to creditors as required by applicable law,
cause the Junior Subordinated Debentures to be distributed to the holders of the
Underlying Capital Securities in liquidation of the Underlying Issuer. The
exercise of this right is subject to the receipt by AON of an opinion of counsel
to the effect that such distribution will not be a taxable event to holders of
the Underlying Capital Securities for United States federal income tax purposes.
In the event the Junior Subordinated Debentures are distributed to the
Trust as a result of the liquidation of the Underlying Issuer, such distribution
will not cause the Certificates to be redeemed. Instead, the Trust will hold the
Junior Subordinated Debentures for the benefit of the holders of the
Certificates in accordance with the terms of the Trust Agreement.
Listing on the New York Stock Exchange Distributions
It is anticipated that by the Closing Date the Certificates will have been
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 Distributions
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 accompanying Prospectus form a part. A Current
Report on Form 8-A relating to the Certificates containing a copy
S-15
<PAGE>
of the CorTS(sm) Supplement 2000-1 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 Capital Securities, (ii) all payments on or
collections in respect of the Underlying Capital Securities due after the
Closing Date and (iii) as more fully described in this Prospectus Supplement,
$600,000 in cash or eligible investments. Reference is made to the accompanying
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.
Certain Payments to the Depositor
On January 1, 2001, as payment of the balance of the purchase price for
the Underlying Capital Securities, the Trustee will pay to the Depositor the
amount of the interest accrued on the Underlying Capital Securities from July 1,
2000 to but not including the Closing Date. In the event the Depositor is not
paid such accrued interest on such date, the Depositor will have a claim for
such accrued interest, and will share pari passu with Certificateholders to the
extent of such claim in the proceeds from the recovery on the Underlying Capital
Securities.
The Trustee Distributions
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 was incurred by reason of willful misconduct,
bad faith or negligence in the performance of the Trustee's duties under the
Trust Agreement.
Pursuant to the Trust Agreement, as compensation for the performance of
its duties under such agreement, the Trustee will be entitled to payment of
Trustee fees and reimbursement of expenses by the Company pursuant to a separate
agreement with the Company, but will 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 Capital Securities occurs), the Trustee will act upon the instruction
of Certificateholders to recover amounts due on the Underlying Capital
Securities 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 Capital Securities
Following Payment Default or Acceleration" herein.
S-16
<PAGE>
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.
Voting of Underlying Capital Securities
The Trustee, as holder of the Underlying Capital Securities, has the right
to vote and give consents and waivers in respect of such Underlying Capital
Securities 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 Capital Securities or any document
relating thereto, or receives any other solicitation for any action with respect
to the Underlying Capital Securities, the Trustee will mail a notice of such
proposed amendment, modification, waiver or solicitation to each
Certificateholder of record as of such date. The Trustee will 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
will 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 will 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 Capital Securities, including,
without limitation, any demand to accelerate the Underlying Capital Securities
or (ii) which would result in the exchange or substitution of any Underlying
Exchange Capital Security pursuant to a plan for the refunding or refinancing of
such Underlying Exchange Capital Security, 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 will 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 will terminate upon (i) the payment in full at maturity or upon
early redemption of the Certificates or (ii) the distribution of the proceeds
received upon a recovery on the Underlying Capital Securities (after deducting
the costs incurred in connection therewith) after a Payment Default or an
Acceleration thereof (or other default with respect to the Underlying Capital
Securities).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For information reporting purposes, absent the occurrence of a deferral of
interest payments by the Underlying Issuer, interest payments on the Underlying
Capital Securities will be reported to
S-17
<PAGE>
you on Form 1099 (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
accompanying Prospectus.
Should AON exercise its right to defer payments of interest on the Junior
Subordinated Debentures, each holder of the Underlying Capital Securities, and
thus each holder of the Certificates, will be required to accrue income (as
original issue discount) in respect of the deferred interest allocable to its
Underlying Capital Securities or Certificates, as the case may be, for United
States federal income tax purposes, which will be allocated but not distributed
to it. As a result, each such holder of a Certificate will recognize income for
United States federal income tax purposes in advance of the receipt of cash and
will not receive the cash related to such income from the Underlying Issuer if
the holder disposes of its Certificates prior to the record date for the payment
of distributions thereafter.
For information reporting purposes, the Trust will treat any Credit Event
Payment as a purchase price adjustment. Orrick, Herrington & Sutcliffe LLP,
counsel to the Depositor, is of the opinion that under existing law a Credit
Event Payment should be treated as a purchase price adjustment. Thus, any such
payment should not be taxable but should reduce a holder's basis in its
Certificates. Prospective investors should be aware that opinions of counsel are
not binding on the Internal Revenue Service or the courts and the Internal
Revenue Service may seek to characterize any Credit Event Payment (or the right
potentially to such a payment) in another manner, including treating any such
payment as income when received (or treating the value of the right potentially
to receive such a payment as capital gain upon a disposition of the
Certificates).
For additional information, see "Certain Federal Income Tax Consequences"
in the accompanying Prospectus.
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
Underwriters, 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 Capital Securities being deemed to be
"plan assets"), as well as subsequent transactions involving the Trust or its
assets, might constitute or result
S-18
<PAGE>
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. 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 an exception applies under the Regulation.
The Underwriters expect 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 Underwriters will verify that there will be at least 100 separate
purchasers (whom the Underwriters have 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 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 Underwriters named below
and the Company, the Company will sell the Certificates to the Underwriters, and
each of the Underwriters named below have agreed to purchase from the Company
the respective number of Certificates set forth opposite its name. In the
Underwriting Agreement, the Underwriters named below have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates if
any Certificates are purchased.
Principal
Amount of
Underwriters Certificates
Salomon Smith Barney...........................
First Union Securities, Inc. ..................
Prudential Securities Incorporated.............
Total
S-19
<PAGE>
The Company has been advised by the Underwriters 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 $0.50 per Certificate.
The Underwriters may allow and such dealers may reallow a concession not in
excess of $0.25. 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. It is anticipated that by the Closing Date 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. The Underwriters have 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 Underwriters are not obligated, however, to make a market in
the Certificates. Any market making by the Underwriters may be discontinued at
any time at the sole discretion of the Underwriters. 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 Underwriters to bid for and purchase the
Certificates. As an exception to these rules, the Underwriters are 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 Underwriters create a short position in the Certificates in
connection with this offering, that is, if they sell a greater aggregate
principal amount of Certificates than is set forth on the cover page of this
Prospectus Supplement, the Underwriters may reduce that short position by
purchasing Certificates in the open market. The Underwriters may also impose a
penalty bid on certain selling group members. This means that if an 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.
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 Underwriters make 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 Underwriters make any representation that the
Underwriters will engage in such transactions. Such transactions, once
commenced, may be discontinued without notice.
S-20
<PAGE>
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriters 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
Capital Securities by both Moody's and S&P. Moody's and S&P have rated the
Underlying Capital Securities "a3" and "A-," 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 Capital Securities.
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 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 Underwriters by Orrick, Herrington & Sutcliffe LLP, New
York, New York.
S-21
<PAGE>
INDEX OF TERMS
Acceleration.....................................................14
Administration Fee................................................9
Administrative Agent..............................................1
AON...............................................................9
Base Rate........................................................16
Bearer Certificates...............................................1
Business Day.................................................12, 15
Calculation Agent................................................17
Calculation Date.................................................19
CD Rate..........................................................18
CD Rate Determination Date.......................................18
CD Reference Rate Certificate....................................16
Cede..............................................................2
CEDEL............................................................47
Certificate Account..............................................35
Certificate Principal Balance....................................23
Certificateholders.............................................9, 1
Certificates......................................................1
Class.............................................................1
Closing Date......................................................9
Code.............................................................50
Commercial Paper Rate Determination Date.........................19
Commercial Paper Reference Rate Certificate......................19
Commission....................................................10, 1
Company........................................................9, 1
Components.......................................................49
Composite Quotations.............................................16
Concentrated Term Assets.........................................28
Coupons..........................................................12
Credit Support....................................................1
Credit Support Instruments.......................................37
Day of Valuation.................................................49
Definitive Certificate...........................................25
Depositary.......................................................25
Deposited Asset Provider.........................................36
Deposited Assets..................................................1
Depositor.........................................................9
Determination Date...............................................13
Distribution Date.................................................1
DOL..............................................................19
DTC..............................................................14
ECU...............................................................1
ERISA............................................................18
Euroclear........................................................47
Exchange Act..................................................10, 1
Exchange Rate Agent..............................................13
Exchangeable Series..............................................23
Extension Period.................................................12
Federal Funds Rate...............................................20
Federal Funds Rate Determination Date............................20
Federal Funds Reference Rate Certificate.........................16
Fixed Pass-Through Rate..........................................12
Fixed Rate Certificates..........................................15
Floating Rate Certificates.......................................16
Global Security...................................................1
H.15(519)........................................................16
Index Maturity...................................................16
Interest Reset Date..............................................17
Interest Reset Period............................................17
IRA..............................................................18
IRS..............................................................50
Junior Subordinated Debentures....................................9
Letter of Credit.................................................34
S-22
<PAGE>
Letter of Credit Bank............................................34
LIBOR............................................................21
LIBOR Determination Date.........................................21
LIBOR Reference Rate Certificate.................................16
London Banking Day...............................................15
Market Exchange Rate.............................................13
Maturity Date....................................................10
Maximum Pass-Through Rate........................................17
Minimum Pass-Through Rate........................................17
Money Market Yield...............................................19
Nonrecoverable Advance...........................................39
Notional Amount..................................................15
NYSE.............................................................15
Offering Agent....................................................3
Option to Elect Exchange.........................................24
Optional Exchange Date...........................................24
Original Issue Date..............................................11
outstanding debt securities......................................30
Parties in Interest..............................................19
Pass-Through Rate................................................12
Payment Default..................................................14
Plan.............................................................18
Prospectus Supplement.............................................1
Purchase Price...................................................46
Rating Agency.....................................................4
Realized Losses..................................................23
Registered Certificates...........................................1
Registration Statement............................................2
Regulation.......................................................19
Related Proceeds.................................................39
Required Percentage..............................................41
Reserve Account..................................................34
Retained Interest.................................................9
Reuters Screen LIBO Page.........................................21
Secured Term Assets..............................................30
Securities Act................................................10, 2
Senior Term Assets...............................................30
Series............................................................1
Special Tax Counsel..............................................50
Specified Currency................................................1
Specified Interest Currency.......................................1
Specified Premium Currency........................................1
Specified Principal Currency......................................1
Spread...........................................................16
Spread Multiplier................................................16
Strip Certificates...............................................12
Stripped Interest................................................15
Sub-Administration Agreement.....................................37
Sub-Administrative Agent.........................................37
Subordinated Term Assets.........................................30
Surety...........................................................34
Surety Bond......................................................34
Tax Event........................................................13
Tax Event Redemption.............................................13
Term Asset Events of Default.....................................30
Term Assets.......................................................1
Term Assets Currency.............................................32
Term Assets Indenture............................................28
Term Assets Interest Accrual Periods.............................31
Term Assets Issuers..............................................28
Term Assets Payment Dates........................................31
Term Assets Rate.................................................31
Treasury bills...................................................22
Treasury Rate....................................................22
Treasury Rate Determination Date.................................22
S-23
<PAGE>
Treasury Reference Rate Certificate..............................16
Trust..........................................................9, 1
Trust Agreement................................................9, 1
Trust Indenture Act...............................................9
Trustee...........................................................1
Trustee's Fee.....................................................8
U.S. Person......................................................47
Underlying Capital Securities.....................................9
Underlying Capital Securities Prospectus.........................10
Underlying Capital Securities Registration Statement.............10
Underlying Issuer.................................................9
Underwriters.....................................................11
Underwriting Agreement...........................................20
United States....................................................47
Variable Pass-Through Rate.......................................12
Voting Rights................................................17, 41
S-24
<PAGE>
APPENDIX A
DESCRIPTION OF THE UNDERLYING CAPITAL SECURITIES
Issuer: Aon Capital A
Underlying Capital Securities: 8.205% Capital Securities due January 1, 2027
Maturity Date: January 1, 2027
Original Principal Amount Issued: $799,400,000
CUSIP No.:. 037388 AE 5
Stated Interest Rate: 8.205% per annum
Interest Payment Dates: January 1 and July 1
Tax Event The Underlying Capital Securities
Redemption and are redeemable, in whole but not in
Investment Company part, at any time by the Underlying
Event Redemption: Issuer if certain adverse tax
events occur with respect to the
Underlying Issuer or AON, or a determination
is made that the Underlying Issuer is or
will become an Investment Company under
the Investment Company Act of 1940,as amended.
Principal Amount of Underlying
Capital Securities Deposited
Under Trust Agreement: $30,000,000
The above summary is qualified in its entirety by reference to the
Underlying Capital Securities Prospectus. Neither the Depositor nor any of its
affiliates make any representation about the completeness, accuracy or
timeliness of information in the Underlying Capital Securities Prospectus.
Available Information
AON is subject to the informational requirements of the Exchange Act and
in accordance therewith files reports, proxy statements and other information
with the Commission. Reports, proxy statements and other information filed by
AON 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 AON's securities are listed.
A-1
<PAGE>
Prospectus
Trust Certificates
(Issuable in Series)
Structured Products Corp.
Depositor
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class") with an aggregate initial public offering
price or purchase price of up to $7,000,000,000 or the equivalent thereof in one
or more foreign or composite currencies, including the European Currency Unit
("ECU"). Certificates of each respective Series and Class will be offered on
terms to be determined at the time of sale as described in the related
Prospectus Supplement accompanying the delivery of this Prospectus. Certificates
may be sold for United States dollars or for one or more foreign or composite
currencies, and the principal of, premium, if any, and any interest to be
distributed in respect of Certificates may be payable in United States dollars
or in one or more foreign or composite currencies. Each Series and Class of
Certificates may be issuable as individual securities in registered form without
coupons ("Registered Certificates") or in bearer form with or without coupons
attached ("Bearer Certificates") or as one or more global securities in
registered or bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in securities (the "Term Assets"), issued by one
or more issuers (the "Term Assets Issuers"), together with certain other assets
described herein and in the related Prospectus Supplement (such assets, together
with the Term Assets, the "Deposited Assets"), to be deposited in a trust (the
"Trust") for the benefit of holders of Certificates of such Series
("Certificateholders") by Structured Products Corp. (the "Company") pursuant to
a trust agreement and a series supplement thereto with respect to a given Series
(collectively, the "Trust Agreement") among the Company, as depositor or
transferor, the administrative agent, if any (the "Administrative Agent"), and
the trustee (the "Trustee") named in the related Prospectus Supplement. The Term
Assets consist of a publicly issued, fixed income debt security or asset backed
security or a pool of such debt securities or asset backed securities issued by
one or more corporations, banking organizations, insurance companies or special
purpose vehicles (including trusts, limited liability companies, partnerships or
other special purpose entities), organized under the laws of the United States
of America or any state, which are subject to the informational requirements of
the Securities Exchange Act of 1934 and which in accordance therewith file
reports and other information with the Securities and Exchange Commission. If so
specified in the related Prospectus Supplement, the Trust for a Series of
Certificates may also include, or the Certificateholders of such Certificates
may have the benefit of, any combination of insurance policies, letters of
credit, reserve accounts and other types of rights or assets designed to support
or ensure the servicing and distribution of amounts due in respect of the
Deposited Assets (collectively, "Credit Support"). See "Description of
Certificates" and "Description of Deposited Assets and Credit Support".
Prospective investors should consider, among other things, the information set
forth under "Risk Factors" commencing on page 3 of this Prospectus and in the
related Prospectus Supplement.
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series. The Certificates of each
Series (or Class within such Series) offered hereby will be rated at the time of
issuance in one of the recognized investment grade rating categories by one or
more nationally recognized rating agencies.
To the extent provided herein and in the applicable Prospectus Supplement, the
Company's only obligations with respect to each Series of Certificates will be,
pursuant to certain representations and warranties concerning the Deposited
Assets, to assign and deliver the Deposited Assets and certain related documents
to the applicable Trustee and, in certain cases, to provide for the Credit
Support, if any. The principal obligations of an Administrative Agent, if any is
named in the applicable Prospectus Supplement, with respect to a Series of
Certificates will be pursuant to its contractual administrative obligations and,
only as and to the extent provided in the related Prospectus Supplement, its
obligation to make certain cash advances in the event of payment delinquencies
on the Deposited Assets. See "Description of Trust Agreement--Advances in
Respect of Delinquencies".
The Certificates of each Series will not represent an obligation of or interest
in the Company, any Administrative Agent or any of their respective affiliates,
except to the limited extent described herein and in the related Prospectus
Supplement. The Certificates will not be guaranteed or insured by any
governmental agency or instrumentality, or by the Company, any Administrative
Agent or their respective affiliates.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" herein and "Method of Distribution" in the related Prospectus
Supplement. This Prospectus may not be used to consummate sales of Certificates
offered hereby unless accompanied by a Prospectus Supplement.
The date of this Prospectus is May 13, 1999
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount, (b) the currency or currencies in which the principal (the
"Specified Principal Currency"), premium, if any (the "Specified Premium
Currency"), and any interest (the "Specified Interest Currency") are
distributable (the Specified Principal Currency, the Specified Premium Currency
and the Specified Interest Currency being collectively referred to as the
"Specified Currency"), (c) the number of Classes of such Series and, with
respect to each Class of such Series, its designation, aggregate principal
amount or, if applicable, notional amount and authorized denominations, (d)
certain information concerning the type, characteristics and specifications of
the Deposited Assets and any Credit Support for such Series or Class, (e) the
relative rights and priorities of each such Class (including the method for
allocating collections from the Deposited Assets to the Certificateholders of
each Class and the relative ranking of the claims of the Certificateholders of
each Class to such Deposited Assets), (f) the name of the Trustee and the
Administrative Agent, if any, for such Series, (g) the Pass Through Rate (as
defined herein) or the terms relating to the applicable method of calculation
thereof, (h) the time and place of distribution (each such date, a "Distribution
Date") of any interest, premium (if any) and/or principal, (i) the date of
issue, (j) the scheduled final Distribution Date, if applicable, (k) the
offering price, (l) any exchange, whether mandatory or optional, the redemption
terms and any other specific terms of Certificates of each such Series or Class.
See "Description of Certificates--General" for a listing of other items that may
be specified in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 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. The Company does not intend to send any
financial reports to Certificateholders.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities
<PAGE>
Act of 1933, as amended (the "Securities Act"), relating to the Certificates.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Certificates shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of Structured Products Corp., 32nd Floor,
Room 33-126, Seven World Trade Center, New York, New York 10048. Telephone
requests for such copies should be directed to the Secretary of Structured
Products Corp. at (212) 783-6645.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, on each Distribution
Date unaudited reports containing information concerning the related Trust 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 Certificates. See
"Description of Certificates--Global Securities" and "Description of Trust
Agreement--Reports to Certificateholders; Notice". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Company, on behalf of each Trust, will cause to be
filed with the Commission such periodic reports as are required under the
Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited facilities
in the United States for conversion of U.S. dollars into foreign currencies and
vice versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Certificate having a Specified Principal Currency other than U.S.
dollars, Salomon Smith Barney Inc. (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined herein) preceding the
2
<PAGE>
date of delivery of such Certificate or by such later date as is determined by
the Offering Agent. Each such exchange will be made by the Offering Agent on
such terms and subject to such conditions, limitations and charges as the
Offering Agent may from time to time establish in accordance with its regular
foreign exchange practice. All costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars", "U.S.$", "USD", "dollar" or "$" are to
the lawful currency of the United States.
RISK FACTORS
In connection with an investment in the Securities of any Series,
prospective investors should consider, among other things, the material risk
factors set forth below and any additional material risk factors set forth in
the applicable Prospectus Supplement.
The Certificates May Not Be a Liquid Investment. There will be no market
for any Series (or Class within such Series) of Certificates prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Certificateholders with
liquidity of investment or will continue for the life of such Certificates.
Certificates Are Limited Obligations and Are Not Recourse Obligations of
the Company or Its Affiliates. The Certificates will not represent a recourse
obligation of or interest in the Company or any of its affiliates. The
Certificates of each Series will not be insured or guaranteed by any government
agency or instrumentality, the Company, any Person affiliated with the Company
or the Issuer, or any other Person. The obligations, if any, of the Company with
respect to the Certificates of any Series will only be pursuant to certain
limited representations and warranties with respect to the Term Assets or other
Deposited Assets. The Company does not have, and is not expected in the future
to have, any significant assets with which to satisfy any claims arising from a
breach of any representation or warranty. If, for example, the Company were
required to repurchase a Term Asset with respect to which the Company has
breached a representation or warranty, its only sources of funds to make such
repurchase would be from funds obtained from the enforcement of a corresponding
obligation, if any, on the part of the seller of such Term Asset to the Company,
or from a reserve fund established to provide funds for such repurchases. The
Company has no obligation to establish or maintain any such reserve fund.
Trust Consists of Limited Assets and Payments on the Certificates Will Be
Made Solely from Deposited Assets. The only material assets expected to be in a
Trust are the Deposited Assets corresponding to the related Series (or Class) of
Certificates being offered. The Certificates are not insured or guaranteed by
the Company, any Administrative Agent or any of their affiliates. Accordingly,
Certificateholders' receipt of distributions in respect of the Certificates will
depend entirely on the performance of and the Trust's receipt of payments with
respect to the Deposited Assets and any Credit Support identified in the related
Prospectus Supplement. See "Description of Deposited Assets and Credit Support".
Average Life and Yield of Certificates May Vary Thus Creating Reinvestment
Risk. The timing of distributions of interest, premium (if any) and principal of
any Series (or of any Class
3
<PAGE>
within such Series) of Certificates is affected by a number of factors,
including the performance of the related Deposited Assets, the extent of any
early redemption, repayment, amortization, acceleration of payment rate, slow
down of payment rate or extension of maturity or amortization with respect to
the related Term Assets (or portion thereof) and the manner and priority in
which collections from such Term Assets and any other Deposited Assets are
allocated to each Class of such Series. Certain of these factors may be
influenced by a variety of accounting, tax, economic, social and other factors.
The related Prospectus Supplement will discuss any calls, puts or other
redemption options, any extension of maturity provisions and certain other terms
applicable to such Term Assets and any other Deposited Assets. See "Maturity and
Yield Considerations".
Tax Considerations Should Be Reviewed. Special Tax Counsel has delivered
an opinion to the Company that the discussion contained herein under the caption
"Certain Federal Income Tax Considerations", to the extent it constitutes
matters of law or legal conclusions thereto, is true and correct in all material
respects. Special Tax Counsel has also delivered an opinion that the Trust will
not be characterized as an association taxable as a corporation (or publicly
traded partnership treated as an association) for federal income tax purposes.
Special Tax Counsel has not delivered (and unless otherwise indicated in the
Prospectus Supplement does not intend to deliver) any other opinions regarding
the Trust or the Certificates. Prospective investors should be aware that no
rulings have been sought from the Internal Revenue Service ("IRS"), and that
legal opinions are not binding on the IRS or the courts. Accordingly, there can
be no assurance that the IRS or the courts will agree with Special Tax Counsel's
opinions. If, contrary to Special Tax Counsel's opinion, the Trust is
characterized or treated as a corporation for federal income tax consequences,
among other consequences, the Trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and distributions to
Certificateholders would be impaired. See "Federal Income Tax Considerations"
herein and in the related Prospectus Supplement.
Limited Nature of Rating; Reduction or Withdrawal of Rating Could Occur
Which May Adversely Affect the Value of the Certificates. At the time of issue,
the Certificates of any given Series (or each Class of such Series that is
offered hereby) will be rated in one of the investment grade categories by one
or more nationally recognized rating agencies (a "Rating Agency"). Unless
otherwise specified in the applicable Prospectus Supplement, the rating of any
Series or Class of Certificates is based primarily on the related Deposited
Assets and any Credit Support and the relative priorities of the
Certificateholders of such Series or Class to receive collections from, and to
assert claims against, the Trust with respect to such Deposited Assets and any
Credit Support. The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. In addition, the rating does not address
the likelihood that the principal amount of any Series or Class will be paid
prior to any final legal maturity date. There can be no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant. Any Class or Classes of a given Series
of Certificates may not be offered pursuant to this Prospectus, in which case
such Class or Classes may or may not be rated in an investment grade category by
a Rating Agency.
4
<PAGE>
Global Securities Limit Direct Voting and Ability to Pledge Certificates.
The Certificates of each Series (or, if more than one Class exists, each Class
of such Series) will initially be represented by one or more Global Securities
deposited with, or on behalf of, a Depositary (as defined herein) and will not
be issued as individual definitive Certificates to the purchasers of such
Certificates. Consequently, unless and until such individual definitive
Certificates of a particular Series or Class are issued, such purchasers will
not be recognized as Certificateholders under the Trust Agreement. Hence, until
such time, such purchasers will only be able to exercise the rights of
Certificateholders indirectly through the Depositary and its respective
participating organizations and, as a result, the ability of any such purchaser
to pledge that Certificate to persons or entities that do not participate in the
Depositary's system, or to otherwise act with respect to such Certificate, may
be limited. See "Description of Certificates--Global Securities" and
"Limitations on Issuance of Bearer Certificates" and any further description
contained in the related Prospectus Supplement.
Risks With Respect to Currency, Exchange Rates and Exchange Controls May
Exist. The Certificates of any given Series (or Class within such Series) may be
denominated in a currency other than U.S. dollars to the extent specified in the
applicable Prospectus Supplement. An investment in a Certificate having a
Specified Currency other than U.S. dollars entails significant risks that are
not associated with a similar investment in a U.S. dollar-denominated security.
Such risks include, without limitation, the possibility of significant changes
in rates of exchange between the U.S. dollar and such Specified Currency and the
possibility of the imposition or modification of foreign exchange controls with
respect to such Specified Currency. Such risks generally depend on factors over
which the Company has no control, such as economic and political events and the
supply of and demand for the relevant currencies. In recent years, rates of
exchange between the U.S. dollar and certain currencies have been highly
volatile, and such volatility may be expected in the future. Past fluctuations
in any particular exchange rate do not necessarily indicate, however,
fluctuations in the rate that may occur during the term of any Certificate.
Depreciation of the Specified Currency for a Certificate against the U.S. dollar
would decrease the effective yield of such Certificate below its Pass-Through
Rate and, in certain circumstances, could result in a loss to the investor on a
U.S. dollar basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates and the availability of a
Specified Currency for making distributions in respect of Certificates
denominated in such currency. There can be no assurance that exchange controls
will not restrict or prohibit distributions of principal, premium or interest in
any Specified Currency. Even if there are no actual exchange controls, it is
possible that, on a Distribution Date with respect to any particular
Certificate, the currency in which amounts then due to be distributed in respect
of such Certificate would not be available.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED IN A
CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN
APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS. See "Currency Risks".
5
<PAGE>
Trust May Include Derivatives Which Could Affect the Value of the
Certificates. A Trust may include various derivative instruments, including
interest rate, currency, securities, commodity and credit swaps, caps, floors,
collars and options and structured securities having embedded derivatives (such
as structured notes). Swaps involve the exchange with another party of their
respective commitments to pay or receive amounts computed by reference to
specified fixed or floating interest rates, currency rates, securities prices,
yields or returns (including baskets of securities or securities indices) or
commodity prices and a notional principal amount (i.e., the reference amount
with respect to which such obligations are determined, although no actual
exchange of principal occurs except for currency swaps); for example, an
exchange of floating rate payments for fixed rate payments. Interim payments are
generally netted, with the difference being paid by one party to the other. The
purchase of a cap entitles the purchaser, to the extent that a specified rate,
price, yield or return exceeds a predetermined level, to receive payments
computed by reference to a specified fixed or floating rate, price, yield or
return and a notional principal amount from the party selling such cap. The
purchase of a floor entitles the purchaser, to the extent that a specified rate,
price, yield or return declines below a predetermined level, to receive payments
computed by reference to a specified fixed or floating rate, price, yield or
return and a notional principal amount from the party selling such floor.
Options function in a manner similar to caps and floors, and exist on various
underlying securities, such as bonds, equities, currencies and commodities.
Options can also be structured as securities such as warrants or can be embedded
in securities such as certain commodity or equity-linked bonds with option-like
characteristics. Forward contracts involve the purchase and sale of a specified
security, commodity, currency or other financial instrument at a specified price
and date in the future, and may be settled by physical delivery or cash payment.
Credit derivatives involve swap and option contracts designed to assume or lay
off credit risk on loans, debt securities or other assets, or in relation to a
particular reference entity or country, in return for either swap payments or
payment of premium. Credit derivatives may also be embedded in other instruments
such as notes or warrants. Credit derivatives give one party to a transaction
the right to dispose of or acquire an asset (or group of assets), or the right
to receive or make a payment from the other party, upon the occurrence of
specified credit events.
Fluctuations in securities, currency and commodity rates, prices, yields
and returns may have a significant effect on the yield to maturity of
derivatives or the levels of support that derivatives can provide to a Trust. In
addition, derivatives may be limited to covering only certain risks. Continued
payments on derivatives may be affected by the financial condition of the
counterparties thereto (or, in some instances, the guarantor thereunder). There
can be no assurance that counterparties will be able to perform their
obligations. Failure by a counterparty (or the related guarantor, if any) to
make required payments may result in the delay or failure to make payments on
the related securities and risks. In addition, the notional amounts on which
payments are made may vary under certain circumstances and may not bear any
correlation to principal amounts of the related securities. The terms and risks
of the relevant derivatives will be described in the related Prospectus
Supplement. Further, the relevant Prospectus Supplement will identify the
material terms, the material risks and the counterparty for any derivative
instrument in a Trust which is the result of an agreement with such counterparty
to the extent that such agreement is material.
Publicly Available Information Concerning Term Assets Issuers Should Be
Reviewed; Risk of Loss if Public Information Not Available. It is strongly
recommended that each
6
<PAGE>
prospective purchaser of Certificates obtain and evaluate the same information
concerning each Term Assets Issuer (as defined herein) as it would obtain and
evaluate if it were investing directly in the Term Assets or in other securities
issued by the Term Assets Issuer. The publicly-available information concerning
a Term Assets Issuer is important in considering whether to invest in or sell
Certificates. To the extent such information ceases to be available, an
investor's ability to make an informed decision to purchase or sell Certificates
could be impeded. The information in this Prospectus and any Prospectus
Supplement concerning the Term Assets and the Term Assets Issuers has been
obtained from publicly available documents, and none of the Company, the Trustee
or any of their affiliates has undertaken, or will undertake, any investigation
of the accuracy or completeness of such documents (whether or not filed with the
Commission) or the financial condition or creditworthiness of any Term Assets
Issuer. The issuance of Certificates of any Series should not be construed as an
endorsement by the Company or the Trustee or any of their affiliates of the
financial condition or business prospects of any Term Assets Issuer.
Remedies Available to Certificateholders Are Limited Due to Passive Nature
of the Trust. The remedies available to a Trustee of a relevant Trust are
predetermined and therefore an investor in the Certificates has less discretion
over the exercise of remedies than if such investor directly invested in the
Term Assets. Each Trust will generally hold the related Deposited Assets to
maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any Term Assets Issuer or the value of the Deposited
Assets. Except as indicated below, a holder will not be able to dispose of or
take other actions with respect to any Deposited Assets. Under certain
circumstances described in the applicable Prospectus Supplement, the Trustee
will (or will at the direction of a specified percentage of Certificateholders
of the relevant Series) dispose of, or take certain other actions in respect of,
the Deposited Assets. In certain limited circumstances, such as a mandatory
redemption of Term Assets or the exercise by a third party of the right to
purchase Term Assets (as described below under "Description of Trust Agreement -
Termination"), the Trustee may dispose of the Deposited Assets prior to
maturity. The applicable Prospectus Supplement will describe the particular
circumstances, if any, under which a Deposited Asset may be disposed of prior to
maturity.
Optional Exchange for Deposited Assets Will Generally Be Unavailable.
Although the Prospectus Supplement for a Series of Certificates may designate
such Series as an Exchangeable Series (as defined herein) and may provide that a
Certificateholder may exchange Certificates of the Exchangeable Series for a pro
rata portion of Deposited Assets of the related Trust, any such Optional
Exchange Right will be exercisable only to the extent that the exercise of such
right would not be inconsistent with the Company's or Trust's continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of 1940, as amended, and all applicable rules,
regulations and interpretations thereunder. See "Description of Certificates -
Optional Exchange.". Accordingly, the optional exchange right described in this
Prospectus under the heading "Description of Certificates - Optional Exchange"
and further described in the relevant Prospectus Supplement may be available
only to the Company and its affiliates and designees. Other Certificateholders
will generally not be able to exchange their Certificates of an Exchangeable
Series for a pro rata portion of the Deposited Assets of the related Trust. In
addition, the exercise of an optional exchange right will decrease the
outstanding aggregate amount of Certificates of the applicable Exchangeable
Series.
7
<PAGE>
---------------------------------
The Prospectus Supplement for each Series of Certificates will set forth
information regarding any additional material risk factors applicable to such
Series (and each Class within such Series).
THE COMPANY
The Company was incorporated in the State of Delaware on November 23,
1992, as an indirect, wholly-owned, limited-purpose finance subsidiary of
Salomon Smith Barney Holdings Inc. The Company will not engage in any business
or other activities other than issuing and selling securities from time to time
and acquiring, owning, holding, pledging and transferring assets (including
Deposited Assets and Credit Support) in connection therewith or with the
creation of a Trust and in activities related or incidental thereto. The Company
does not have, nor is it expected to have, any significant unencumbered assets.
The Company's principal executive offices are located at Room 33-126, 32nd
Floor, Seven World Trade Center, New York, New York 10048 (telephone (212)
783-6645).
USE OF PROCEEDS
The net proceeds to be received from the sale of each Series or Class of
Certificates (whether or not offered hereby) will be used by the Company for
such purposes as may be specified in the applicable Prospectus Supplement. Such
purposes may include, without limitation, purchasing the related Deposited
Assets (or providing a Trust with funds to purchase such Deposited Assets) and
arranging certain Credit Support including, if specified in the related
Prospectus Supplement, making required deposits into any reserve account or
other account for the benefit of the Certificateholders of such Series or Class.
Any remaining net proceeds will be used by the Company for general corporate
purposes.
FORMATION OF THE TRUST
The Company will assign the Deposited Assets (or cash to purchase such
assets) for each Series of Certificates to the Trustee named in the applicable
Prospectus Supplement, in its capacity as Trustee, for the benefit of the
Certificateholders of such Series. See "Description of Trust
Agreement--Assignment of Deposited Assets". The Deposited Assets will consist of
a publicly issued, fixed income debt security or asset backed security or pool
of such debt securities or asset backed securities issued by one or more
corporations, banking organizations, insurance companies or special purpose
vehicles (including trusts, limited liability companies, partnerships or other
special purpose entities) organized under the laws of the United States of
America or any state, which are subject to the informational requirements of the
Exchange Act and which in accordance therewith file reports and other
information with the Commission. See "Description of Deposited Assets and Credit
Support." The Trustee named in the applicable Prospectus Supplement will
administer the Deposited Assets pursuant to the Trust Agreement and will receive
a fee for such services (the "Trustee's Fee"). Any Administrative Agent named in
the applicable Prospectus Supplement will perform such tasks as are specified
therein and in the Trust Agreement and will receive a fee for such services (the
"Administration Fee") as
8
<PAGE>
specified in the Prospectus Supplement. See "Description of Trust
Agreement--Collection and Other Administrative Procedures" and "--Retained
Interest; Administrative Agent Compensation and Payment of Expenses". The
Trustee or an Administrative Agent, if applicable, will either cause the
assignment of the Deposited Assets to be recorded or will obtain an opinion of
counsel that no recordation is required to obtain a first priority perfected
security interest in such Deposited Assets.
The Company's assignment of the Deposited Assets to the Trustee will be
without recourse. To the extent provided in the applicable Prospectus
Supplement, the obligations of an Administrative Agent, if any, so named therein
with respect to the Deposited Assets will consist primarily of its contractual
administrative obligations, if any, under the Trust Agreement, its obligation,
if any, to make certain cash advances in the event of delinquencies in payments
on or with respect to any Deposited Assets in amounts described under
"Description of Trust Agreement--Advances in Respect of Delinquencies", and its
obligations, if any, to purchase Deposited Assets as to which there has been a
breach of certain representations and warranties or as to which the
documentation is materially defective. The obligations of an Administrative
Agent, if any, named in the applicable Prospectus Supplement to make advances
will be limited to amounts which any such Administrative Agent believes
ultimately would be recoverable under any Credit Support, insurance coverage,
the proceeds of liquidation of the Deposited Assets or from other sources
available for such purposes. See "Description of Trust Agreement--Advances in
Respect of Delinquencies".
To the extent provided in the related Prospectus Supplement, each Trust
will consist of (i) the applicable Deposited Assets, or interests therein,
exclusive of any interest in such assets (the "Retained Interest") retained by
the Company or any previous owner thereof, as from time to time are specified in
the Trust Agreement; (ii) such collections as from time to time are identified
as deposited in the related Certificate Account; (iii) property, if any,
acquired on behalf of Certificateholders by foreclosure or repossession and any
revenues received thereon; (iv) those elements of Credit Support, if any,
provided with respect to any Class within such Series that are specified as
being part of the related Trust in the applicable Prospectus Supplement, as
described therein and under "Description of Deposited Assets and Credit
Support--Credit Support"; (v) the rights of the Company under the agreement or
agreements entered into by the Trustee on behalf of the Certificateholders which
constitute, or pursuant to which the Trustee has acquired, such Deposited
Assets; and (vi) the rights of the Trustee in any cash advance, reserve fund or
surety bond.
In addition, to the extent provided in the applicable Prospectus
Supplement, the Company will obtain Credit Support for the benefit of the
Certificateholders of any related Series (or Class within such Series) of
Certificates.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Term Assets
and the terms, if any, upon which such Term Assets may be subject to early
redemption (either by the applicable obligor or pursuant to a third-party call
option), repayment (at the option of the holders thereof) or
9
<PAGE>
extension of maturity. The provisions of the Term Assets with respect to the
foregoing may affect the weighted average life of the related Series of
Certificates.
The effective yield to holders of the Certificates of any Series (and
Class within such Series) may be affected by certain aspects of the Deposited
Assets or any Credit Support or the manner and priorities of allocations of
collections with respect to such Deposited Assets between the Classes of a given
Series. The yield to maturity of any Series (or Class within such Series) may be
affected by any optional or mandatory redemption, repayment, amortization or
extension of maturity of the related Term Assets. A variety of tax, accounting,
economic, and other factors will influence whether any applicable party
exercises any right of redemption, repurchase or extension in respect of its
securities. The rate of redemption may also be influenced by prepayments on the
obligations a Term Assets Issuer holds for its own account. All else remaining
equal, if prevailing interest rates fall significantly below the interest rates
on the related Term Assets, the likelihood of redemption would be expected to
increase. There can be no certainty as to whether any Term Asset redeemable at
the option of a Term Assets Issuer will be repaid prior to its stated maturity.
To the extent specified in the related Prospectus Supplement, each of the
Term Assets will be subject to acceleration upon the occurrence of certain Term
Asset Events of Default (as defined herein). The maturity and yield on the
Certificates will be affected by any early repayment of the Term Assets as a
result of the acceleration of the Term Assets. See "Description of Deposited
Assets".
The extent to which the yield to maturity of such Certificates may vary
from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates will also
be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that the
Pass-Through Rate for such Series (or Class) is based on variable or adjustable
interest rates. With respect to any Series of Certificates, disproportionate
principal payments (whether resulting from differences in amortization
schedules, payments due on scheduled maturity or upon early redemption) on the
related Term Assets having interest rates higher or lower than the then
applicable Pass-Through Rates applicable to such Certificates may affect the
yield thereon.
The Prospectus Supplement for each Series of Certificates will set forth
additional information regarding yield and maturity considerations applicable to
such Series (and each Class within such Series) and the related Deposited
Assets, including the applicable Term Assets.
DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates will be issued pursuant to a Trust Agreement and a
separate series supplement
10
<PAGE>
thereto among the Company, the Administrative Agent, if any, and the Trustee
named in the related Prospectus Supplement, a form of which Trust Agreement is
attached as an exhibit to the Registration Statement. The provisions of the
Trust Agreement (as so supplemented) may vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the Deposited Assets,
Credit Support and related Trust.
The following summaries describe material provisions of the Trust
Agreement which may be applicable to each Series of Certificates. The applicable
Prospectus Supplement for a Series of Certificates will describe any material
provision of the Trust Agreement or the applicable Certificates that is not
described in this Prospectus. The following summaries do not purport to be
complete and are subject to the detailed provisions of the form of Trust
Agreement to which reference is hereby made for a full description of such
provisions, including the definition of certain terms used, and for other
information regarding the Certificates. As used herein with respect to any
Series, the term "Certificate" refers to all the Certificates of that Series,
whether or not offered hereby and by the related Prospectus Supplement, unless
the context otherwise requires.
General
There is no limit on the amount of Certificates that may be issued under
the Trust Agreement, and the Trust Agreement will provide that Certificates of
the applicable Series may be issued in multiple Classes. The Series (or Classes
within such Series) of Certificates to be issued under the Trust Agreement will
represent the entire beneficial ownership interest in the Trust for such Series
created pursuant to the Trust Agreement and each such Class will be allocated
certain relative priorities to receive specified collections from, and a certain
percentage ownership interest of the assets deposited in, such Trust, all as
identified and described in the applicable Prospectus Supplement. See
"Description of Deposited Assets and Credit Support--Collections".
Reference is made to the related Prospectus Supplement for a description
of the following terms of the Series (and if applicable, Classes within such
Series) of Certificates in respect of which this Prospectus and such Prospectus
Supplement are being delivered: (i) the title of such Certificates; (ii) the
Series of such Certificates and, if applicable, the number and designation of
Classes of such Series; (iii) certain information concerning the type,
characteristics and specifications of the Deposited Assets being deposited into
the related Trust by the Company (and, with respect to any Term Asset which at
the time of such deposit represents a significant portion of all such Deposited
Assets and any related Credit Support, certain information concerning the terms
of each such Term Asset, the identity of the issuer thereof and where publicly
available information regarding such issuer may be obtained); (iv) the limit, if
any, upon the aggregate principal amount or notional amount, as applicable, of
each Class thereof; (v) the dates on which or periods during which such Series
or Classes within such Series may be issued (each, an "Original Issue Date"),
the offering price thereof and the applicable Distribution Dates on which the
principal, if any, of (and premium, if any, on) such Series or Classes within
such Series will be distributable; (vi) if applicable, the relative rights and
priorities of each such Class (including the method for allocating collections
from and defaults or losses on the Deposited Assets to the Certificateholders of
each such Class); (vii) whether the Certificates of such Series or each Class
within such Series are Fixed Rate Certificates or Floating Rate Certificates
(each as
11
<PAGE>
defined below) and the applicable interest rate (the "Pass-Through Rate") for
each such Class, including the applicable rate, if fixed (a "Fixed Pass-Through
Rate"), or the terms relating to the particular method of calculation thereof
applicable to such Series or each Class within such Series, if variable (a
"Variable Pass-Through Rate"); the date or dates from which such interest will
accrue; the applicable Distribution Dates on which interest, principal and
premium, in each case as applicable, on such Series or Class will be
distributable and the related Record Dates, if any; (viii) the option, if any,
of any Certificateholder of such Series or Class to withdraw a portion of the
assets of the Trust in exchange for surrendering such Certificateholder's
Certificate or to put the Certificate to the Company or a third party or of the
Company or Administrative Agent, if any, or another third party to purchase or
repurchase any Deposited Assets (in each case to the extent not inconsistent
with the Company's or Trust's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder) and
the periods within which or the dates on which, and the terms and conditions
upon which any such option may be exercised, in whole or in part; (ix) the
rating of such Series or each Class within such Series offered hereby (provided,
however, that one or more Classes within such Series not offered hereunder may
be unrated or may be rated below investment grade); (x) if other than
denominations of $1,000 and any integral multiple thereof, the denominations in
which such Series or Class within such Series will be issuable; (xi) whether the
Certificates of any Class within a given Series are to be entitled to (1)
principal distributions, with disproportionate, nominal or no interest
distributions, or (2) interest distributions, with disproportionate, nominal or
no principal distributions ("Strip Certificates"), and the applicable terms
thereof; (xii) whether the Certificates of such Series or of any Class within
such Series are to be issued as Registered Securities or Bearer Certificates or
both and, if Bearer Certificates are to be issued, whether coupons ("Coupons")
will be attached thereto; whether Bearer Certificates of such Series or Class
may be exchanged for Registered Securities of such Series or Class and the
circumstances under which and the place or places at which any such exchanges,
if permitted, may be made; (xiii) whether the Certificates of such Series or of
any Class within such Series are to be issued in the form of one or more Global
Securities and, if so, the identity of the Depositary (as defined herein), if
other than The Depository Trust Company, for such Global Security or Securities;
(xiv) if a temporary Certificate is to be issued with respect to such Series or
any Class within such Series, whether any interest thereon distributable on a
Distribution Date prior to the issuance of a definitive Certificate of such
Series or Class will be credited to the account of the Persons entitled thereto
on such Distribution Date; (xv) if a temporary Global Security is to be issued
with respect to such Series or Class, the terms upon which beneficial interests
in such temporary Global Security may be exchanged in whole or in part for
beneficial interests in a definitive Global Security or for individual
Definitive Certificates (as defined herein) of such Series or Class and the
terms upon which beneficial interests in a definitive Global Security, if any,
may be exchanged for individual Definitive Certificates of such Series or Class;
(xvi) if other than U.S. dollars, the Specified Currency applicable to the
Certificates of such Series or Class for purposes of denominations and
distributions on such Series or each Class within such Series and the
circumstances and conditions, if any, when such Specified Currency may be
changed, at the election of the Company or a Certificateholder, and the currency
or currencies in which any principal of or any premium or any interest on such
Series or Class are to be distributed pursuant to such election; (xvii) any
additional Administrative Agent Termination Events (as defined herein), if
12
<PAGE>
applicable, provided for with respect to such Class; (xviii) all applicable
Required Percentages and Voting Rights (each as defined below) relating to the
manner and percentage of votes of Certificateholders of such Series and each
Class within such Series required with respect to certain actions by the Company
or the applicable Administrative Agent, if any, or the Trustee; and (xix) any
other terms of such Series or Class within such Series of Certificates not
inconsistent with the provisions of the Trust Agreement relating to such Series.
The United States federal income tax consequences and ERISA consequences
relating to any Series or any Class within such Series of Certificates will be
described in this Prospectus and in the applicable Prospectus Supplement. In
addition, any risk factors, the specific terms and other information with
respect to the issuance of any Series or Class within such Series of
Certificates on which the principal of and any premium and interest are
distributable in a Specified Currency other than U.S. dollars will be described
in the applicable Prospectus Supplement relating to such Series or Class. The
U.S. dollar equivalent of the public offering price or purchase price of a
Certificate having a Specified Principal Currency other than U.S. dollars will
be determined on the basis of the noon buying rate in New York City for cable
transfer in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York (the "Market Exchange Rate") for such Specified
Principal Currency on the applicable issue date. As specified in the applicable
Prospectus Supplement such determination will be made by the Company, the
Trustee, the Administrative Agent, if any, or an agent thereof as exchange rate
agent for each Series of Certificates (the "Exchange Rate Agent").
Registered Certificates may be transferred or exchanged for like
Certificates of the same Series and Class at the corporate trust office or
agency of the applicable Trustee in the City and State of New York, subject to
the limitations provided in the Trust Agreement, without the payment of any
service charge, other than any tax or governmental charge payable in connection
therewith. Bearer Certificates will be transferable by delivery. Provisions with
respect to the exchange of Bearer Certificates will be described in the
applicable Prospectus Supplement. Registered Securities may not be exchanged for
Bearer Certificates. The Company may at any time purchase Certificates at any
price in the open market or otherwise. Certificates so purchased by the Company
may, at the discretion of the Company, be held or resold or surrendered to the
Trustee for cancellation of such Certificates.
Distributions
Distributions allocable to principal, premium (if any) and interest on the
Certificates of each Series (and Class within such Series) will be made in the
Specified Currency for such Certificates by or on behalf of the Trustee on each
Distribution Date as specified in the related Prospectus Supplement and the
amount of each distribution will be determined as of the close of business on
the date specified in the related Prospectus Supplement (the "Determination
Date"). If the Specified Currency for a given Series or Class within such Series
of Registered Certificates is other than U.S. dollars, the Administrative Agent,
if any, or otherwise the Trustee will (unless otherwise specified in the
applicable Prospectus Supplement) arrange to convert all payments in respect of
each Certificate of such Series or Class into U.S. dollars in the manner
described in the following paragraph. The Certificateholder of a Registered
Certificate of a given Series or Class within such Series denominated in a
Specified Currency other than U.S. dollars may (if the applicable Prospectus
Supplement and such Certificate so indicate) elect to receive all
13
<PAGE>
distributions in respect of such Certificate in the Specified Currency by
delivery of a written notice to the Trustee and Administrative Agent, if any,
for such Series not later than fifteen calendar days prior to the applicable
Distribution Date, except under the circumstances described under "Currency
Risks--Payment Currency" below. Such election will remain in effect until
revoked by written notice to such Trustee and Administrative Agent, if any,
received by each of them not later than fifteen calendar days prior to the
applicable Distribution Date.
In the case of a Registered Certificate of a given Series or Class within
such Series having a Specified Currency other than U.S. dollars, the amount of
any U.S. dollar distribution in respect of such Registered Certificate will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable Distribution Date (or, if no such rate is quoted on such date, the
last date on which such rate was quoted), from three (or, if three are not
available, then two) recognized foreign exchange dealers in The City of New York
(one of which may be the Offering Agent and another of which may be the Exchange
Rate Agent) selected by the Exchange Rate Agent, for the purchase by the quoting
dealer, for settlement on such Distribution Date, of the aggregate amount
payable in such Specified Currency on such payment date in respect of all
Registered Certificates. All currency exchange costs will be borne by the
Certificateholders of such Registered Certificates by deductions from such
distributions. If no such bid quotations are available, such distributions will
be made in such Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond the Company's control, in which case such distributions will be made as
described under "Currency Risks--Payment Currency" below. The applicable
Prospectus Supplement will specify such information with respect to Bearer
Certificates.
Except as provided in the succeeding paragraph, distributions with respect
to Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement; provided, however, that any such amounts distributable on
the final Distribution Date of a Certificate will be distributed only upon
surrender of such Certificate at the applicable location set forth above. No
distribution on a Bearer Certificate will be made by mail to an address in the
United States or by wire transfer to an account maintained by the
Certificateholder thereof in the United States.
Distributions on Registered Certificates in U.S. dollars will be made,
except as provided below, by check mailed to the Registered Certificateholders
of such Certificates (which, in the case of Global Securities, will be a nominee
of the Depositary); provided, however, that, in the case of a Series or Class of
Registered Certificates issued between a Record Date (as defined herein) and the
related Distribution Dates, interest for the period beginning on the issue date
for such Series or Class and ending on the last day of the interest accrual
period ending immediately prior to or coincident with such Distribution Date
will be distributed on the next succeeding Distribution Date to the Registered
Certificateholders of the Registered Certificates of such Series or Class on the
related Record Date. A Certificateholder of $10,000,000 (or the equivalent
thereof in a Specified Principal Currency other than U.S. dollars) or more in
aggregate principal amount of Registered Certificates of a given Series shall be
entitled to receive such U.S. dollar distributions by wire transfer of
immediately available funds, but only if appropriate wire transfer instructions
have been received in writing by the Trustee for such Series not later
14
<PAGE>
than fifteen calendar days prior to the applicable Distribution Date.
Simultaneously with the election by any Certificateholder to receive payments in
a Specified Currency other than U.S. dollars (as provided above), such
Certificateholder shall provide appropriate wire transfer instructions to the
Trustee for such Series, and all such payments will be made by wire transfer of
immediately available funds to an account maintained by the payee with a bank
located outside the United States.
"Business Day" with respect to any Certificate means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in (a) The City of New
York or (b) if the Specified Currency for such Certificate is other than U.S.
dollars, the financial center of the country issuing such Specified Currency
(which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such Certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Certificate means any day on which
dealings in deposits in the Specified Currency of such Certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
Interest on the Certificates
General. Each Class of Certificates (other than certain Classes of Strip
Certificates) of a given Series may have a different Pass-Through Rate, which
may be a fixed or variable Pass-Through Rate, as described below. In the case of
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance, such distributions of interest will be in an amount (as to any
Distribution Date, "Stripped Interest") described in the related Prospectus
Supplement. For purposes hereof, "Notional Amount" means the notional principal
amount specified in the applicable Prospectus Supplement on which interest on
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance will be made on each Distribution Date. Reference to the Notional Amount
of a Class of Strip Certificates herein or in a Prospectus Supplement does not
indicate that such Certificates represent the right to receive any distributions
in respect of principal in such amount, but rather the term "Notional Amount" is
used solely as a basis for calculating the amount of required distributions and
determining certain relative voting rights, all as specified in the related
Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one Class exists,
each Class within such Series) of Certificates with a fixed Pass-Through Rate
("Fixed Rate Certificates") will bear interest, on the outstanding Certificate
Principal Balance (or Notional Amount, if applicable), from its Original Issue
Date, or from the last date to which interest has been paid, at the fixed
Pass-Through Rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for payment (or in the case of Fixed Rate Certificates with no or a nominal
principal amount, until the Notional Amount thereof is reduced to zero), except
that, if so specified in the applicable Prospectus Supplement, the Pass-Through
Rate for such Series or any such Class or Classes may be subject to adjustment
from time to time in response to designated changes in the rating assigned to
such Certificates by one or more rating agencies, in accordance with a schedule
or otherwise, all as described in such Prospectus Supplement. Interest on each
Series or Class of Fixed Rate Certificates will be distributable in arrears on
each Distribution Date specified in such Prospectus Supplement. Each such
15
<PAGE>
distribution of interest shall include interest accrued through the day
specified in the applicable Prospectus Supplement. Interest on Fixed Rate
Certificates will be computed on the basis of a 360-day year of twelve 30-day
months.
Floating Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the first Interest Reset Date (as defined
herein) for such Series or Class at the Initial Pass-Through Rate set forth on
the face thereof and in the applicable Prospectus Supplement. Thereafter, the
Pass-Through Rate on such Series or Class for each Interest Reset Period (as
defined herein) will be determined by reference to an interest rate basis (the
"Base Rate"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis point
equals one one-hundredth of a percentage point) that may be specified in the
applicable Prospectus Supplement as being applicable to such Series or Class,
and the "Spread Multiplier" is the percentage that may be specified in the
applicable Prospectus Supplement as being applicable to such Series or Class,
except that if so specified in the applicable Prospectus Supplement, the Spread
or Spread Multiplier on such Series or any such Class or Classes of Floating
Rate Certificates may be subject to adjustment from time to time in response to
designated changes in the rating assigned to such Certificates by one or more
rating agencies, in accordance with a schedule or otherwise, all as described in
such Prospectus Supplement. The applicable Prospectus Supplement, unless
otherwise specified therein, will designate one of the following Base Rates as
applicable to a Floating Rate Certificate: (i) LIBOR (a "LIBOR Reference Rate
Certificate"), (ii) the Commercial Paper Rate (a "Commercial Paper Reference
Rate Certificate"), (iii) the Treasury Rate (a "Treasury Reference Rate
Certificate"), (iv) the Federal Funds Rate (a "Federal Funds Reference Rate
Certificate"), (v) the CD Rate (a "CD Reference Rate Certificate") or (vi) such
other Base Rate (which may be based on, among other things, one or more market
indices or the interest and/or other payments (whether scheduled or otherwise)
paid, accrued or available with respect to a designated asset, pool of assets or
type of asset) as is set forth in such Prospectus Supplement and in such
Certificate. The "Index Maturity" for any Series or Class of Floating Rate
Certificates is the period of maturity of the instrument or obligation from
which the Base Rate is calculated. "H.15(519)" means the publication entitled
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve System.
"Composite Quotations" means the daily statistical release entitled "Composite
3:30 p.m. Quotations for U.S. Government Securities" published by the Federal
Reserve Bank of New York.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given Series or Class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period specified in the applicable Prospectus
Supplement ("Maximum Pass-Through Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest accrual
period ("Minimum Pass-Through Rate"). In addition to any Maximum Pass-Through
Rate that may be applicable to any Series or Class of Floating Rate
Certificates, the Pass-Through Rate applicable to any Series or Class of
Floating Rate Certificates will in no event be higher than the maximum rate
permitted by applicable law, as the same may be modified by United States law of
general
16
<PAGE>
application. The Floating Rate Certificates will be governed by the law of the
State of New York and, under such law as of the date of this Prospectus, the
maximum rate of interest, with certain exceptions, is 25% per annum on a simple
interest basis.
The Company will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Pass-Through Rates on each Series or Class of
Floating Rate Certificates. The applicable Prospectus Supplement will set forth
the identity of the Calculation Agent for each Series or Class of Floating Rate
Certificates. All determinations of interest by the Calculation Agent shall, in
the absence of manifest error, be conclusive for all purposes and binding on the
holders of Floating Rate Certificates of a given Series or Class.
The Pass-Through Rate on each Class of Floating Rate Certificates will be
reset daily, weekly, monthly, quarterly, semiannually or annually (such period
being the "Interest Reset Period" for such Class, and the first day of each
Interest Reset Period being an "Interest Reset Date"), as specified in the
applicable Prospectus Supplement. Interest Reset Dates with respect to each
Series, and any Class within such Series of Floating Rate Certificates will be
specified in the applicable Prospectus Supplement; provided, however, that
unless otherwise specified in such Prospectus Supplement, the Pass-Through Rate
in effect for the ten days immediately prior to the Scheduled Final Distribution
Date will be that in effect on the tenth day preceding such Scheduled Final
Distribution Date. If an Interest Reset Date for any Class of Floating Rate
Certificates would otherwise be a day that is not a Business Day, such Interest
Reset Date will occur on a prior or succeeding Business Day, specified in the
applicable Prospectus Supplement.
Interest payable in respect of Floating Rate Certificates shall be the
accrued interest from and including the Original Issue Date of such Series or
Class or the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date.
With respect to a Floating Rate Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such Certificate
(or, in the case of a Strip Certificate with no or a nominal Certificate
Principal Balance, the Notional Amount specified in the applicable Prospectus
Supplement) by an accrued interest factor. Such accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. The interest factor (expressed
as a decimal calculated to seven decimal places without rounding) for each such
day is computed by dividing the Pass-Through Rate in effect on such day by 360,
in the case of LIBOR Reference Rate Certificates, Commercial Paper Reference
Rate Certificates, Federal Funds Reference Rate Certificates and CD Reference
Rate Certificates or by the actual number of days in the year, in the case of
Treasury Reference Rate Certificates. For purposes of making the foregoing
calculation, the variable Pass-Through Rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date.
All percentages resulting from any calculation of the Pass-Through Rate on
a Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
17
<PAGE>
Interest on any Series (or Class within such Series) of Floating Rate
Certificates will be distributable on the Distribution Dates and for the
interest accrual periods as and to the extent set forth in the applicable
Prospectus Supplement.
Upon the request of the holder of any Floating Rate Certificate of a given
Series or Class, the Calculation Agent for such Series or Class will provide the
Pass-Through Rate then in effect and, if determined, the Pass-Through Rate that
will become effective on the next Interest Reset Date with respect to such
Floating Rate Certificate.
(1) CD Reference Rate Certificates. Each CD Reference Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the CD Rate and the Spread or Spread Multiplier, if
any, specified in such Certificate and in the applicable Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)". In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined herein) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "CD Rate" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Reference Rate Certificate and will be the arithmetic mean of the secondary
market offered rates as of 10:00 a.m., New York City time, on such CD Rate
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for such CD Reference Rate Certificate for negotiable certificates of
deposit of major United States money center banks of the highest credit standing
(in the market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the related Prospectus Supplement in
a denomination of $5,000,000; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "CD Rate" for such Interest Reset Period will be the same
as the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (b) the second Business Day preceding the date any distribution
of interest is required to be made following the applicable Interest Reset Date.
(2) Commercial Paper Reference Rate Certificates. Each Commercial Paper
Reference Rate Certificate will bear interest for each Interest Reset Period at
the Pass-Through
18
<PAGE>
Rate calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Reference Rate
Certificate as of the second Business Day prior to the Interest Reset Date for
such Interest Reset Period (a "Commercial Paper Rate Determination Date") and
shall be the Money Market Yield (as defined herein) on such Commercial Paper
Rate Determination Date of the rate for commercial paper having the Index
Maturity specified in the applicable Prospectus Supplement, as such rate shall
be published in H.15(519) under the heading "Commercial Paper". In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined herein) pertaining to such Commercial Paper Rate
Determination Date, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper". If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York
City time, on such Commercial Paper Rate Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Reference Rate Certificate for commercial paper
of the specified Index Maturity placed for an industrial issuer whose bonds are
rated "AA" or the equipment by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
-------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
Business Day, the next succeeding Business Day or (b) the second Business Day
preceding the date any distribution of interest is required to be made following
the applicable Interest Reset Date.
(3) Federal Funds Reference Rate Certificates. Each Federal Funds
Reference Rate Certificate will bear interest for each Interest Resort Period at
the Pass-Through Rate calculated
19
<PAGE>
with name to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Certificate and in the applicable Prospectus Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)". In the event that such
rate is not published prior to 3:00 p.m., New York City time on the Calculation
Date (as defined herein) pertaining to such Federal Funds Rate Determination
Date, the "Federal Funds Rate" for such Interest Reset Period shall be the rate
on such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "Federal Funds Rate" for such
Interest Reset Period shall be the rate on such Federal Funds Rate Determination
Date made publicly available by, the Federal Reserve Bank of New York which is
equivalent to the rate which appears in H.15(519) under the heading "Federal
Funds (Effective)", provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Calculation Date, the "Federal Funds Rate" for such Interest Reset
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Pass-Through Rate). Unless otherwise specified in the applicable
Prospectus Supplement, in the case of a Federal Funds Reference Rate Certificate
that resets daily, the Pass-Through Rate on such Certificate for the period from
and including a Monday to but excluding the succeeding Monday will be reset by
the Calculation Agent for such Certificate on such second Monday (or, if not a
Business Day, on the next succeeding Business Day) to a rate equal to the
average of the Federal Funds Rates in effect with respect to each such day in
such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Reference Rate Certificates. Each LIBOR Reference Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to LIBOR and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Reference Rate Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Reference Rate Certificate will determine
the arithmetic mean of the offered rates for deposits in U.S. dollars for
the period of the Index Maturity specified in the applicable Prospectus
Supplement, commencing on such Interest Reset Date, which appear on the
Reuters Screen LIBO Page at approximately 11:00 a.m., London time, on such
LIBOR Determination Date. "Reuters Screen LIBO Page" means the display
designated as page "LIBOR" on the Reuters Monitor Money Rates Service (or
20
<PAGE>
such other page may replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major banks). If at least
two such offered rates appear on the Reuters Screen LIBO Page, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of such offered
rates as determined by the Calculation Agent for such LIBOR Reference Rate
Certificate.
(ii) If fewer than two offered rates appear on the Reuters Screen
LIBO Page on such LIBOR Determination Date, the Calculation Agent for such
LIBOR Reference Rate Certificate will request the principal London offices
of each of four major banks in the London interbank market selected by
such Calculation Agent to provide such Calculation Agent with its offered
quotations for deposits in U.S. dollars for the period of the specified
Index Maturity, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single transaction
in such market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of such
quotations. If fewer than two such quotations are provided, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of rates quoted by
three major banks in The City of New York selected by the Calculation
Agent for such LIBOR Reference Rate Certificate at approximately 11:00
a.m., New York City time, on such LIBOR Determination Date for loans in
U.S. dollars to leading European banks, for the period of the specified
Index Maturity, commencing on such Interest Reset Date, and in a principal
amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Reference Rate Certificate is indexed
to the offered rates for deposits in a currency other than U.S. dollars, the
applicable Prospectus Supplement will set forth the method for determining such
rate.
(5) Treasury Reference Rate Certificates. Each Treasury Reference Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Treasury Rate and the Spread
or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
The "Treasury Rate" for each Interest Reset Period will be the rate for
the auction held on the Treasury Rate Determination Date (as defined herein) for
such Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H.15(519) under the heading "U.S.
Government Certificates-Treasury bills-auction average (investment)" or, in the
event that such rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date (as defined herein) pertaining to such Treasury Rate
Determination Date, the auction
21
<PAGE>
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) on such Treasury Rate
Determination Date as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury bills having
the specified Index Maturity are not published or reported as provided above by
3:00 p.m., New York City time, on such Calculation Date, or if no such auction
is held on such Treasury Rate Determination Date, then the "Treasury Rate" for
such Interest Reset Period shall be calculated by the Calculation Agent for such
Treasury Reference Rate Certificate and shall be a yield to maturity (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Reference
Rate Certificate, then such Interest Reset Date shall instead be the Business
Day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
Principal of the Certificates
Each Certificate (other than certain Classes of Strip Certificates) will
have a "Certificate Principal Balance" which, at any time, will equal the
maximum amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Distributions generally will be applied to
undistributed accrued interest on, then to principal of, and then to premium (if
any) on, each such Certificate of the Class or Classes entitled thereto (in the
manner and priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, applicable pursuant to
the terms of the related Series, by the amount of any net losses realized on any
Deposited Asset
22
<PAGE>
("Realized Losses") allocated thereto. The initial aggregate Certificate
Principal Balance of a Series and each Class thereof will be specified in the
related Prospectus Supplement. Distributions of principal of any Class of
Certificates will be made on a pro rata basis among all the Certificates of such
Class. Strip Certificates with no Certificate Principal Balance will not receive
distributions of principal.
Optional Exchange
If a holder may exchange Certificates of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series". The terms upon which a holder
may exchange Certificates of any Exchangeable Series for a pro rata portion of
the Deposited Assets of the related Trust will be specified in the related
Prospectus Supplement; provided that any right of exchange shall be exerciseable
only to the extent that such exchange would not be inconsistent with the
Company's and such Trust's continued satisfaction of the applicable requirements
for exemption under Rule 3a-7 under the Investment Company Act of 1940 and all
applicable rules, regulations and interpretations thereunder. Such terms may
relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the
Trustee Certificates of each Class within such Exchangeable
Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each Certificate tendered for exchange be an integral
multiple of an amount specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such
an exchange (each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any Credit Support or other non-Term Assets deposited
in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based upon
the required prepayment of future expense allocations and the establishment of a
reserve for any anticipated Extraordinary Trust Expenses.
In order for a Certificate of a given Exchangeable Series (or Class within
such Exchangeable Series) to be exchanged by the applicable Certificateholder,
the Trustee for such Certificate must receive, at least 30 (or such shorter
period acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
23
<PAGE>
forth the name of the holder of such Registered Certificate, the Certificate
Principal Balance or Notional Amount of such Registered Certificate to be
exchanged, the certificate number or a description of the tenor and terms of
such Registered Certificate, a statement that the option to elect exchange is
being exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by such Trustee not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Certificate and form duly
completed must be received by such Trustee by such fifth Business Day. Any
tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of such Certificate provided that the
Certificate Principal Balance or Notional Amount, as applicable, of such
Certificate remaining outstanding after redemption is an authorized denomination
and all other exchange requirements set forth in the related Prospectus
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for the remaining Certificate
Principal Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged Certificate).
Because initially and unless and until Definitive Certificates are issued
each Certificate will be represented by a Global Security, the Depositary's
nominee will be the Certificateholder of such Certificate and therefore will be
the only entity that can exercise a right of exchange. In order to ensure that
the Depositary's nominee will timely exercise a right of exchange with respect
to a particular Certificate, the beneficial owner of such Certificate must
instruct the broker or other direct or indirect participant through which it
holds an interest in such Certificate to notify the Depositary of its desire to
exercise a right of exchange. Different firms have different cut-off times for
accepting instructions from their customers and, accordingly, each beneficial
owner should consult the broker or other direct or indirect participant through
which it holds an interest in a Certificate in order to ascertain the cut-off
time by which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Deposited Assets, as described in the
applicable Prospectus Supplement, the applicable Certificateholder will be
entitled to receive a distribution of a pro rata share of the Deposited Assets
related to the Exchangeable Series (and Class within such Exchangeable Series)
of the Certificate being exchanged, in the manner and to the extent described in
such Prospectus Supplement, and would therefore own the Deposited Assets and
have the ability to enforce their rights directly as owners of the Deposited
Assets. Alternatively, to the extent so specified in the applicable Prospectus
Supplement, the applicable Certificateholder, upon satisfaction of such
conditions, may direct the related Trustee to sell, on behalf of such
Certificateholder, such pro rata share of the Deposited Assets, in which event
the Certificateholder shall be entitled to receive the net proceeds of such
sale, less any costs and expenses incurred by such Trustee in facilitating such
sale, subject to any additional adjustments set forth in the Prospectus
Supplement.
24
<PAGE>
Put Option
If specified in the applicable Prospectus Supplement, a holder may put
Certificates of a given Series to the Company or a third party. The terms upon
which a holder may put its Certificates (including the price) will be specified
in the related Prospectus Supplement; provided, however, any put option shall be
exerciseable only to the extent that such put would not be inconsistent with the
Company's or Trust's continued satisfaction of the applicable requirements for
exemption under Rule 3a-7 under the Investment Company Act of 1940 and all
applicable rules, regulations and interpretations thereunder.
Global Securities
All Certificates of a given Series (or, if more than one Class exists, any
given Class within that Series) will, upon issuance, be represented by one or
more Global Securities that will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. Global Securities may be issued in either
registered or bearer form and in either temporary or definitive form. See
"Limitations on Issuance of Bearer Certificates" for provisions applicable to
Certificate issued in bearer form. Unless and until it is exchanged in whole or
in part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor.
The Depository Trust Company has advised the Company as follows: The
Depository Trust Company is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depository Trust Company was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among the institutions that have accounts with such
Depositary ("participants") in such securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Such Depositary's participants
include securities brokers and dealers (including the Offering Agent), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own such Depositary. Access to such
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The Depository
Trust Company has confirmed to the Company that it intends to follow such
procedures.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Certificates represented by such
Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Certificates, or, if
such Certificates are offered and sold directly through one or more agents, by
25
<PAGE>
the Company or such agent or agents. Ownership of beneficial interests in a
Global Security will be limited to participants or Persons that may hold
beneficial interests through participants. Ownership of beneficial interests in
a Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary for such Global
Security or by participants or Persons that hold through participants. The laws
of some states require that certain purchasers of securities take physical
delivery of such securities. Such limits and such laws may limit the market for
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Certificateholder of the individual Certificates
represented by such Global Security for all purposes. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to have
any of the individual Certificates represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Certificates and will not be considered the
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Certificate to pledge that Certificate to persons or entries
that do not participate in the Depositary's system, or to otherwise act with
respect to such Certificate, may be limited due to the lack of a physical
certificate for such Certificate.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Certificates" below, distributions of principal of (and premium, if any)
and any interest on individual Certificates represented by a Global Security
will be made to the Depositary or its nominee, as the case may be, as the
Certificateholder of such Global Security. None of the Company, the
Administrative Agent, if any, the Trustee for such Certificates, any Paying
Agent or the Certificate Registrar for such Certificates will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests. Receipt by owners of beneficial interests in a temporary Global
Security of payments of principal, premium or interest in respect thereof will
be subject to the restrictions discussed below under "Limitations on Issuance of
Bearer Certificates" below.
The Company expects that the Depositary for Certificates of a given Class
and Series, upon receipt of any distribution of principal, premium or interest
in respect of a definitive Global Security representing any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such participants. Receipt
by owners of beneficial interests in a temporary Global Security of payments of
principal, premium or interest in respect thereof will be subject to the
restrictions discussed below under "Limitations on Issuance of Bearer
Certificates".
If the Depositary for Certificates of a given Class of any Series is at
any time unwilling or unable to continue as depositary and a successor
26
<PAGE>
depositary is not appointed by the Company within ninety days, the Company will
issue individual Definitive Certificates in exchange for the Global Security or
Securities representing such Certificates. In addition, the Company may at any
time and in its sole discretion determine not to have any Certificates of a
given Class represented by one or more Global Securities and, in such event will
issue individual Definitive Certificates of such Class in exchange for the
Global Security or Securities representing such Certificates. Further, if the
Company so specifies with respect to the Certificates of a given Class, an owner
of a beneficial interest in a Global Security representing Certificates of such
Class may, on terms acceptable to the Company and the Depositary for such Global
Security, receive individual Definitive Certificates in exchange for such
beneficial interest. In any such instance, an owner of a beneficial interest in
a Global Security will be entitled to physical delivery of individual Definitive
Certificates of the Class represented by such Global Security equal in principal
amount to such beneficial interest and to have such Definitive Certificates
registered in its name (if the Certificates of such Class are issuable as
Registered Certificates). Individual Definitive Certificates of such Class so
issued will be issued as (a) Registered Certificates in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Certificates or such Class are issuable as Registered Securities, (b) as
Bearer Certificates in the denomination or denominations specified by the
Company if the Certificates of such Class are issuable as Bearer Certificates or
(c) as either Registered or Bearer Certificates, if the Certificates of such
Class are issuable in either form. See, however, "Limitations on Issuance of
Bearer Certificates" below for a description of certain restrictions on the
issuance of individual Bearer Certificates in exchange for beneficial interests
in a Global Security.
The applicable Prospectus Supplement will set forth any material terms of
the depositary arrangement with respect to any Class or Series of Certificates
being offered thereby to the extent not set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
General
Each Certificate of each Series (or if more than one Class exists, each
Class (whether or not each such Class is offered hereby) within such Series)
will represent an ownership interest specified for such Series (or Class) of
Certificates in a designated, publicly issued, fixed income debt security or
asset backed security or a pool of such debt securities or asset backed
securities (the "Term Assets") issued by one or more issuers (the "Term Assets
Issuers"), purchased by a Trust with proceeds from, and at the direction of, the
Company or purchased by the Company (or an affiliate thereof) in the secondary
market and assigned to a Trust as described in the applicable Prospectus
Supplement. The Term Assets Issuers will be one or more corporations, banking
organizations, insurance companies or special purpose vehicles (including trust,
limited liability companies, partnerships or other special purpose entities)
organized under the laws of the United States or any state, which are subject to
the informational requirements of the Exchange Act and which, in accordance
therewith, file reports and other information with the Commission. Based on
information contained in the offering document pursuant to which any Term Assets
Issuer's securities were originally offered (a "Term Assets Prospectus"), the
applicable Prospectus Supplement shall set forth certain information with
respect to the public availability of information with respect to any Term
27
<PAGE>
Assets Issuer the debt securities of which constitute more than ten percent of
the Term Assets for any series of Certificates as of the date of such Prospectus
Supplement ("Concentrated Term Assets"). Material terms of the Term Assets will
be set forth in the related Prospectus Supplement.
The following is a general description of the Deposited Assets which the
Company is permitted to include in a Trust and does not purport to be a complete
description of any such Deposited Asset. This description is qualified in its
entirety by reference to the applicable Prospectus Supplement, the Term Assets
Prospectus and the Term Assets themselves. Material information regarding the
actual Deposited Assets, as of the Cut-off Date (as defined herein), will be
provided in the Prospectus Supplement used to offer a Series of Certificates. A
maximum of 5% of the aggregate principal balance of the Deposited Assets
included with respect to a Series of Certificates as described in this
Prospectus and the related Prospectus Supplement as of the relevant Cut-off Date
will deviate from the characteristics of the assets as of the date of issuance
of such Series.
Term Assets
General. As specified in the related Prospectus Supplement, each Term
Asset will have been issued pursuant to an agreement (each, a "Term Assets
Indenture") between the Term Assets Issuer and the Term Assets Trustee. Unless
otherwise specified, the Term Assets Indenture and the Term Assets Trustee will
be qualified under the Trust Indenture Act of 1939 (the "TIA") and the Term
Assets Indenture will contain certain provisions required by the TIA.
Certain Covenants. Indentures generally contain covenants intended to
protect security holders against the occurrence or effects of certain specified
events, including restrictions limiting the issuer's, and in some cases any
subsidiary's, ability to: (i) consolidate, merge, or transfer or lease assets;
(ii) incur or suffer to exist any lien, charge, or encumbrance upon any of its
property or assets, or to incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money if the payment of such indebtedness is secured
by the grant of such a lien; (iii) declare or pay any cash dividends, or make
any distribution on or in respect of, or purchase, redeem, exchange or otherwise
acquire or retire for value any capital stock or subordinated indebtedness of
the issuer or its subsidiaries, if any. An indenture may also contain financial
covenants which, among other things, require the maintenance of certain
financial ratios or the creation or maintenance of reserves. Subject to certain
exceptions, indentures typically may be amended or supplemented and past
defaults may be waived with the consent of the indenture trustee, the consent of
the holders of not less than a specified percentage of the outstanding
securities, or both.
The Term Assets Indenture related to one or more Term Assets included in a
Trust may include some, all or none of the foregoing provisions or variations
thereof or additional covenants not discussed herein. To the extent that the
Term Assets are investment grade debt they are unlikely to contain significant
restrictive covenants although certain non-investment grade debt may not be
subject to restrictive covenants either. There can be no assurance that any such
provision will protect the Trust or Trustee as a holder of the Term Assets
against losses. The Prospectus Supplement used to offer any Series of
Certificates will describe material covenants in relation to any Concentrated
Term Asset and, as applicable, will describe material covenants which are common
to any pool of Term Assets.
28
<PAGE>
Events of Default. Indentures generally provide that any one of a number
of specified events will constitute an event of default with respect to the
securities issued thereunder. Such events of default typically include the
following or variations thereof: (i) failure by the issuer to pay an installment
of interest or principal on the securities at the time required (subject to any
specified grace period) or to redeem any of the securities when required
(subject to any specified grace period); (ii) failure by the issuer to observe
or perform any covenant, agreement, or condition contained in the securities or
the indenture which failure is materially adverse to security holders and
continues for a specified period after notice thereof is given to the issuer by
the indenture trustee or the holders of not less than a specified percentage of
the outstanding securities; (iii) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to certain
of the other outstanding debt obligations of the issuer or the acceleration by
or on behalf of the holders thereof of such securities, and (iv) certain events
of insolvency or bankruptcy with respect to the Term Assets Issuer.
Remedies. Indentures generally provide that upon the occurrence of an
event of default, the indenture trustee may, and upon the written request of the
holders of not less than a specified percentage of the outstanding securities
must, take such action as it may deem appropriate to protect and enforce the
rights of the security holders. Certain indentures provide that the indenture
trustee or a specified percentage of the holders of the outstanding securities
have the right to declare all or a portion of the principal and accrued interest
on the outstanding securities immediately due and payable upon the occurrence of
certain events of default, subject to the issuer's right to cure, if applicable.
Generally, an indenture will contain a provision entitling the trustee
thereunder to be indemnified by the security holders prior to proceeding to
exercise any right or power under such indenture with respect to such securities
at the request of such security holders. An indenture is also likely to limit a
security holder's right to institute certain actions or proceedings to pursue
any remedy under the indenture unless certain conditions are satisfied,
including consent of the indenture trustee, that the proceeding be brought for
the ratable benefit of all holders of the security, and/or the indenture
trustee, after being requested to institute a proceeding by the owners of at
least a specified minimum percentage of the securities, shall have refused or
neglected to comply with such request within a reasonable time.
Each Term Assets Indenture may include some, all or none of the foregoing
provisions or variations thereof or additional events of default not discussed
herein. The Prospectus Supplement with respect to any Series of Certificates
will describe the events of default under the Term Assets Indenture with respect
to any Concentrated Term Asset ("Term Asset Events of Default") and applicable
remedies with respect thereto. With respect to any Trust comprised of a pool of
securities, the applicable Prospectus Supplement will describe certain common
Term Asset Events of Default with respect to such pool. There can be no
assurance that any such provision will protect the Trust, as a holder of the
Term Assets, against losses. If a Term Asset Event of Default occurs and the
Trustee as a holder of the Term Assets is entitled to vote or take such other
action to declare the principal amount of a Term Assets and any accrued and
unpaid interest thereon to be due and payable, the Certificateholders'
objectives may differ from those of holders of other securities of the same
series and class as any Term Asset ("outstanding debt securities") in
determining whether to declare the acceleration of the Term Assets.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Term Assets with respect to any Trust may be either senior
("Senior Term Assets") or subordinated
29
<PAGE>
("Subordinated Term Assets") in right to payment to other existing or future
indebtedness of the Term Assets Issuer. With respect to Subordinated Term
Assets, to the extent of the subordination provisions of such securities, and
after the occurrence of certain events, security holders and direct creditors
whose claims are senior to Subordinated Term Assets, if any, may be entitled to
receive payment of the full amount due thereon before the holders of any
subordinated debt securities are entitled to receive payment on account of the
principal (and premium, if any) or any interest on such securities.
Consequently, the Trust or Trustee as a holder of subordinated debt may suffer a
greater loss than if it held unsubordinated debt of the Term Assets Issuer.
There can be no assurance, however, that in the event of a bankruptcy or similar
proceeding the Trust or Trustee as a holder of Senior Term Assets would receive
all payments in respect of such securities even if holders of subordinated
securities receive amounts in respect of such securities. Reference is made to
the Prospectus Supplement used to offer any Series of Certificates for a
description of any subordination provisions with respect to any Concentrated
Term Assets and the percentage of Senior Term Assets and Subordinated Term
Assets, if any, in a Trust comprised of a pool of securities.
Secured Obligations. Certain of the Term Assets with respect to any Trust
may represent secured obligations of the Term Assets Issuer ("Secured Term
Assets"). Generally, unless an event of default shall have occurred, or with
respect to certain collateral or as otherwise set forth in the indenture
pursuant to which such securities were offered and sold, an issuer of secured
obligations generally has the right to remain in possession and retain exclusive
control of the collateral securing a security and to collect, invest and dispose
of any income related to the collateral. The indenture pursuant to which any
secured indebtedness is issued may also contain certain provisions for release,
substitution or disposition of collateral under certain circumstances with or
without the consent of the indenture trustee or upon the direction of not less
than a specified percentage of the security holders. The indenture pursuant to
which any secured indebtedness is issued will also provide for the disposition
of the collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal (and
premium, if any) or any interest on such securities pending the sale of any
collateral and prior to or during such period the related collateral may decline
in value. If proceeds of the sale of collateral following an indenture event of
default are insufficient to repay all amounts due in respect of any secured
obligations, the holders of such securities (to the extent not repaid from the
proceeds of the sale of the collateral) would have only an unsecured claim
ranking pari passu with the claims of all other general unsecured creditors.
The Term Assets Indenture with respect to any Secured Term Asset may
include, some, or all or none of the foregoing provisions or variations thereof.
The Prospectus Supplement used to offer any Series of Certificates which
includes Concentrated Term Assets which are Secured Term Assets, will describe
the security provisions of such Term Assets and the related collateral. With
respect to any Trust comprised of a pool of securities, a substantial portion of
which are Secured Term Assets, the applicable Prospectus Supplement will
disclose certain general information with respect to such security provisions
and the collateral.
30
<PAGE>
Principal Economic Terms of Term Assets
The applicable Prospectus Supplement will disclose the name of each Term
Assets Issuer with respect to the applicable Series of Certificates. In
addition, reference is made to the applicable Prospectus Supplement with respect
to each Series of Certificates for a description of the following terms, as
applicable, of any Concentrated Term Asset: (i) the title and series of such
Term Assets, the aggregate principal amount, denomination and form thereof; (ii)
whether such securities are senior or subordinated to any other obligations of
the issuer; (iii) whether any of the obligations are secured or unsecured and
the nature of any collateral; (iv) the limit, if any, upon the aggregate
principal amount of such debt securities; (v) the dates on which, or the range
of dates within which, the principal of (and premium, if any, on) such debt
securities will be payable; (vi) the rate or rates or the method of
determination thereof, at which such Term Assets will bear interest, if any
("Term Assets Rate"); the date or dates from which such interest will accrue
("Term Assets Interest Accrual Periods"); and the dates on which such interest
will be payable ("Term Assets Payment Dates"); (vii) the obligation, if any, of
the Term Assets Issuer to redeem the outstanding debt securities pursuant to any
sinking fund or analogous provisions, or at the option of a holder thereof, and
the periods within which or the dates on which, the prices at which and the
terms and conditions upon which such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Term Assets Issuer; (ix) whether the Term
Assets were issued at a price lower than the principal amount thereof; (x) if
other than United States dollars, the foreign or composite currency in which
such debt securities are denominated, or in which payment of the principal of
(and premium, if any) or any interest on such Term Assets will be made (the
"Term Assets Currency"), and the circumstances, if any, when such currency of
payment may be changed; (xi) material events of default or restrictive covenants
provided for with respect to such Term Assets; (xii) the rating thereof, if any;
and (xiii) any other material terms of such Term Assets.
With respect to a Trust comprised of a pool of Term Assets, the related
Prospectus Supplement will, to the extent applicable, describe the composition
of the Term Assets pool as of the Cut-off Date, certain material events of
default or restrictive covenants common to the Term Assets, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in the
preceding paragraph and any other material terms regarding such pool of
securities.
Publicly Available Information
In addition to the foregoing, the applicable Prospectus Supplement will
describe, with respect to each Concentrated Term Assets Issuer, the existence
and type of certain information that is made publicly available by such Term
Assets Issuer regarding such Term Asset or Term Assets and will disclose where
and how prospective purchasers of the Certificates may obtain such publicly
available information with respect to each such Term Assets Issuer. Such
information will typically consist of such Term Assets Issuer's annual report,
which contains financial statements or similar financial information, and can be
obtained from the Commission, if so specified in the applicable Prospectus
Supplement, or from the office of such Term Assets Issuer identified in the
related Prospectus Supplement. However, the precise nature of such
31
<PAGE>
publicly available information and where and how it may be obtained with respect
to any given Term Assets Issuer will vary, and, as described above, will be set
forth in the applicable Prospectus Supplement.
Other Deposited Assets
In addition to the Term Assets, the Company may also deposit into a given
Trust, or the Trustee on behalf of the Certificateholders of a Trust, may enter
into an agreement constituting or providing for the purchase of, to the extent
described in the related Prospectus Supplement, certain assets related or
incidental to one or more of such Term Assets or to some other asset deposited
in the Trust, including hedging contracts and other similar arrangements (such
as puts, calls, interest rate swaps, currency swaps, credit swaps, default
swaps, floors, caps and collars, cash and assets ancillary or incidental to the
foregoing or to the Term Assets (including assets obtained through foreclosure
or in settlement of claims with respect thereto) (all such assets for any given
Series, together with the related Term Assets, the "Deposited Assets"). The
applicable Prospectus Supplement will to the extent appropriate contain
analogous disclosure with respect to the foregoing assets as referred to above
with respect to the Term Assets.
The Deposited Assets for a given Series of Certificates and the related
Trust will not constitute Deposited Assets for any other Series of Certificates
and the related Trust and the Certificates of each Class of a given Series
possess an equal and ratable interest in such Deposited Assets. The applicable
Prospectus Supplement may, however, specify that certain assets constituting a
part of the Deposited Assets relating to any given Series may be beneficially
owned solely by or deposited solely for the benefit of one Class or a group of
Classes within such Series. In such event, the other Classes of such Series will
not possess any beneficial ownership interest in those specified assets
constituting a part of the Deposited Assets.
Credit Support
As specified in the applicable Prospectus Supplement for a given Series of
Certificates, the Trust for any Series of Certificates may include, or the
Certificateholders of such Series (or any Class or group of Classes within such
Series) may have the benefit of, Credit Support for any Class or group of
Classes within such Series. Such Credit Support may be provided by any
combination of the following means described below. The applicable Prospectus
Supplement will set forth whether the Trust for any Class or group of Classes of
Certificates contains, or the Certificateholders of such Certificates have the
benefit of, Credit Support and, if so, the amount, type and other relevant terms
of each element of Credit Support with respect to any such Class or Classes and
certain information with respect to the obligors of each such element. In
addition, the applicable Prospectus Supplement will include (or incorporate by
reference, as applicable) audited financial statements for any obligor providing
Credit Support for 20% or more of the cashflow of the relevant Series and
information required by Item 301 of Regulation S-K for any obligor providing
Credit Support for between 10 and 20% of the cashflow of such Series.
Subordination. As discussed below under "--Collections", the rights of the
Certificateholders of any given Class within a Series of Certificates to receive
collections from the Trust for such Series and any Credit Support obtained for
the benefit of the Certificateholders of such Series (or Classes within such
Series) may be subordinated to the rights of the Certificateholders of one or
32
<PAGE>
more other Classes of such Series to the extent described in the related
Prospectus Supplement. Such subordination accordingly provides some additional
credit support to those Certificateholders of those other Classes. For example,
its losses are realized during a given period on the Deposited Assets relating
to a Series of Certificates such that the collections received thereon are
insufficient to make all distributions on the Certificates of such Series, those
realized losses would be allocated to the Certificateholder of any Class of such
Series that is subordinated to another Class, to the extent and in the manner
provided in the related Prospectus Supplement. In addition, if so provided in
the applicable Prospectus Supplement, certain amounts otherwise payable to
Certificateholders of any Class that is subordinated to another Class may be
required to be deposited into a reserve account. Amounts held in any reserve
account may be applied as described below under "-Reserve Accounts" and in the
related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit Support
for any Series or Class of Certificates may include, in addition to the
subordination of certain Classes of such Series and the establishment of a
reserve account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
Class will be limited to the extent necessary to make required distributions to
the Certificateholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any Series (or
Class or group of Classes of Certificates within such Series) may, if specified
in the applicable Prospectus Supplement, have the benefit of a letter or letters
of credit (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or
a surety bond or bonds (a "Surety Bond") issued by a surety company (a
"Surety"). In either case, the Trustee or such other person specified in the
applicable Prospectus Supplement will use its reasonable efforts to cause the
Letter of Credit or the Surety Bond, as the case may be, to be obtained, to be
kept in full force and effect (unless coverage thereunder has been exhausted
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. The Trustee or such other person
specified in the applicable Prospectus Supplement will make or cause to be made
draws under the Letter of Credit or the Surety Bond, as the case may be, under
the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will
describe the manner, priority and source of funds by which any such draws are to
be repaid.
In the event that the Letter of Credit Bank or the Surety, as applicable,
ceases to satisfy any credit rating or other applicable requirements specified
in the related Prospectus Supplement, the Trustee or such other person specified
in the applicable Prospectus Supplement will use its reasonable efforts to
obtain or cause to be obtained a substitute Letter of Credit or Surety Bond, as
applicable, or other form of credit enhancement providing similar protection,
that meets such requirements and provides the same coverage to the extent
available for the same cost. There can be no assurance that any Letter of Credit
Bank or any Surety, as applicable, will continue to satisfy such requirements or
that any such substitute Letter of Credit, Surety Bond or similar
33
<PAGE>
credit enhancement will be available providing equivalent coverage for the same
cost. To the extent not so available, the credit support otherwise provided by
the Letter of Credit or the Surety Bond (or similar credit enhancement) may be
reduced to the level otherwise available for the same cost as the original
Letter of Credit or Surety Bond.
Reserve Accounts. If so provided in the related Prospectus Supplement, the
Trustee or such other person specified in the Prospectus Supplement will deposit
or cause to be deposited into an account maintained with an eligible institution
(which may be the Trustee) (a "Reserve Account") any combination of cash or
permitted investments in specified amounts, which will be applied and maintained
in the manner and under the conditions specified in such Prospectus Supplement.
In the alternative or in addition to such deposit, a Reserve Account may be
funded through application of a portion of collections received on the Deposited
Assets for a given Series of Certificates, in the manner and priority specified
in the applicable Prospectus Supplement Amounts may be distributed to
Certificateholders of such Class or group of Classes within such Series, or may
be used for other purposes, in the manner and to the extent provided in the
related Prospectus Supplement. Amounts deposited in any Reserve Account will be
invested in certain permitted investments by, or at the direction of, the
Trustee, the Company or such other person named in the related Prospectus
Supplement.
Other Credit Support. If so provided in the related Prospectus Supplement,
the Trust may include, or the Certificateholders of any Series (or any Class or
group of Classes within such Series) may have the benefit of, one or more
interest rate, currency, securities, commodity or credit swaps, caps, floors,
collars or options. The Prospectus Supplement will identify the counterparty to
any such instrument and will provide a description of the material terms
thereof.
Collections
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to administer
the related Deposited Assets, including making collections of all payments made
thereon, depositing from time to time prior to any applicable Distribution Date
such collections into a segregated account maintained or controlled by the
applicable Trustee for the benefit of such Series (each a "Certificate
Account"). An Administration Agent, if any is appointed pursuant to the
applicable Prospectus Supplement, will direct the Trustee, and otherwise the
Trustee will make all determinations, as to the appropriate application of such
collections and other amounts available for distribution to the payment of any
administrative or collection expenses (such as any administrative fee) and
certain Credit Support-related ongoing fees (such as insurance premiums, letter
of credit fees or any required account deposits) and to the payment of amounts
then due and owing on the Certificates of such Series (and Classes within such
Series), all in the manner and priorities described in the related Prospectus
Supplement. The applicable Prospectus Supplement will specify the collection
periods, if applicable, and Distribution Dates for a given Series of
Certificates and the particular requirements relating to the segregation and
investment of collections received on the Deposited Assets during a given
collection period or on or by certain specified dates. There can be no assurance
that amounts received from the Deposited Assets and any Credit Support obtained
for the benefit of Certificateholders for a particular Series or Class of
Certificates over a specified period will be sufficient, after payment of all
prior expenses and fees for such period, to pay
34
<PAGE>
amounts then due and owing to holders of such Certificates. The applicable
Prospectus Supplement will also set forth the manner and priority by which any
Realized Loss will be allocated among the Classes of any Series of Certificates,
if applicable.
The relative priorities of distributions with respect to collections from
the assets of the Trust assigned to Classes of a given Series of Certificates
may permanently or temporarily change over time upon the occurrence of certain
circumstances specified in the applicable Prospectus Supplement. Moreover, the
applicable Prospectus Supplement may specify that the relative distribution
priority assigned to each Class of a given Series for purposes of payments of
certain amounts, such as principal, may be different from the relative
distribution priority assigned to each such Class for payments of other amounts,
such as interest or premium.
DESCRIPTION OF TRUST AGREEMENT
General
The following summary of material provisions of the Trust Agreement and
the Certificates does not purport to be complete and such summary is qualified
in its entirety by reference to the detailed provisions of the form of Trust
Agreement filed as an exhibit to the Registration Statement. The applicable
Prospectus Supplement for a Series of Certificates will describe any applicable
material provision of the Trust Agreement or the Certificates that is not
described herein. Wherever particular sections or defined terms of the Trust
Agreement are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
Assignment of Deposited Assets
At the time of issuance of any Series of Certificates, the Company will
cause the Term Assets to be included in the related Trust, and any other
Deposited Asset specified in the Prospectus Supplement, to be assigned to the
related Trustee, together with all principal, premium (if any) and interest
received by or on behalf of the Company on or with respect to such Deposited
Assets after the cut-off date specified in the Prospectus Supplement (the
"Cut-off Date"), other than principal, premium (if any) and interest due on or
before the Cut-off Date and other than any Retained Interest. If specified in
the Prospectus Supplement, the Trustee will, concurrently with such assignment,
deliver the Certificates to the Company in exchange for certain assets to be
deposited in the Trust. Each Deposited Asset will be identified in a schedule
appearing as an exhibit to the Trust Agreement. Such schedule will include
certain statistical information with respect to each Term Asset and each other
Deposited Asset as of the Cut-off Date, and in the event any Term Asset
represents ten percent or more of the total Term Assets with respect to any
Series of Certificates, such schedule will include, to the extent applicable,
information regarding the payment terms thereof, the Retained Interest, if any,
with respect thereto, the maturity or term thereof, the rating, if any, thereof
and certain other information with respect thereto.
In addition, the Company will, with respect to each Deposited Asset,
deliver or cause to be delivered to the Trustee (or to the custodian hereinafter
referred to) all documents necessary to transfer ownership of such Deposited
35
<PAGE>
Asset to the Trustee. The Trustee (or such custodian) will review such documents
upon receipt thereof or within such period as is permitted in the Prospectus
Supplement, and the Trustee (or such custodian) will hold such documents in
trust for the benefit of the Certificateholders.
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement only if and to the extent provided therein, if
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian) shall immediately notify the Administrative
Agent, if any, and the Company, and the Administrative Agent, if any, and
otherwise the Trustee shall immediately notify the relevant person who sold the
applicable Deposited Asset to the Company (a "Deposited Asset Provider"). To the
extent specified in the applicable Prospectus Supplement, if the Deposited Asset
Provider cannot cure such omission or defect within 60 days after receipt of
such notice, the Deposited Asset Provider will be obligated, within 90 days of
receipt of such notice, to repurchase the related Deposited Asset from the Trust
at the Purchase Price (as defined herein) or provide a substitute for such
Deposited Asset. There can be no assurance that a Deposited Asset Provider will
fulfill this repurchase or substitution obligation. Although the Administrative
Agent, if any, or otherwise an Administrator, on behalf of the Trustee is
obligated to use its best efforts to enforce such obligation, neither such
Administrative Agent nor the Company will be obligated to repurchase or
substitute for such Deposited Asset if the Deposited Asset Provider defaults on
its obligation. When applicable, this repurchase or substitution obligation
constitutes the sole remedy available to the Certificateholders or the Trustee
for omission of, or a material defect in, or failure to provide, a constituent
document, and the Trust and the Certificateholders will not have any continuing
direct or indirect liability under the Trust Agreement as sellers of the assets
of the Trust in enforcing such obligation.
Each of the Company and the Administrative Agent, if any, will make
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the Trust Agreement. Upon a
breach of any such representation of the Company or any such Administrative
Agent, as the case may be, which materially and adversely affects the interests
of the Certificateholders, the Company or any such Administrative Agent,
respectively, will be obligated to cure the breach in all material respects.
Collection and Other Administrative Procedures
General. With respect to any Series of Certificates, the Trustee or such
other person specified in the Prospectus Supplement, directly or through
sub-administrative agents, will make reasonable efforts to collect all scheduled
payments under the Deposited Assets and will follow or cause to be followed such
collection procedures, if any, as it would follow with respect to comparable
financial assets that it held for its own account, provided that such procedures
are consistent with the Trust Agreement and any related instrument governing any
Credit Support (collectively, the "Credit Support Instruments") and provided
that, except as otherwise expressly set forth in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability.
Sub-Administration. Any Trustee or Administrative Agent may delegate its
obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent), but
the Trustee or Administrative Agent will
36
<PAGE>
remain obligated with respect to such obligations under the Trust Agreement.
Each Sub-Administrative Agent will be required to perform the customary
functions of an administrator of comparable financial assets, including, if
applicable, collecting payments from obligors and remitting such collections to
the Trustee; maintaining accounting records relating to the Deposited Assets,
attempting to cure defaults and delinquencies; and enforcing any other remedies
with respect thereto all as and to the extent provided in the applicable
Sub-Administration Agreement (as defined herein).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a "Sub-Administration Agreement") will be consistent
with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust Agreement.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, although each such Sub-Administration Agreement
will be a contract solely between such Administrative Agent and the
Sub-Administrative Agent, the Trust Agreement pursuant to which a Series of
Certificates is issued will provide that, if for any reason such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, will be solely liable
for all fees owed by it to any Sub-Administrative Agent, irrespective of whether
the compensation of the Administrative Agent or Trustee, as applicable, pursuant
to the Trust Agreement with respect to the particular Series of Certificates is
sufficient to pay such fees. However, a Sub-Administrative Agent may be entitled
to a Retained Interest in certain Deposited Assets to the extent provided in the
related Prospectus Supplement. Each Sub-Administrative Agent will be reimbursed
by the Administrative Agent, if any, or otherwise the Trustee for certain
expenditures which it makes, generally to the same extent the Administrative
Agent or Trustee, as applicable, would be reimbursed under the terms of the
Trust Agreement relating to such Series. See "--Retained Interest;
Administrative Agent Compensation and Payment of Expenses".
The Administrative Agent or Trustee, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. As administrator with respect
to the Deposited Assets, the Trustee (or an Administrator on its behalf), on
behalf of the Certificateholders of a given Series (or any Class or Classes
within such Series), will present claims under each applicable Credit Support
Instrument, and will take such reasonable steps as are necessary to receive
payment or to permit recovery thereunder with respect to defaulted Deposited
Assets. As set forth above, all collections by or on behalf of the Trustee or
Administrative Agent under any Credit Support Instrument are to be deposited in
the Certificate Account for the related Trust, subject to withdrawal as
described above.
If recovery on a defaulted Deposited Asset under any related Credit
Support Instrument is not available, the Trustee will be obligated to follow or
cause to be followed such normal
37
<PAGE>
practices and procedures as it deems necessary or advisable to realize upon the
defaulted Deposited Asset, provided that it shall not be required to expend or
risk its own funds or otherwise incur personal financial liability. If the
proceeds of any liquidation of the defaulted Deposited Asset are less than the
sum of (i) the outstanding principal balance of the defaulted Deposited Asset,
(ii) interest accrued thereon at the applicable interest rate and (iii) the
aggregate amount of expenses incurred by the Administrative Agent and the
Trustee, as applicable, in connection with such proceedings to the extent
reimbursable from the assets of the Trust under the Trust Agreement, the Trust
will realize a loss in the amount of such difference. Only if and to the extent
provided in the applicable Prospectus Supplement, the Administrative Agent or
Trustee, as so provided, will be entitled to withdraw or cause to be withdrawn
from the related Certificate Account out of the net proceeds recovered on any
defaulted Deposited Asset, prior to the distribution of such proceeds to
Certificateholders, amounts representing its normal administrative compensation
on the Deposited Asset, unreimbursed administrative expenses incurred with
respect to the Deposited Asset and any unreimbursed advances of delinquent
payments made with respect to the Deposited Asset.
Retained Interest; Administrative Agent Compensation and Payment
of Expenses
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Deposited Assets, and, if so,
the owner thereof. If so provided, the Retained Interest will be established on
an asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the Trust Agreement. A Retained Interest in a Deposited
Asset represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Deposited Assets as
received and, in general, will not be deposited in the applicable Certificate
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, after deduction of all applicable administration fees, will be
allocated between the Retained Interest (if any) and interest distributions to
Certificateholders on a pari passu basis.
The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus Supplement, in
addition to amounts payable to any Sub-Administrative Agent, the Administrative
Agent, if any, and otherwise the Trustee will pay from its compensation certain
expenses incurred in connection with its administration of the Deposited Assets,
including, without limitation, payment of the fees and disbursements of the
Trustee, if applicable, and independent accountants, payment of expenses
incurred in connection with distributions and reports to Certificateholders, and
payment of any other expenses described in the related Prospectus Supplement.
Advances in Respect of Delinquencies
The Administrative Agent, if any, specified in the applicable Prospectus
Supplement will have no obligation to make any advances with respect to
collections on the Deposited Assets or in favor of the Certificateholders of the
related Series of Certificates. However, to the extent provided in the
applicable Prospectus Supplement, any such Administrative Agent will advance on
or before each Distribution Date its own funds or funds held in the Certificate
38
<PAGE>
Account for such Series that are not part of the funds available for
distribution for such Distribution Date, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest (net of related
administration fees and any Retained Interest) with respect to the Deposited
Assets that were due during the related Collection Period and were delinquent on
the related Determination Date, subject to (i) any such Administrative Agent's
good faith determination that such advances will be reimbursable from Related
Proceeds (as defined herein) and (ii) such other conditions as may be specified
in the Prospectus Supplement.
Advances, if any, are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the Class or
Classes of Certificates entitled thereto, rather than to guarantee or insure
against losses. Advances of an Administrative Agent's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account for such Series to the extent that such
Administrative Agent shall determine, in its sole judgment, that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by such Administrative Agent from excess funds in the
Certificate Account for any Series, such Administrative Agent will replace such
funds in such Certificate Account on any future Distribution Date to the extent
that funds in such Certificate Account on such Distribution Date are less than
payments required to be made to Certificateholders on such date. If so specified
in the related Prospectus Supplement, the obligations, if any, of an
Administrative Agent to make advances may be secured by a cash advance reserve
fund or a surety bond. If applicable, information regarding the characteristics
of, and the identity of any obligor on, any such surety bond, will be set forth
in the related Prospectus Supplement.
Certain Matters Regarding the Administrative Agent and the Company
An Administrative Agent, if any, for each Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The entity
serving as Administrative Agent for any such Series may be the Trustee, the
Company, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Company, their affiliates or the Deposited Asset Provider.
The Trust Agreement will provide that an Administrative Agent may resign
from its obligations and duties under the Trust Agreement with respect to any
Series of Certificates only if such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of any
Class of Certificates of such Series or upon a determination that its duties
under the Trust Agreement with respect to such Series are no longer permissible
under applicable law. No such resignation will become effective until the
Trustee or a successor has assumed the Administrative Agent's obligations and
duties under the Trust Agreement with respect to such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, the Company nor any director, officer, employee, or agent
of the Administrative Agent or the Company will incur any liability to the
related Trust or Certificateholders for any action taken, or for refraining from
taking any action, in good faith pursuant to the Trust Agreement or for errors
39
<PAGE>
in judgment; provided, however, that none of the Administrative Agent, the
Company nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. The Trust Agreement may further provide that,
unless otherwise provided in the applicable series supplement thereto, such an
Administrative Agent, the Company and any director, officer, employee or agent
of the Administrative Agent or the Company will be entitled to the
indemnification by the related Trust and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Trust Agreement or the Certificates, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will provide
that neither such an Administrative Agent nor the Company will be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to their respective responsibilities under the Trust Agreement or
which in its opinion may involve it in any expense or liability. Each of such
Administrative Agent or the Company any, however, in its discretion undertake
any such action which it may deem necessary or desirable with respect to the
Trust Agreement and the rights and duties of the parties thereto and the
interests of the Certificateholders thereunder. The applicable Prospectus
Supplement will describe how such legal expenses and costs of such action and
any liability resulting therefrom will be allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to which
an Administrative Agent is a part, or any person succeeding to the business of
an Administrative Agent, will be the successor of the Administrative Agent under
the Trust Agreement with respect to the Certificates of any given Series.
Administrative Agent Termination Events; Rights Upon
Administrative Agent Termination Event
"Administrative Agent Termination Events" under the Trust Agreement with
respect to any given Series of Certificates will consist of the following: (i)
any failure by an Administrative Agent to remit to the Trustee any funds in
respect of collections on the Deposited Assets and Credit Support, if any, as
required under the Trust Agreement, that continues unremedied for five days
after the giving of written notice of such failure to the Administrative Agent
by the Trustee or the Company, or to the Administrative Agent, the Company and
the Trustee by the holders of such Certificates evidencing not less than 25% of
the Voting Rights (as defined herein); (ii) any failure by an Administrative
Agent duly to observe or perform in any material respect any of its other
covenants or obligations under the Trust Agreement with respect to such Series
which continues unremedied for thirty days after the giving of written notice of
such failure to the Administrative Agent by the Trustee or the Company, or to
the Administrative Agent, the Company and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by or on behalf of an
Administrative Agent indicating its insolvency or inability to pay its
obligations. Any additional Administrative Agent Termination Events with respect
to any given Series of Certificates will be set forth in the applicable
Prospectus Supplement. In addition, the applicable Prospectus Supplement and the
related series supplement to the Trust Agreement will specify as
40
<PAGE>
to each matter requiring the vote of holders of Certificates of a Class or group
of Classes within a given Series, the circumstances and manner in which the
Required Percentage (as defined herein) applicable to each such matter is
calculated. "Required Percentage" means, with respect to any matter requiring a
vote of holders of Certificates of a given Series, the specified percentage
(computed on the basis of outstanding Certificate Principal Balance or Notional
Amount, as applicable) of Certificates of a designated Class or group of Classes
within such Series (either voting as separate classes or as a single class)
applicable to such matter, all as specified in the applicable Prospectus
Supplement and the related series supplement to the Trust Agreement. "Voting
Rights" evidenced by any Certificate will be the portion of the voting rights of
all the Certificates in the related Series allocated in the manner described in
the Prospectus Supplement.
So long as an Administrative Agent Termination Event under the Trust
Agreement with respect to a given Series of Certificates remains unremedied, the
Company or the Trustee may, and at the direction of holders of such Certificates
evidencing not less than the "Required Percentage--Administrative Agent
Termination" of the Voting Rights, the Trustee will, terminate all the rights
and obligations of such Administrative Agent under the Trust Agreement relating
to the applicable Trust and in and to the related Deposited Assets (other than
any Retained Interest of such Administrative Agent), whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of such
Administrative Agent under the Trust Agreement with respect to such Series
(except that if the Trustee is prohibited by law from obligating itself to make
advances regarding delinquent Deposited Assets, then the Trustee will not be so
obligated) and will be entitled to similar compensation arrangements. In the
event that the Trustee is unwilling or unable so to act, it may, or, at the
written request of the holders of such Certificates evidencing not less than the
"Required Percentage--Termination" of the Voting Rights, it will appoint, or
petition a court of competent jurisdiction for the appointment of, an
administration agent with a net worth at the time of such appointment of at
least $15,000,000 to act as successor to such Administrative Agent under the
Trust Agreement with respect to such Series. Pending such appointment, the
Trustee is obligated to act in such capacity (except that if the Trustee is
prohibited by law from obligating itself to make advances regarding delinquent
Deposited Assets, then the Trustee will not be so obligated). The Trustee and
any such successor may agree upon the compensation to be paid to such successor,
which in no event may be greater than the compensation payable to such
Administrative Agent under the Trust Agreement with respect to such Series.
Remedies of Certificateholders
Any Certificateholder may institute any proceeding with respect to the
applicable Trust Agreement subject to the following conditions: (i) such holder
previously has given to the Trustee written notice of breach; (ii) the holders
of Certificates evidencing not less than the "Required Percentage--Remedies" of
the Voting Rights have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity; and (iii) the Trustee for fifteen days has neglected or
refused to institute any such proceeding. The Trustee, however, is under no
obligation to exercise any of the trusts or powers vested in it by the Trust
Agreement or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the holders of Certificates covered by
41
<PAGE>
the Trust Agreement, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
Modification and Waiver
The Trust Agreement for each Series of Certificates may be amended by the
Company and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders, for certain purposes including (i) to cure
any ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or in the Prospectus Supplement,
(iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such addition affects any series or
class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion of
counsel, have a material adverse effect on the interests of any affected series
or class of Certificateholders), (iv) to add to the covenants, restrictions or
obligations of the Company, the Administrative Agent, if any, or the Trustee for
the benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement, so long as (x) any such addition, change or elimination will not, as
evidenced by an opinion of counsel, affect the tax status of the Trust or result
in a sale or exchange of any Certificate for tax purposes and (y) the Trustee
has received written confirmation from each Rating Agency rating such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) to comply with any
requirements imposed by the Code. Without limiting the generality of the
foregoing, the Trust Agreement may also be modified or amended from time to time
by the Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" of the Voting
Rights of those Certificates that are materially adversely affected by such
modification or amendment for the purpose of adding any provision to or changing
in any manner or eliminating any provision of the Trust Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
however, that in the event such modification or amendment would materially
adversely affect the rating of any Series or Class by each Rating Agency, the
"Required Percentage--Amendment" specified in the related series supplement to
the Trust Agreement shall include an additional specified percentage of the
Certificates of such Series or Class.
No such modification or amendment may, however, (i) reduce in any manner
the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Holders of Certificates evidencing not less than the "Required
Percentage--Waiver" of the Voting Rights of a given Series may, on behalf of all
Certificateholders of that Series, (i) waive, insofar as that Series is
concerned, compliance by the Company, the Trustee or the Administrative Agent,
if any, with certain restrictive provisions, if any, of the Trust Agreement
before the time for such compliance and (ii) waive any past default under the
Trust Agreement with respect to Certificates of that Series, except a default in
the failure to distribute amounts received as principal of (and premium, if any)
42
<PAGE>
or any interest on any such Certificate and except a default in respect of a
covenant or provision the modification or amendment of which would require the
consent of the holder of each outstanding Certificate affected thereby.
Reports to Certificateholders; Notices
Reports to Certificateholders. With each distribution to
Certificateholders of any Class of Certificates of a given Series, the
Administrative Agent or the Trustee, if provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such
Certificateholder, to the Company and to such other parties as may be specified
in the Trust Agreement, a statement setting forth:
(i) the amount of such distribution to Certificateholders of such Class
allocable to principal of or interest or premium, if any, on the Certificates of
such Class; and the amount of aggregate unpaid interest as of such Distribution
Date;
(ii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified herein and in the related Prospectus
Supplement;
(iii)the amount of compensation received by the Administrative Agent, if
any, and the Trustee for the period relating to such Distribution Date, and such
other customary information as the Administrative Agent, if any, or otherwise
the Trustee deems necessary or desirable to enable Certificateholders to prepare
their tax returns;
(iv) if the Prospectus Supplement provides for advances, the aggregate
amount of advances included in such distribution, and the aggregate amount of
unreimbursed advances at the close of business on such Distribution Date;
(v) the aggregate stated principal amount or, if applicable, notional
principal amount of the Deposited Assets and the current interest rate thereon
at the close of business on such Distribution Date;
(vi) the aggregate Certificate Principal Balance or aggregate Notional
Amount, if applicable, of each Class of Certificates (including any Class of
Certificates not offered hereby) at the close of business on such Distribution
Date, separately identifying any reduction in such aggregate Certificate
Principal Balance or aggregate Notional Amount due to the allocation of any
Realized Losses or otherwise;
(vii)as to any Series (or Class within such Series) for which Credit
Support has been obtained, the amount of coverage of each element of Credit
Support included therein as of the close of business on such Distribution Date.
In the case of information furnished pursuant to subclauses (i) and (iii)
above, the amounts shall be expressed as a U.S. dollar amount (or equivalent
thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent, if
any, or the Trustee shall furnish to each person who at any time during the
calendar year was a Certificateholder a statement containing the information set
forth in subclauses (i) and (iii)
43
<PAGE>
above, aggregated for such calendar year or the applicable portion thereof
during which such person was a Certificateholder. Such obligation of the
Administrative Agent or the Trustee, as applicable, shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Administrative Agent or the Trustee, as applicable, pursuant to
any requirements of the Code as are from time to time in effect.
Notices. Any notice required to be given to a holder of a Registered
Certificate will be mailed to the address of such holder set forth in the
applicable Certificate Register. Any notice required to be given to a holder of
a Bearer Certificate will be published in a newspaper of general circulation in
the city or cities specified in the Prospectus Supplement relating to such
Bearer Certificate.
Evidence as to Compliance
If specified in the applicable Prospectus Supplement, the Trust Agreement
will provide that a firm of independent public accountants will furnish an
annual statement to the Trustee to the effect that such firm has examined
certain documents and records relating to the administration of the Deposited
Assets during the related 12-month period (or, in the case of the first such
report, the period ending on or before the date specified in the Prospectus
Supplement, which date shall not be more than one year after the related
Original Issue Date), which report should enable the recipients to determine
whether such administration was conducted in compliance with the terms of the
Trust Agreement. Such report shall identify any exceptions found during the
examination.
If so specified in the applicable Prospectus Supplement, the Trust
Agreement will also provide for delivery to the Company, the Administrative
Agent, if any, and the Trustee on behalf of the Certificateholders, on or before
a specified date in each year, of an annual statement signed by two officers of
the Trustee to the effect that the Trustee has fulfilled its obligations under
the Trust Agreement throughout the preceding year with respect to any Series of
Certificates.
Copies of the annual accountants' statement, if any, and the statement of
officers of the Trustee may be obtained by Certificateholders without charge
upon written request to either the Administrative Agent or the Trustee, as
applicable, at the address set forth in the related Prospectus Supplement.
Replacement Certificates
If a Certificate is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the applicable Trustee in
the City and State of New York (in the case of Registered Securities) or at the
principal London office of the applicable Trustee (in the case of Bearer
Certificates), or such other location as may be specified in the applicable
Prospectus Supplement, upon payment by the holder of such expenses as may be
incurred by the applicable Trustee in connection therewith and the furnishing of
such evidence and indemnity as such Trustee may require. Mutilated Certificates
must be surrendered before new Certificates will be issued.
44
<PAGE>
Termination
The obligations created by the Trust Agreement for each Series of
Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related Prospectus Supplement. In no event, however, will any trust
created by the Trust Agreement continue beyond the respective date specified in
the related Prospectus Supplement. Written notice of termination of the
obligations with respect to the related Series of Certificates under the Trust
Agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices--Notices", and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee which will be specified in the notice of termination.
Any such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall be made at a price
approximately equal to the aggregate fair market value of all the assets in the
Trust (as determined by the Trustee, the Administrative Agent, if any, and, if
different than both such persons, the person entitled to effect such
termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable Prospectus Supplement, a specified
price as determined therein, which price will not be less than the outstanding
principal balance of the Certificates plus accrued interest, if any, thereon
(such price, a "Purchase Price"). The exercise of such right will effect early
retirement of the Certificates of that Series, but the right of the person
entitled to effect such termination is subject to the aggregate principal
balance of the outstanding Deposited Assets for such Series at the time of
purchase being not more than 10% of the aggregate principal balance of the
Deposited Assets at the Cut-off Date for that Series, or such smaller percentage
as shall be specified in the related Prospectus Supplement. The Trust and the
Certificateholders shall have no continuing direct or indirect liability under
the Trust Agreement as sellers of the assets of the Trust in effecting such
termination.
Duties of the Trustee
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates of any Series or any Deposited Asset or
related document and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Certificate Account or any other
account by or on behalf of such Administrative Agent. The Trustee is required to
perform only those duties specifically required under the Trust Agreement with
respect to such Series. However, upon receipt of the various certificates,
reports or other instruments required to be furnished to it, the Trustee is
required to examine such documents and to determine whether they conform to the
applicable requirements of the Trust Agreement.
45
<PAGE>
The Trustee
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the related Prospectus Supplement. The commercial bank,
national banking association or trust company serving as Trustee, will be
unaffiliated with, but may have normal banking relationships with, the Company,
any Administrative Agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Certificate will agree that, in connection with the original
issuance of such Bearer Certificate and during the period ending 40 days after
the issue date of such Bearer Certificate, they will not offer, sell or deliver
such Bearer Certificate, directly or indirectly, to a U.S. Person or to any
person within the United States, except to the extent permitted under U.S.
Treasury regulations.
Bearer Certificates will bear a legend to the following effect: "Any
United States Person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 1650(j) and 1287(a) of the Internal Revenue Code". The sections
referred to in the legend provide that, with certain exceptions, a United States
taxpayer who holds Bearer Certificates will not be allowed to deduct any loss
with respect to, and will not be eligible for capital gain treatment with
respect to any gain realized on a sale, exchange, redemption or other
disposition of, such Bearer Certificates.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States Federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Certificates, as the case may be, Securities that are issuable as Bearer
Certificates may initially be represented by a single temporary Global Security,
without interest coupons, to be deposited with a common depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") for credit to the accounts designated by or on behalf of the
purchases thereof. Following the availability of a definitive Global Security in
bearer form, without coupons attached, or individual Bearer Certificates and
subject to any further limitations described in the applicable Prospectus
Supplement, the temporary Global Security will be exchangeable for interests in
such definitive Global Security or for such individual Bearer Certificates,
respectively, only upon receipt of a Certificate of Non-U.S. Beneficial
Ownership. A "Certificate of Non-U.S. Beneficial Ownership" is a certificate to
the effect that a beneficial interest in a temporary Global Security is owned by
a person that is not a U.S. Person or is owned by or through a financial
institution in compliance with applicable U.S. Treasury regulations. No Bearer
Certificate will be delivered in or to the United States. If so specified in the
applicable Prospectus Supplement, interest on a temporary Global Security will
be distributed to each of Euroclear and CEDEL with respect to that portion of
such temporary
46
<PAGE>
Global Security held for its account, but only upon receipt as of the relevant
Distribution Date of a Certificate of Non-U.S. Beneficial Ownership.
CURRENCY RISKS
Exchange Rates and Exchange Controls
An investment in a Certificate having a Specified Currency other than U.S.
dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
Company has no control, such as economic and political events and the supply of
and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
Certificate. Depreciation of the Specified Currency for a Certificate against
the U.S. dollar would result in a decrease in the effective yield of such
Certificate below its Pass-Through Rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency for making distributions in respect of Certificates
denominated in such currency. At present, the Company has identified the
following currencies in which distributions of principal, premium and interest
on Certificates may be made: Australian dollars, Canadian dollars, Danish
kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU.
However, Certificates distributable with Specified Currencies other than those
listed may be issued at any time. There can be no assurance that exchange
controls will not restrict or prohibit distributions of principal, premium or
interest in any Specified Currency. Even if there are no actual exchange
controls, it is possible that, on a Distribution Date with respect to any
particular Certificate, the currency in which amounts then due to be distributed
in respect of such Certificate are distributable would not be available. In that
event, such payments will be made in the manner set forth above under
"Description of Certificates--General" or as otherwise specified in the
applicable Prospectus Supplement.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
CERTIFICATES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH
CERTIFICATES ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus is directed to prospective
purchasers of Certificates who are United States residents. The applicable
Prospectus Supplement for certain issuances of Certificates may set forth
certain information applicable to prospective purchasers
47
<PAGE>
who are residents of countries other than the United States with respect to
matters that may affect the purchase or holding of, or receipt of distributions
of principal, premium or interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a description of such
currency, any exchange controls affecting such currency and any other required
information concerning such currency.
Payment Currency
Except as set forth below, if distributions in respect of a Certificate
are required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all distributions in respect of such Certificate shall be made
in U.S. dollars until such currency is again available or so used. The amounts
so payable on any date in such currency shall be converted into U.S. dollars on
the basis of the most recently available Market Exchange Rate for such currency
or as otherwise indicated in the applicable Prospectus Supplement.
If distribution in respect of a Certificate is required to be made in ECU
and ECU is no longer used in the European Monetary System, then all
distributions in respect of such Certificate shall be made in U.S. dollars until
ECU is again so used. The amount of each distribution in U.S. dollars shall be
computed on the basis of the equivalent of the ECU in U.S. dollars, determined
as described below, as of the second Business Day prior to the date on which
such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined for the Certificates of any Series and Class by
the applicable Trustee on the following basis. The component currencies of the
ECU for this purpose (the "Components") shall be the currency amounts that were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
48
<PAGE>
All determinations referred to above made by the applicable Trustee shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the related Certificateholders of
such Series.
Foreign Currency Judgments
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates will be governed by and construed in accordance with the law of the
State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material United States federal income tax
consequences of the ownership of the Certificates as of the date hereof.
(Certain minor and incidental consequences are discussed as well.) It is based
on the advice of Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel
("Special Tax Counsel"), which has delivered an opinion to the Company that the
discussion below, to the extent it constitutes matters of law or legal
conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the Trust will not
be characterized as an association taxable as a corporation (or publicly traded
partnership treated as an association) for federal income tax purposes. Special
Tax Counsel has not delivered (and unless otherwise indicated in the Prospectus
Supplement does not intend to deliver) any other opinions regarding the Trust or
the Certificates. Prospective investors should be aware that no rulings have
been sought from the Internal Revenue Service (the "IRS"), and that legal
opinions are not binding on the IRS or the courts. Accordingly, there can be no
assurance that the IRS or the courts will agree with Special Tax Counsel's
opinions. If, contrary to Special Tax Counsel's opinion, the Trust is
characterized or treated as a corporation for federal income tax consequences,
among other consequences, the Trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and distributions to
Certificateholders would be impaired. In light of Special Tax Counsel's opinion,
however, the balance of this discussion assumes that the Trust will not be
characterized or treated as a corporation.
This summary is based on the Internal Revenue Code of 1986 (the "Code") as
well as Treasury regulations and administrative and judicial rulings and
practice. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could alter or modify the continued validity of
the statements and conclusions set forth herein. This summary is intended as an
explanatory discussion of the consequences of holding the Certificates generally
and does not purport to furnish information in the level of detail or with the
investor's specific tax circumstances that would be provided by an investor's
own tax advisor. Accordingly, it is strongly recommended that each prospective
investor consult with its own tax advisor regarding
49
<PAGE>
the application of United States federal income tax laws, as well as any state,
local, foreign or other tax laws, to their particular situations.
Except with respect to certain withholding tax matters discussed below
under "Withholding Taxes", the discussion is limited to consequences to U.S.
Persons. For purposes of this discussion, a U.S. Person is: (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust that is a United States Person within the
meaning of Section 7701(a)(30) of the Code.
For the purposes of this discussion, the Company and Special Tax Counsel
have assumed, without inquiry, that the Term Assets will be characterized as
indebtedness for federal income tax purposes. The Prospectus Supplement may
contain additional information about the federal income tax characterization of
the Term Assets.
Tax Status of the Trust
The Trustee intends for tax reporting purposes to treat the Trust as a
grantor trust. Prospective investors should be aware, however, that certain of
the terms of Certificates (for example, the allocation of the proceeds of a
disposition of the Term Assets) may be viewed by the IRS as inconsistent with
the grantor trust rules and, accordingly, unless otherwise indicated in the
Prospectus Supplement, Special Tax Counsel is not able to deliver an opinion
that the Trust will be treated as a grantor trust. Nonetheless, because treating
the Trust as a grantor trust is the more appropriate approach for tax reporting
purposes, the Trustee currently intends to treat the trust as a grantor trust
and, except as specifically indicated otherwise under "Possible
Recharacterization of the Trust as a Partnership" below, the balance of this
discussion assumes that the Trust will be so classified. (The Trust Agreement
prohibits the Trust from electing to be taxed as a corporation.)
Each Certificateholder will be treated, for federal income tax purposes,
as a holder of an equity interest in the Trust and, accordingly, (i) as if it
had purchased its pro rata interest of the Trust's underlying assets and (ii) as
if it were the obligor on its pro rata portion of the Trust's obligations. Thus,
for example, if the Certificates are subject to early redemption on account of
the Trust being the obligor under any call options ("Call Warrants"), each
Certificateholder will be treated as if it had sold Call Warrants with respect
to the Term Assets in an amount representing its pro rata interest in the Trust.
Further, if the income of the Trust is used (directly or indirectly) to pay
expenses of the Trust, the holders will be treated as if each had first earned
its pro rata share of that income and then paid its share of the expense.
Prospective investors should be aware that expenses of the Trust may be subject
to limitations on deductibility, which may depend on each particular investor's
circumstances, but would include, in the case of an individual (or entity
treated as an individual) section 67 of the Code that allows miscellaneous
itemized deductions only to the extent that in the aggregate they exceed 2
percent of adjusted gross income.
The Trust has identified the Term Assets and any Call Warrants as part of
an integrated transaction within the meaning of Treasury Regulation ss.
1.1275-6. Among other consequences of such identification is the treatment
generally of each Certificate as a synthetic debt instrument
50
<PAGE>
issued on the date it is acquired by the holder thereof. Similar treatment will
also generally apply to Certificates representing "stripped coupons" and/or
"stripped bonds," which generally will be the case when Certificates are issued
in multiple classes and the different classes represent the ownership of
differing percentage ownership interests of the right to interest and principal
on the Term Assets. It is also possible that each Certificate will be treated as
an actual debt instrument issued on the Closing Date. In that case, the
Certificates would be taxed like conventional debt instruments and the
discussion under "Income of Certificateholders" would not apply. If a Series of
Certificates has more than one Class and some but not all classes are treated as
actual debt instruments issued on the Closing Date, income on the Classes not so
treated may be treated as unrelated business taxable income (and thus subject to
tax) in the hands of pension plans, individual retirement accounts and other
tax-exempt investors.
Income of Certificateholders
Original Issue Discount. Each Certificateholder will be subject to the
original issue discount ("OID") rules of the Code and Treasury Regulations with
respect to such Certificates. Under those rules, the Certificateholder (whether
on the cash or accrual method of accounting) will be required to include in
income the OID on the Certificates as it accrues on a daily basis, on a constant
yield method regardless of when cash payments are received. The amount of OID on
a Certificate generally will be equal to the excess of all amounts payable on
the Certificate over the amount paid to acquire the Certificate and the constant
yield used in accruing OID generally will be the yield to maturity of a
Certificate as determined by each holder based on that holder's purchase price
for the Certificate. It is unclear whether the holder of a Certificate should,
in calculating OID, assume that the Term Assets will, or will not, be called
pursuant to any Call Warrant. Further, it is not clear how actual and expected
future prepayments or losses on the Term Assets are to be taken into account.
The Trustee intends for information reporting purposes to account for OID,
if any, reportable by Certificateholders by reference to the price paid for a
Certificate by an initial purchaser at an assumed issue price, although the
amount of OID will differ for other purchasers. Such purchasers should consult
their tax advisers regarding the proper calculation of OID.
The amount of OID that is reported in income in any particular year will
not necessarily bear any relationship to the amount of distributions, if any,
paid to a holder in that year.
Purchase and Sale of a Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the cost of the Certificates increased by any
amounts includible in income as OID, and reduced by any payments made on the
Certificates. If a Certificate is sold or redeemed, capital gain or loss will be
recognized equal to the difference between the proceeds of sale and the
Certificateholder's adjusted basis in the Certificates.
Possible Recharacterization of the Trust as a Partnership
As indicated above, it is possible that the IRS will seek to
recharacterize the Trust as a partnership. If the IRS were to successfully
recharacterize the Trust as a partnership, the Trust would not be subject to
federal income tax. Under Treasury Regulation 1.761-2, certain partnerships may
"elect out" of subchapter K of the Code (partnership tax accounting).
51
<PAGE>
Although subject to uncertainty, the Trust is likely to be eligible for this
election. Assuming that it is so eligible, each Certificateholder will be
required to report its respective share of the items of income, deductions, and
credits of the organization on their respective returns (making such elections
as to individual items as may be appropriate) in a manner consistent with the
exclusion of the Trust from partnership tax accounting. Such reporting should be
substantially similar to the income tax reporting that would be required under
the grantor trust rules. In mutual consideration for each Holder's purchase of a
Certificate, each such Holder is deemed to consent to the Trust's making of a
protective election out of subchapter K of the Code.
If the election to be excluded from the partnership tax accounting
provisions of the Code is not effective, among other consequences, (i) the Trust
would be required to account for its income and deductions at the Trust level
(not necessarily taking into account any particular holder's circumstances,
including any difference between the holder's basis in its Certificates and the
Trust's basis in its assets) and to utilize a taxable year for reporting
purposes and (ii) each Holder would be required to separately take into account
such Holder's distributive share of income and deductions of the Trust. A Holder
would take into account its distributive share of Trust income and deductions
for each taxable year of the Trust in the Holder's taxable year which ends with
or within the Trust's taxable year. A Holder's share of the income of the Trust
computed at the Trust level would not necessarily be the same if computed under
the OID rule described above under "Income of Certificateholders" and, in
particular, may not take account of any difference in the yield on the
Certificate to the Holder based on the Certificateholder's purchase price and
the yield on the Term Assets determined at the Trust level.
Withholding Taxes
Payments made on a Certificate to a person that is not a U.S. Person and
has no connection with the United States other than holding its certificates
generally will be made free of United States federal withholding tax, provided
that (i) the holder is not related (directly or indirectly) to the obligor,
guarantor, if any, or sponsor of the Term Assets, the Company, the holder of any
other class of Certificates (if such Series provides for multiple classes of
Certificates), the holder of any Call Warrant or the counterparty on any notion
principal contract or other derivative contract of which the Trust is a party
and (ii) the holder complies with certain identification and certification
requirements imposed by the IRS.
State and Other Tax Consequences
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 the Certificates.
State, local and foreign tax law may differ substantially from federal tax law,
and this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction (including whether the Trust, if treated as a
partnership for federal income tax purposes, would be treated as a partnership
under any state or local jurisdiction). Therefore, it is strongly recommended
that prospective purchasers consult their own tax advisers with respect to such
matters.
52
<PAGE>
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through underwriters
or dealers; (ii) directly to one or more purchasers; or (iii) through agents.
The applicable Prospectus Supplement will set forth the terms of the offering of
any Series of Certificates, which may include the names of any underwriters, or
initial purchasers, the purchase price of such Certificates and the proceeds to
the Company from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, any securities
exchanges on which such Certificates may be listed, any restrictions on the sale
and delivery of Certificates in bearer form and the place and time of delivery
of the Certificates to be offered thereby.
If underwriters are used in the sale, Certificates will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Such Certificates may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Salomon Smith
Barney Inc., an affiliate of the Company. Unless otherwise set forth in the
applicable Prospectus Supplement, the obligations of the underwriters to
purchase such Certificates will be subject to certain conditions precedent, and
the underwriters will be obligated to purchase all such Certificates if any of
such Certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Certificates may also be sold through agents designated by the Company
from time to time. Any agent involved in the offer or sale of Certificates will
be named, and any commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Certificates at the public offering price described in
such Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in such Prospectus Supplement.
Such contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Certificates may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be
53
<PAGE>
customers of, engage in transactions with, or perform services for, the Company
or its affiliates in the ordinary course of business.
Salomon Smith Barney Inc. is an affiliate of the Company and is an indirect
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., the indirect
parent corporation of the Company. Salomon Smith Barney Inc.'s participation in
the offer and sale of Certificates complies with the requirements of Rule 2720
of the National Association of Securities Dealers, Inc. regarding underwriting
securities of an affiliate.
As to each Series of Certificates, only those Classes rated in one of the
investment grade rating categories by a Rating Agency will be offered hereby.
Any unrated Classes or Classes rated below investment grade may be retained by
the Company or sold at any time to one or more purchasers.
Affiliates of the Underwriters may act as agents or underwriters in
connection with the sale of the Certificates. Any affiliate of the Underwriters
so acting will be named, and its affiliation with the Underwriters described, in
the related Prospectus Supplement. Also, affiliates of the Underwriters may act
as principals or agents in connection with market-making transactions relating
to the Certificates. A Prospectus Supplement will be prepared with respect to
the Certificates for use by such affiliates in connection with offers and sales
related to market-making transactions in the Certificates.
LEGAL OPINIONS
Certain legal matters (including federal income tax matters) with respect
to the Certificates will be passed upon for the Company and the Underwriters by
Orrick, Herrington & Sutcliffe LLP, New York, New York or other counsel
identified in the applicable Prospectus Supplement.
54
<PAGE>
INDEX OF TERMS
Acceleration.....................................................14
Administration Fee................................................9
Administrative Agent..............................................1
AON...............................................................9
Base Rate........................................................16
Bearer Certificates...............................................1
Business Day.................................................12, 15
Calculation Agent................................................17
Calculation Date.................................................19
CD Rate..........................................................18
CD Rate Determination Date.......................................18
CD Reference Rate Certificate....................................16
Cede..............................................................2
CEDEL............................................................47
Certificate Account..............................................35
Certificate Principal Balance....................................23
Certificateholders.............................................9, 1
Certificates......................................................1
Class.............................................................1
Closing Date......................................................9
Code.............................................................50
Commercial Paper Rate Determination Date.........................19
Commercial Paper Reference Rate Certificate......................19
Commission....................................................10, 1
Company........................................................9, 1
Components.......................................................49
Composite Quotations.............................................16
Concentrated Term Assets.........................................28
Coupons..........................................................12
Credit Support....................................................1
Credit Support Instruments.......................................37
Day of Valuation.................................................49
Definitive Certificate...........................................25
Depositary.......................................................25
Deposited Asset Provider.........................................36
Deposited Assets..................................................1
Depositor.........................................................9
Determination Date...............................................13
Distribution Date.................................................1
DOL..............................................................19
DTC..............................................................14
ECU...............................................................1
ERISA............................................................18
Euroclear........................................................47
Exchange Act..................................................10, 1
Exchange Rate Agent..............................................13
Exchangeable Series..............................................23
Extension Period.................................................12
Federal Funds Rate...............................................20
Federal Funds Rate Determination Date............................20
Federal Funds Reference Rate Certificate.........................16
Fixed Pass-Through Rate..........................................12
Fixed Rate Certificates..........................................15
Floating Rate Certificates.......................................16
Global Security...................................................1
H.15(519)........................................................16
Index Maturity...................................................16
Interest Reset Date..............................................17
Interest Reset Period............................................17
IRA..............................................................18
55
<PAGE>
IRS..............................................................50
Junior Subordinated Debentures....................................9
Letter of Credit.................................................34
Letter of Credit Bank............................................34
LIBOR............................................................21
LIBOR Determination Date.........................................21
LIBOR Reference Rate Certificate.................................16
London Banking Day...............................................15
Market Exchange Rate.............................................13
Maturity Date....................................................10
Maximum Pass-Through Rate........................................17
Minimum Pass-Through Rate........................................17
Money Market Yield...............................................19
Nonrecoverable Advance...........................................39
Notional Amount..................................................15
NYSE.............................................................15
Offering Agent....................................................3
Option to Elect Exchange.........................................24
Optional Exchange Date...........................................24
Original Issue Date..............................................11
outstanding debt securities......................................30
Parties in Interest..............................................19
Pass-Through Rate................................................12
Payment Default..................................................14
Plan.............................................................18
Prospectus Supplement.............................................1
Purchase Price...................................................46
Rating Agency.....................................................4
Realized Losses..................................................23
Registered Certificates...........................................1
Registration Statement............................................2
Regulation.......................................................19
Related Proceeds.................................................39
Required Percentage..............................................41
Reserve Account..................................................34
Retained Interest.................................................9
Reuters Screen LIBO Page.........................................21
Secured Term Assets..............................................30
Securities Act................................................10, 2
Senior Term Assets...............................................30
Series............................................................1
Special Tax Counsel..............................................50
Specified Currency................................................1
Specified Interest Currency.......................................1
Specified Premium Currency........................................1
Specified Principal Currency......................................1
Spread...........................................................16
Spread Multiplier................................................16
Strip Certificates...............................................12
Stripped Interest................................................15
Sub-Administration Agreement.....................................37
Sub-Administrative Agent.........................................37
Subordinated Term Assets.........................................30
Surety...........................................................34
Surety Bond......................................................34
Tax Event........................................................13
Tax Event Redemption.............................................13
Term Asset Events of Default.....................................30
Term Assets.......................................................1
Term Assets Currency.............................................32
Term Assets Indenture............................................28
Term Assets Interest Accrual Periods.............................31
56
<PAGE>
Term Assets Issuers..............................................28
Term Assets Payment Dates........................................31
Term Assets Rate.................................................31
Treasury bills...................................................22
Treasury Rate....................................................22
Treasury Rate Determination Date.................................22
Treasury Reference Rate Certificate..............................16
Trust..........................................................9, 1
Trust Agreement................................................9, 1
Trust Indenture Act...............................................9
Trustee...........................................................1
Trustee's Fee.....................................................8
U.S. Person......................................................47
Underlying Capital Securities.....................................9
Underlying Capital Securities Prospectus.........................10
Underlying Capital Securities Registration Statement.............10
Underlying Issuer.................................................9
Underwriters.....................................................11
Underwriting Agreement...........................................20
United States....................................................47
Variable Pass-Through Rate.......................................12
Voting Rights................................................17, 41
58
<PAGE>
===================================================================
Credit-Enhanced CorTS(sm) Trust
For Aon Capital A
1,200,000 Credit-Enhanced Corporate-Backed Trust Securities
(Credit-Enhanced CorTS(sm)) Certificates
(principal amount of $25 per Certificate)
-----------------
Prospectus Supplement
Dated December __, 2000
-----------------
Salomon Smith Barney
First Union Securities, Inc.
Prudential Securities
===================================================================
