<PAGE> 1
As Filed Pursuant to Rule 424(b)(3)
Registration No. 033-91744
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME A FINAL PROSPECTUS AND PROSPECTUS SUPPLEMENT IS DELIVERED.
THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MARCH 16, 1999
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 16, 1999)
CORPORATE ASSET BACKED CORPORATION, THE DEPOSITOR
2,000,000 TRUST CERTIFICATES
(PRINCIPAL AMOUNT $25 PER TRUST CERTIFICATE)
ISSUED BY
CABCO TRUST FOR J.C. PENNEY DEBENTURES, THE TRUST
RELATING TO
J.C. PENNEY COMPANY, INC. 7 5/8% DEBENTURES DUE 2097
-------------------------
<TABLE>
<S> <C> <C> <C>
- --------------------------------------- THE TRUST WILL ISSUE--
YOU SHOULD FULLY CONSIDER THE RISK - A single class of Trust Certificates, which will
FACTORS ON PAGE S-8 IN THIS represent interests in the Trust and will be paid only
PROSPECTUS SUPPLEMENT PRIOR TO from the trust assets.
INVESTING IN THE TRUST THE TRUST WILL OWN--
CERTIFICATES. - $50,000,000 7 5/8% Debentures due 2097 issued by
J.C. Penney Company, Inc. and all future payments of
No governmental agency or interest and a single payment of principal due on the
instrumentality has insured or debentures, as described in this Prospectus
guaranteed the Trust Certificates Supplement.
or the underlying debentures. THE TRUST CERTIFICATES WILL EVIDENCE--
The Trust Certificates will - the right to receive semi-annual interest
represent interests in the Trust payments on the principal amount of your Trust
only and will not represent an Certificates at an interest rate of 7 5/8% per annum;
interest in or obligations of any and
other party. - the right to receive your pro rata amount of a
single payment of principal of $50,000,000 due on
March 1, 2097 or on such earlier date (and together
with any applicable redemption premium) as described
in this Prospectus Supplement.
- ---------------------------------------
</TABLE>
The Depositor intends to file an application to list the Trust Certificates on
the New York Stock Exchange.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER TRUST
CERTIFICATE TOTAL
----------- --------------
<S> <C> <C>
Public offering price(1).................................... $ $
Underwriting discount....................................... $ $
Proceeds to Trust (before expenses)......................... $ $
</TABLE>
(1) Plus accrued interest from , 1999, if settlement occurs after
that date.
The underwriters expect to deliver your Trust Certificates in book-entry form
only through The Depository Trust Company on or about , 1999.
-------------------------
PAINEWEBBER INCORPORATED SALOMON SMITH BARNEY
-------------------------
The date of this Prospectus Supplement is , 1999.
<PAGE> 2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Information about Trust Certificates........................................S-2
Summary.....................................................................S-4
Risk Factors................................................................S-8
The Trust Certificates......................................................S-8
General............................................................S-8
Redemption of Trust Certificates..................................S-10
Default on Bonds..................................................S-10
DTC Book Entry Only System........................................S-11
The Trustee and the Trust Agreement........................................S-11
Underwriting...............................................................S-14
Legal Matters..............................................................S-15
Ratings....................................................................S-15
Certain Federal Income Tax Considerations..................................S-16
Certain ERISA Considerations...............................................S-16
General...........................................................S-16
Availability of Publicly-Offered
Security Exception................................................S-17
Ineligible Purchasers.............................................S-18
Review by Plan Fiduciaries........................................S-18
Index of Terms.............................................................S-19
Appendix A -- Description of Bonds..........................................A-1
PROSPECTUS PAGE
Prospectus....................................................................1
Available Information.........................................................3
Incorporation of Certain Documents by Reference...............................3
Reports to Certificateholders.................................................3
Prospectus Summary............................................................6
The Trusts...................................................................10
The Bonds....................................................................11
Available Information Regarding
the Corporate Obligors..................................................11
Use of Proceeds..............................................................12
The Depositor................................................................12
The Certificates.............................................................12
Certain Information Regarding the Certificates...............................13
Certain Federal Income Tax Considerations....................................18
Certain ERISA Considerations.................................................24
Plan of Distribution.........................................................29
Legal Opinions...............................................................29
INFORMATION ABOUT TRUST CERTIFICATES
We provide information to you about the Trust 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 Trust Certificates; and (b) this Prospectus Supplement, which describes the
specific terms of your series of Trust Certificates.
You are urged to read both the Prospectus and this Prospectus
Supplement in full to obtain material information concerning the Trust
Certificates. If the descriptions of the Trust Certificates vary between this
Prospectus Supplement and the Prospectus, you should rely on the information
contained in this Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
Prospectus to captions in these materials where you can find further related
discussions. The Table of Contents in this Prospectus Supplement and the
Prospectus identify the pages where these sections are located.
You can find a listing of the pages where capitalized terms used in
this Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Terms" beginning on page S-19 in this document and beginning
on page 30 in the accompanying Prospectus.
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (of which this Prospectus Supplement
and the accompanying Prospectus form a part) under the Securities Act of 1933,
as amended, with respect to the Trust Certificates. This Prospectus Supplement
and the accompanying Prospectus do not contain all of the information contained
in the registration statement. For further information regarding the documents
referred to in this Prospectus Supplement and the Prospectus, you should refer
to the registration statement and the exhibits thereto. The registration
statement and such exhibits can be inspected and copied at
S-2
<PAGE> 3
prescribed rates at the public reference facilities maintained by the Commission
at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549
(information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330), and at its Regional Offices located
at: Chicago Regional Office, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 6066; and New York Regional Office, Seven World Trade Center, New York,
New York 10048. Copies of such materials can also be obtained electronically
through the Commission's Internet Web Site (http://www.sec.gov).
You should rely only on the information contained in this Prospectus
Supplement or the Prospectus. Neither the Depositor nor the 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 Prospectus is accurate as of the date on their respective front covers only.
S-3
<PAGE> 4
SUMMARY
This summary highlights selected information from this Prospectus
Supplement. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the Trust Certificates, you should read carefully this Prospectus Supplement
and the accompanying Prospectus in full.
ESTABLISHMENT OF THE TRUST ..... Corporate Asset Backed Corporation (the
"Depositor") is establishing a trust, to be
designated as CABCO Trust for J. C. Penney
Debentures (the "Trust"). The assets of the
Trust will consist of $50,000,000 7 5/8%
Debentures due 2097 (the "Bonds") issued by J.
C. Penney Company, Inc. (the "Underlying
Issuer") and payments of principal and
interest made by the Underlying Issuer on the
Bonds as discussed in more detail under "The
Trust Certificates--General" herein.
OFFERED SECURITIES.............. The Trust will issue the Trust Certificates
(the "Trust Certificates") in a single class.
As holder of Trust Certificates, you will have
the right to receive from the Trust:
- periodic payments of interest on the
principal amount of your Trust
Certificates accruing from , 1999 at
a rate of 7 5/8% per annum on each
September 1 and March 1, commencing
on September 1, 1999, until the
principal amount of your Trust
Certificates is paid in full as
described below; and
- the pro rata share for your Trust
Certificates of a single payment of
principal of $50,000,000. You will be
expected to receive your pro rata
share of the principal payment on
March 1, 2097 (the "Stated Maturity
Date"), or on such earlier date on
which the Trust redeems your Trust
Certificates as described under
"Redemption of the Trust
Certificates" below.
S-4
<PAGE> 5
REDEMPTION OF THE
TRUST CERTIFICATES......... The Underlying Issuer has the right, at its
option, to redeem the Bonds at any time, in
whole or in part from time to time, at an
amount equal to the principal amount of the
par value of Bonds to be redeemed, plus a
Redemption Premium (as described below), if
any.
If the Underlying Issuer exercises its right
to redeem the Bonds in whole or in part, the
Trust will redeem your Trust Certificates, pro
rata, for an amount at least equal to their
principal amount. The amount, if any, by which
the redemption price paid on the Bonds exceeds
their principal amount is called "Redemption
Premium." If the Underlying Issuer pays a
Redemption Premium on the Bonds, you will
receive the pro rata amount of such Redemption
Premium corresponding to the principal amount
of your Trust Certificates. See "Trust
Certificates--Redemption of Trust
Certificates" herein.
The Underlying Issuer, however, is not
required to redeem the Bonds. Therefore, there
can be no assurance that the Trust will
repurchase your Trust Certificates prior to
the Stated Maturity Date. Should the Trust
redeem your Trust Certificates prior to the
Stated Maturity Date, the Trustee will notify
you by mail at least 15 days before such
redemption date.
BONDS........................... J. C. Penney Company, Inc. 7 5/8% Debentures
due 2097.
TRUSTEE AND TRUST AGREEMENT..... United States Trust Company of New York (the
"Trustee") will act as trustee pursuant to a
series trust deposit agreement (the "Trust
Agreement"). You may inspect the Trust
Agreement at the office of the Trustee at 114
West 47th Street, New York, NY 10036-1532.
DENOMINATIONS................... Each Trust Certificate will have a principal
amount of $25.
S-5
<PAGE> 6
REGISTRATION, CLEARANCE AND
SETTLEMENT................. Your Trust Certificates will be registered in
the name of Cede & Co., as the nominee of The
Depository Trust Company ("DTC"). You will not
receive a definitive certificate representing
your interest, except in limited circumstances
described in the accompanying Prospectus when
Trust Certificates in fully registered,
certificated form are issued. See "Certain
Information Regarding the Certificates--
Definitive Certificates" in the accompanying
Prospectus.
TAX CONSIDERATIONS.............. Sidley & Austin, counsel to the Depositor, is
of the opinion that under existing law (1) the
Trust will be a grantor trust and not a
partnership or an association taxable as a
corporation; and (2) your Trust Certificates
will represent beneficial interests in the
Bonds. See "Certain Federal Income Tax
Considerations" herein and in the accompanying
Prospectus for additional information
concerning the application of federal income
tax laws.
ERISA CONSIDERATIONS............ An "employee benefit plan" subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or a "plan"
subject to Section 4975 of the Internal
Revenue Code of 1986 ("Code"), contemplating
the purchase of Trust Certificates should
consult with its counsel before making such a
purchase. The fiduciary of such an employee
benefit plan or plan and such legal advisors
should consider whether the Trust Certificates
will satisfy all of the requirements of the
"Publicly-Offered Securities Exception"
described herein or the possible application
of other "prohibited transaction exemptions"
described herein. See "Certain ERISA
Considerations" herein and in the accompanying
Prospectus.
LISTING......................... The Depositor intends to file an application
to list the Trust Certificates on the New York
Stock Exchange.
S-6
<PAGE> 7
RATINGS......................... It is a condition to issuance that the Trust
Certificates be rated investment grade by each
of Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Group ("S&P").
In January 1999, Moody's placed the ratings of
the Underlying Issuer under review for
possible downgrade, and S&P placed such
ratings on CreditWatch with negative
implications. Thus, it is possible that the
Bonds may be downgraded from their current
ratings of "A2" by Moody's and "A" by S&P. See
"Risk Factors" herein.
S-7
<PAGE> 8
RISK FACTORS
You should consider the following factors in deciding whether to
purchase the Trust Certificates:
1. NO DETAILED INFORMATION ABOUT BONDS OR UNDERLYING ISSUER.
This Prospectus Supplement does not provide you with detailed
information with respect to the Bonds or the Underlying Issuer, any
risk factors relating thereto, or any legal, financial or other rights
or obligations arising under or related to the Bonds. See "Available
Information Regarding The Corporate Obligors" in the accompanying
Prospectus and "Appendix A--Description of Bonds--Available
Information" herein.
2. UNDERLYING ISSUER IS THE ONLY PAYMENT SOURCE. The payments
made by the Underlying Issuer on the Bonds are the only source of
payment on your Trust Certificates. The Underlying Issuer is subject to
laws permitting bankruptcy, moratorium, reorganization or other
actions; should the Underlying Issuer experience financial
difficulties, this could result in delays in payment, partial payment
or non-payment of your Trust Certificates. See "The Trust
Certificates--Default on Bonds" herein.
3. RISK OF DOWNGRADE. In January 1999, Moody's placed the
ratings of the Underlying Issuer under review for possible downgrade,
and S&P placed such ratings on CreditWatch with negative implications.
Thus, it is possible that the Bonds may be downgraded from their
current ratings of "A2" by Moody's and "A" by S&P. Any such downward
revision may have an adverse effect on the market prices of the Trust
Certificates.
THE TRUST CERTIFICATES
GENERAL
The Trust Certificates (the "Trust Certificates") relate to $50,000,000
aggregate principal amount (of $500,000,000 aggregate principal amount issued in
February 1997) of 7 5/8% Debentures due 2097 (the "Bonds") of J. C. Penney
Company, Inc. (the "Underlying Issuer"). The Bonds provide for semiannual
interest payments ("Interest Payments") due on March 1 and September 1 of each
year (each, an "Interest Payment Date") and for a single payment of principal of
$50,000,000 (the "Principal Payment") payable on March 1, 2097 (the "Stated
Maturity Date") or upon earlier redemption.
The Trust Certificates are issued in a single class with a principal
amount of $50,000,000. Each Trust Certificate evidences the right to receive
periodic interest payments on its principal amount accruing from ,
1999, at a rate of 7 5/8% per annum on each September 1 and
S-8
<PAGE> 9
March 1, commencing September 1, 1999, until the principal amount of such Trust
Certificate is paid on the Stated Maturity Date, or upon the earlier redemption
of such Trust Certificate. Interest shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. The Trust Certificates evidence
ownership in the aggregate of all of the Interest Payments, and of the Principal
Payment, due on the Bonds. In addition, the Trust Certificates are entitled to
the Redemption Premium, if any, payable by the Underlying Issuer upon a
redemption of the Bonds by the Underlying Issuer. See "--Redemption of Trust
Certificates" herein.
The Bonds were transferred to the Trust exclusive of the right to
receive interest on the Bonds accrued from March 1, 1999 until, but excluding,
, 1999 (the "Retained Amount"). Therefore, the interest payment
that purchasers of Trust Certificates (each, a "Certificateholder") are
scheduled to receive on the interest payment date on September 1, 1999 will not
include the Retained Amount and the Retained Amount will be distributed to the
Depositor or its designee.
The scheduled interest and principal payments on the Trust Certificates
are payable solely from payments of principal and interest on the Bonds made by
the Underlying Issuer. If payments are not made on the Bonds, the
Certificateholders will not be paid and will suffer losses. You should avail
yourself of the same information concerning the Underlying Issuer as you would
if you were purchasing the Bonds. See "Available Information Regarding The
Corporate Obligors" in the Prospectus and "Appendix A--Description of
Bonds--Available Information" herein. Information with respect to the Underlying
Issuer is also available at the Underlying Issuer's corporate website
(http://www.jcpenneyinc.com/investor.htm).
Pursuant to the Trust Agreement, the Bonds underlying the Trust
Certificates will be held by the Trustee for the benefit of the
Certificateholders as book-entry credits to an account of the Trustee at DTC.
The Underlying Issuer is not a party to the Trust Agreement. Each
Certificateholder, by its acceptance of a Trust Certificate, agrees to be bound
by the terms and conditions of the Trust Agreement. Copies of the Trust
Agreement are available upon written request from PaineWebber at 1285 Avenue of
the Americas, New York, New York 10019.
The Trust Certificates will be delivered in registered form. Each Trust
Certificate will have a principal amount of $25. The Trust Certificates are
being offered initially in book entry form only through DTC, and purchasers will
not receive physical certificates representing their ownership of Trust
Certificates.
The Trust Certificates offered hereby are different from, and not
exchangeable for, any other series of Trust Certificates or any other receipt or
certificate evidencing ownership of future interest or principal payments due on
Underlying Issuer obligations, and are subject to the terms and conditions of
the Trust Agreement.
Neither the Trustee nor the Depositor will be responsible for the
payments due on the Trust Certificates, except that the Trustee will be required
to apply all payments received in respect of the Bonds, exclusive of the
Retained Amount, to the Trust Certificates to which they relate without making
any deduction, other than any applicable tax or other governmental charge.
S-9
<PAGE> 10
REDEMPTION OF TRUST CERTIFICATES
The Bonds as originally issued are redeemable at any time, in whole or
in part from time to time, on not less than 30 nor more than 60 days' notice, at
the option of the Underlying Issuer. In addition, upon the occurrence of certain
adverse tax events, the Underlying Issuer will have the right (i) to shorten the
maturity of the Bonds to the extent required to cure the adverse consequences of
such tax event, or (ii) under certain circumstances, within 90 days of the
occurrence of such an event, to redeem the Bonds in whole (but not in part), on
not less than 30 nor more than 60 days' notice. The redemption price for the
Bonds will be equal to the par value of the Bonds to be redeemed plus accrued
interest on the principal amount being redeemed, plus a Redemption Premium, if
any.
The holder of a Trust Certificate which is redeemed will receive a
payment equal to its pro rata share of the greater of (i) the par value of the
Bonds to be redeemed and (ii) the sum of the present value of the remaining
scheduled payments thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at a certain
benchmark interest rate plus 20 basis points (or, in the case of a redemption in
connection with the occurrence of an adverse tax event, 40 basis points),
together in either case with accrued interest on the principal amount being
redeemed to the date of redemption. The amount, if any, by which the amount
described in (ii) above exceeds the amount described in (i) is referred to
herein as "Redemption Premium."
On or after the redemption date, interest will cease to accrue on the
Trust Certificates or on any portion thereof called for redemption.
Subject to receipt by the Trustee of actual notice of such redemption
from the Underlying Issuer, the principal amount of Trust Certificates
corresponding to the principal amount of Bonds to be redeemed will be called for
redemption. Notice of such call shall be given by the Trustee to the registered
Certificateholders not less than 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 shall not be required to give any notice of redemption prior to the
third business day after the date it receives notice of such redemption.
DEFAULT ON BONDS
If the Underlying Issuer defaults on the payment of interest or
principal of any Bond, the Trustee shall promptly give notice to DTC or, for any
Trust Certificates which are not then held by DTC or any other depository,
directly to the registered holders thereof. Such notice shall set forth (a) the
identity of the issue of Bonds, (b) the date and nature of such default, (c) the
principal amount of the interest or principal in default, (d) the Trust
Certificates affected by the default, and (e) any other information which the
Trustee may deem appropriate.
In the event of a payment default on the Bonds the Trustee is required
to proceed against the Underlying Issuer on behalf of the Certificateholders to
enforce the Bonds or otherwise to
S-10
<PAGE> 11
protect the interests of the Certificateholders, subject to the receipt of
indemnity in form and substance satisfactory to the Trustee; provided, that
holders of Trust Certificates representing a majority of the voting rights on
the Trust Certificates will be entitled to direct the Trustee in any such
proceeding, subject to the Trustee's receipt of satisfactory indemnity.
In the event that the Trustee receives money or other property in
respect of the Bonds (other than a scheduled Interest Payment on or with respect
to an Interest Payment Date) as a result of a payment default on the Bonds, or
actual notice that such moneys or other property will be received, the Trustee
will promptly give notice as provided in the Trust Agreement to DTC, or for any
Trust Certificates which are not then held by DTC or any other depository,
directly to the registered holders of the Trust Certificates then outstanding
and unpaid. Such notice will state that, not later than 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 Trust Certificates
then outstanding and unpaid, pro rata by principal amount. Property other than
cash will be liquidated by the Trustee, and the proceeds thereof distributed in
cash, only to the extent necessary to avoid distribution of fractional
securities to Certificateholders. Any such amounts received by the Trustee in
excess of principal and accrued unpaid interest on the Trust Certificates will
be distributed to the Depositor. In-kind distribution of Bonds to
Certificateholders will be deemed to reduce the principal amount of Trust
Certificates on a dollar for dollar basis. No amounts will be distributed to the
Depositor in respect of the Bonds unless and until principal and accrued
interest on the Trust Certificates has been paid (or reduced by distributions in
kind) in full.
Interest and principal payments on the Bonds are payable solely by the
Underlying Issuer. The Underlying Issuer is subject to laws permitting
bankruptcy, liquidation, moratorium, reorganization or other actions which, in
the event of financial difficulties of the Underlying Issuer, could result in
delays in payment, partial payment or non-payment of the Trust Certificates
relating to a Bond.
DTC BOOK ENTRY ONLY SYSTEM
The Depositor will deliver Trust Certificates to investors in
book-entry form only through the facilities of DTC (the "DTC Book Entry Only
System"), against payment in same day funds. Delivery will be made to investors
at the offices of the Underwriter or to an office (specified by the investor) of
an entity that is a Participant or Indirect Participant (as defined in the
Prospectus). See "Certain Information Regarding the Certificates--Book-Entry
Registration" in the Prospectus.
THE TRUSTEE AND THE TRUST AGREEMENT
The following summary as well as other pertinent information included
elsewhere in this Prospectus Supplement and the Prospectus describes the
material terms generally applicable to the Trust Certificates, but does not
purport to be complete and is expressly made subject to the actual provisions of
the documents. For details of all terms and conditions, reference is made to the
Trust Agreement, a copy of which is available for inspection at the offices of
the Trustee or, during the offering period, at the offices of the Depositor.
S-11
<PAGE> 12
Pursuant to the Trust Agreement, the Bonds underlying the Trust
Certificates will be held for the Certificateholders by United States Trust
Company of New York (the "Trustee") initially as book-entry credits to an
account of the Trustee at DTC. The Trustee will establish a separate trust
account for the Bonds relating to Trust Certificates offered hereby. It is the
intent of the Depositor that all of the Bonds will be held by the Trustee by
book-entry credit to its account at DTC. If, for any reason, the Bonds may no
longer be held by book-entry credit at DTC, the Bonds will thereafter be held by
the Trustee in a separate trust account.
Prior to a payment default by the Underlying Issuer, the only
responsibility of the Trustee with respect to payments on Trust Certificates
will be to apply all payments received in respect of the Bonds to the registered
Certificateholders without making any deductions other than for any taxes and
governmental charges. After a payment default by the Underlying Issuer, the
Trustee is required to proceed against the Underlying Issuer on behalf of the
Certificateholders to enforce the Bonds or otherwise to protect the interests of
the Certificateholders, subject to the receipt of indemnity in form and
substance satisfactory to the Trustee. See "The Trust Certificates--Default on
Bonds" herein.
Trust accounts established for Trust Certificates will be accounts
identified and held separate and apart from the general assets of the Trustee
and will not contain any property of the Trustee in its individual capacity.
Pursuant to the Trust Agreement, the Trustee has agreed that it does not have
the authority to assign, transfer, encumber, pledge, sell, set-off or otherwise
dispose of any of the Bonds or any interests therein except as provided
thereunder or as required by law.
The Trust Agreement provides that the Trustee shall keep at its
designated office in New York, New York a register (the "Certificate Register")
in which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of, and for the registration of
transfers or exchanges of, Trust Certificates. Notwithstanding the foregoing,
under the DTC Book Entry Only System, transfers and exchange of Trust
Certificates will be accomplished as described under "Certain Information
Regarding the Certificates" in the Prospectus. Under the DTC Book Entry Only
System, DTC will be the sole registered holder of the Trust Certificates.
The voting rights on the Trust Certificates will be apportioned among
the Certificateholders pro rata by principal amount. The Trust Agreement
provides that, in the event of any action requiring a vote of the registered
holders of any Bonds, the Trustee (as the owner of record of the Bonds), upon
receipt of the Bond proxy, will notify DTC (in its capacity as the owner of
record of the Trust Certificates) of such action. Pursuant to currently existing
procedures, it is expected that DTC, in turn, will notify its Participants
(including the Depositor) who, in turn, will notify the Certificateholders of
such event. The Certificateholders will give their proxies to their
Participants. The Participants will give such proxies to DTC, and DTC will give
such proxies to the Trustee. Thereafter, the Trustee will vote solely in
accordance with such proxies and will apportion its voting power on the basis of
the votes cast by the Certificateholders. In the event that the Trust
Certificates have been removed from the DTC Book Entry Only System and are held
as physical certificates, the Trustee, upon receipt of the
S-12
<PAGE> 13
Bond proxy, will notify the registered Certificateholders directly of such
action and shall vote in the same manner as noted above. In casting any votes on
the Bonds in connection with the foregoing, the Trustee will be required to cast
its vote on the Bonds in proportion to the voting rights on the Trust
Certificates held by Certificateholders so directing it, notwithstanding that
such Certificateholders may give contrary instructions. In no event shall the
Depositor be allowed or entitled (other than in its capacity as a safekeeper for
a Certificateholder) to vote, directly or indirectly through the Trustee, any
Trust Certificates or the Bonds.
The Trustee shall at no time vote for or consent to any action (i) to
the extent that such vote or consent could reasonably be expected to alter the
status of the Trust as a grantor trust for federal income tax purposes, (ii)
prior to the filing of a bankruptcy petition by or against the Underlying
Issuer, or the commencement of any other similar proceeding, if such action
would alter the timing or amount of any payment on the Bonds or (iii) prior to
the filing of a bankruptcy petition by or against the Underlying Issuer, or the
commencement of any other similar proceeding, if such action would result in the
exchange or substitution of any of the outstanding Bonds pursuant to a plan for
the refunding or refinancing of such Bonds.
The Trustee will maintain a fidelity bond in reasonable form and amount
to protect against loss resulting from the dishonest or fraudulent action by its
employees in connection with the Trustee's obligations under the Trust
Agreement.
The Trust Agreement provides that neither the Trustee nor the Depositor
shall be subject to any liabilities to Certificateholders other than by reason
of willful misconduct, bad faith or negligence in the performance of duties set
forth in the Trust Agreement and that neither of them shall be liable to such
Certificateholders if any law, government regulation or other circumstance
prevents or delays the performance of duties set forth in the Trust Agreement.
DTC will not be deemed an agent of the Trustee. The Trustee may own and
deal in bonds of the same issue and maturity as the Bonds and in Trust
Certificates.
The Trustee and the Depositor may amend the Trust Agreement, provided
that no amendment may be made which defers or alters the maturity of a Trust
Certificate or which in any manner adversely affects the rights of a
Certificateholder to the payment of interest, principal or premium, if any,
evidenced thereby or otherwise materially prejudices any substantial existing
right of such a Certificateholder.
The Trustee may at any time resign as Trustee by written notice to the
Depositor, such resignation to take effect upon the appointment of a successor
Trustee, subject to the terms and conditions of the Trust Agreement.
The Depositor may at any time remove the Trustee as Trustee under the
Trust Agreement by written notice of its election to do so, delivered to the
Trustee, and such removal shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment, subject to the terms and
conditions of the Trust Agreement.
In the event that the Trustee becomes incapable of acting, is adjudged
to be bankrupt or insolvent, or a receiver of the Trustee or of its property is
appointed, or any public officer takes
S-13
<PAGE> 14
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Trustee may be removed
by court action instituted by any Certificateholder who has been a
Certificateholder for six months or by Certificateholders of 10% of the
principal amount of Trust Certificates outstanding at such time.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Underwriters named below
(the "Underwriters") and the Trust, the Trust will sell the Trust Certificates
to the Underwriters, and each of the Underwriters has agreed to purchase from
the Trust the respective number of Trust Certificates set forth opposite its
name. In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Trust
Certificates if any Trust Certificates are purchased.
<TABLE>
<CAPTION>
NUMBER OF
TRUST
UNDERWRITERS CERTIFICATES
- ------------ ------------
<S> <C>
PaineWebber Incorporated.......................................
Salomon Smith Barney Inc.......................................
Total..................................................... 2,000,000
=========
</TABLE>
The Trust has been advised by the Underwriters that they propose
initially to offer the Trust Certificates to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $ per Trust
Certificate. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ . After the initial public offering, the
public offering price and the concessions may be changed.
The Trust Certificates are a new issue of securities with no
established trading market. The Depositor intends to apply for listing of the
Trust Certificates on the New York Stock Exchange. The Underwriters have told
the Depositor that they presently intend to make a market in the Trust
Certificates, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Trust 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 Trust Certificates will develop or as to the liquidity of
any trading market.
Until the distribution of the Trust Certificates is completed, rules of
the Commission may limit the ability of the Underwriters to bid for and purchase
the Trust Certificates. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Trust Certificates. Possible transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Trust Certificates.
S-14
<PAGE> 15
If the Underwriters create a short position in the Trust Certificates
in connection with this offering, that is, if they sell a greater aggregate
principal amount of Trust Certificates than is set forth on the cover page of
this Prospectus Supplement, the Underwriters may reduce that short position by
purchasing Trust 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 Trust Certificates in the open market to reduce its short
position or to stabilize the price of the Trust Certificates, it may reclaim the
amount of the selling concession from the selling group members who sold those
Trust Certificates as part of the offering.
In general, purchases of a security for the purposes of stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a Trust Certificate to the extent
that it were to discourage resales of the Trust Certificates.
Neither the Depositor nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Trust Certificates. In addition,
neither the Depositor nor the Underwriters make any representation that the
Underwriters will engage in such transactions. Such transactions, once
commenced, may be discontinued without notice.
The Depositor has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), or to contribute to payments that the Underwriters may
be required to make in respect thereof.
The entire proceeds received by the Trust from the sale of the Trust
Certificates will be used to acquire the Bonds from the Depositor, which will
acquire the Bonds from PaineWebber Incorporated ("PaineWebber"), and to pay the
expenses of the offering. Thus, the Trust is not expected to receive any net
cash proceeds from the sale of the Trust Certificates.
LEGAL MATTERS
Certain legal matters relating to the offering and sale of the Trust
Certificates and certain federal income tax aspects thereof will be passed upon
by Sidley & Austin, New York, New York.
RATINGS
It is a condition to issuance of the Trust Certificates that each of
Moody's and S&P shall have assigned an investment grade rating to the Trust
Certificates. The rating given to the Trust Certificates will be based primarily
upon the credit rating of the related Bonds and the legal structure of the
transaction, including the limitation that payments in respect of the Trust
Certificates are subject to receipt by the Trustee of payments on the Bonds.
There is no assurance that any rating will remain in effect for any
given period of time or that it will not be revised downward or withdrawn
entirely by the rating agency, if in the judgment
S-15
<PAGE> 16
of the rating agency, circumstances so warrant. Securities ratings address the
likelihood that the purchasers of Trust Certificates will receive all payments
required under the Trust Agreement. In January 1999, Moody's placed the ratings
of the Underlying Issuer under review for possible downgrade, and S&P placed
such ratings on CreditWatch with negative implications. Thus, it is possible
that the Bonds may be downgraded from their current ratings of "A2" by Moody's
and "A" by S&P. Any such downward revision or withdrawal of such rating may have
an adverse effect on the market prices of the Trust Certificates.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning entity. The Depositor has not requested a rating of the Trust
Certificates from any rating agency other than Moody's and S&P. However, there
can be no assurance as to whether any other rating agency will rate the Trust
Certificates, or if one does, what rating would be assigned by such rating
agency.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Sidley & Austin, for federal income tax purposes, (1)
the Trust will be treated as a grantor trust under subpart E of Part I of
subchapter J of the Code and not as a partnership or an association taxable as a
corporation, and (2) the Trust Certificates will represent undivided beneficial
ownership interests in the interest and principal payments on the Bonds. The
Bonds will likely be treated as "stripped bonds." To the extent that the
allocable purchase price paid by a Certificateholder for its interest in the
Bonds exceeds the Certificateholder's interest in the Bonds' principal balance,
the Bonds will be acquired with amortizable bond premium. A Certificateholder
may elect to amortize such premium as an offset to interest income. See "Certain
Federal Income Tax Considerations--Taxation of Certificateholders--Stripped
Certificates" in the Prospectus.
CERTAIN ERISA CONSIDERATIONS
GENERAL
As more fully described in the accompanying Prospectus, Section 406 of
ERISA and Section 4975 of the Code prohibit certain "employee benefit plans," as
defined in and subject to ERISA, and "plans," as defined in and subject to
Section 4975 of the Code (such employee benefit plans and plans referred to
herein as "Plans"), from engaging in certain transactions involving "plan
assets" with persons that are "parties in interests" under ERISA or
"disqualified persons" under the Code with respect to the Plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and the Code for such persons. For example, a prohibited
transaction would arise, unless an exemption were applicable, if PaineWebber
were a party in interest or disqualified person with respect to a Plan that
acquired Trust Certificates from PaineWebber.
Moreover, additional prohibited transactions could arise if the assets
of the Trust were deemed to constitute plan assets of any Plan that owned Trust
Certificates. The Department of
S-16
<PAGE> 17
Labor ("DOL") has issued a final regulation (the "DOL Regulation") concerning
the definition of what constitutes the "plan assets" of a Plan. Under the DOL
Regulation the assets and properties of certain corporations, partnerships and
certain other entities in which a Plan acquires an "equity interest" could be
deemed to be plan assets of each Plan unless one of the exceptions under the DOL
Regulation is applicable to the Trust.
AVAILABILITY OF PUBLICLY-OFFERED SECURITY EXCEPTION
The DOL Regulation contains an exception (the "Publicly-Offered
Securities Exception") that provides generally that if a Plan acquires an equity
interest in another entity and that equity interest constitutes a
"publicly-offered security," then the assets of the entity are not deemed to be
plan assets of such Plan as a result of such acquisition. A publicly-offered
security is a security that is (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 and (iii) either is (A) part of a class of securities registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or (B) sold to the Plans as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act, and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
It is anticipated that the Trust Certificates will meet the criteria of
the Publicly-Offered Securities Exception. First, the Trust Certificates are
being sold as part of a public offering pursuant to an effective registration
statement under the Securities Act, and will be timely registered under the
Exchange Act. Second, it appears that the Trust Certificates are freely
transferable because the minimum investment is not more than $25, and the Trust
Certificates generally may be transferred or exchanged upon payment of a service
charge of the Trustee and a sum sufficient for reimbursement of certain tax or
governmental charges and the making of certain representations and warranties.
As described in the accompanying Prospectus, the DOL Regulation provides that if
a security is part of an offering in which the minimum investment is $10,000 or
less, then a requirement that reasonable transfer or administrative fees be
paid, or that advance written notice (including representations as to compliance
with the requirements of the DOL Regulation or the entity's governing
instruments) be provided to the entity that issued the security, will not
prevent a finding that the security is freely transferable. Third, PaineWebber
expects (although no assurance can be given) that at the conclusion of the
offering, the Trust Certificates will be owned by at least 100 investors who are
independent of the Trust and each other. Therefore, it is anticipated that the
underlying assets of the Trust should not be deemed to constitute plan assets of
any Plan which purchases Trust Certificates.
If the Trust Certificates fail to meet the criteria of the
Publicly-Offered Securities Exception so that the Trust's assets are deemed to
be plan assets of Plans that are owners of Trust Certificates, transactions
involving the Trust and parties in interest or disqualified persons with respect
to such Plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code unless a prohibited transaction exemption is applicable. There are five
class exemptions
S-17
<PAGE> 18
issued by the DOL that may apply in such event: DOL Prohibited Transaction
Exemption 84-14 (Class Exemption for Certain Transactions Determined by a
Qualified Professional Asset Manager), 90-1 (Class Exemptions for Transactions
Involving Insurance Company Pooled Separate Accounts), 91-38 (Class Exemptions
for Certain Transactions Involving Bank Collective Investment Funds), 95-60
(Class Exemption for Transactions Involving Insurance Company General Accounts)
and 96-23 (Class Exemption for Certain Transactions Determined by an In-house
Asset Manager). There is no assurance that these exemptions, even if all of the
conditions specified therein are satisfied, will apply to all transactions
involving the Trust's assets.
INELIGIBLE PURCHASERS
Regardless of whether the Publicly-Offered Security Exception or the
PTCEs described above apply, Trust Certificates generally may not be purchased
with plan assets of a Plan if PaineWebber, the Depositor, the Underlying Issuer,
the Trustee or any of their respective affiliates either: (a) has investment
discretion with respect to the investment of such Plan's assets; (b) has
authority or responsibility to give or regularly gives investment advice with
respect to such Plan assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such Plan assets and that such advice will be based on
the particular need of the Plan; or (c) is an employer maintaining or
contributing to such Plan.
REVIEW BY PLAN FIDUCIARIES
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is especially important that any
Plan fiduciary who proposes to cause a Plan to purchase Trust Certificates
should consult with its own counsel with respect to the potential consequences
under ERISA and the Code of the Plan's acquisition and ownership of Trust
Certificates. Assets of a Plan should not be invested in the Trust Certificates
unless it is clear that the assets of the Trust will not be plan assets of such
Plan or unless it is clear that a prohibited transaction class exemption will
apply and exempt all potential prohibited transactions.
S-18
<PAGE> 19
INDEX OF TERMS
<TABLE>
<S> <C>
Bonds .................................................... S-4, S-8
Certificate Register ..................................... S-12
Certificateholder ........................................ S-9
Code ..................................................... S-6
Commission ............................................... S-2
Depositor ................................................ S-4
DOL ...................................................... S-16
DOL Regulation ........................................... S-16
DTC ...................................................... S-6
DTC Book Entry Only System ............................... S-11
ERISA .................................................... S-6
Exchange Act ............................................. S-17
Index of Terms ........................................... S-2
Interest Payment Date .................................... S-8
Interest Payments ........................................ S-8
Moody's .................................................. S-7
PaineWebber .............................................. S-15
Plans .................................................... S-16
Principal Payment ........................................ S-8
prohibited transaction exemptions ........................ S-6
Publicly-Offered Securities Exception .................... S-6, S-17
Redemption Premium ....................................... S-5, S-10
Retained Amount .......................................... S-9
S&P ...................................................... S-7
Securities Act ........................................... S-15
Stated Maturity Date ..................................... S-4, S-8
Trust .................................................... S-4
Trust Agreement .......................................... S-5
Trust Certificates ....................................... S-4, S-8
Trustee .................................................. S-5, S-12
Underlying Issuer ........................................ S-4, S-8
Underwriters ............................................. S-14
Underwriting Agreement ................................... S-14
</TABLE>
S-19
<PAGE> 20
APPENDIX A
DESCRIPTION OF BONDS
AVAILABLE INFORMATION
The Underlying Issuer is subject to the information requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission. Such reports, proxy and information statements and other
information filed by the Underlying Issuer with the Commission can be inspected
and copied at prescribed rates at the public reference facilities maintained by
the Commission at its Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its Regional Offices located at: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Chicago, Illinois 6066; and
New York Regional Office, Seven World Trade Center, New York, New York 10048.
Copies of such materials can also be obtained electronically through the
Commission's Internet Web Site (http://www.sec.gov). Information about the
Underlying Issuer is also available at the Underlying Issuer's website
(http://www.jcpenneyinc.com/investor.htm).
TERMS OF BONDS
Underlying Issuer: J. C. Penney Company, Inc.
Bonds: 7 5/8% Debentures due March 1, 2097
Dated: February 20, 1997
Stated Maturity
Date: March 1, 2097
Original Par Value
Amount Issued: $500,000,000
CUSIP Number: 708160 BL 9
Stated Interest Rate: 7 5/8%
Interest Payment Dates: March 1 and September 1
Redemption of Bonds;
Conditional Right to
Shorten Maturity: The Bonds are redeemable at the option of the
Underlying Issuer at any time, in whole or in part
from time to time on not less than 30 nor more than
60 days' notice. In addition, upon the occurrence of
certain adverse tax events, the Underlying Issuer will
have the right (i) to shorten the maturity of the
Bonds to the extent required to cure the adverse
A-1
<PAGE> 21
consequences of such tax event, or (ii) under
certain circumstances, within 90 days of the
occurrence of such an event, to redeem the Bonds in
whole (but not in part), on not less than 30 nor
more than 60 days' notice.
The redemption price will be equal to the greater of
(i) 100% of the principal amount of the Bonds to be
redeemed and (ii) the sum of the present value of
the remaining scheduled payments thereon discounted
to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day
months) at a certain benchmark interest rate plus 20
basis points (or, in the case of a redemption in
connection with the occurrence of an adverse tax
event, 40 basis points), together in either case
with accrued interest on the principal amount being
redeemed to the date of redemption.
Mode of Payment
of Bonds: By credit to the account of the holder at DTC
Par Value Amount of
Bonds Deposited Under
Trust Agreement: $50,000,000
The Bonds will be held by the Trustee for the benefit of the
Certificateholders, as book-entry credits to an account of the Trustee at DTC.
A-2
<PAGE> 22
PROSPECTUS
TRUST CERTIFICATES
CORPORATE ASSET BACKED CORPORATION
DEPOSITOR
The Trust Certificates (the "Certificates") described herein may be
sold from time to time in one or more series, in amounts, at prices and on terms
to be determined at the time of sale and to be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement"). Each series of Certificates will
include one or more classes of Certificates.
The Certificates of each series will be issued by a newly formed,
limited purpose trust to be formed with respect to such series (each, a
"Trust").
(Continued on next page)
----------
PROCEEDS OF THE ASSETS OF THE TRUST FOR ANY SERIES ARE THE SOLE SOURCE
OF PAYMENTS ON THE CERTIFICATES FOR SUCH SERIES. THE CERTIFICATES WILL NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY,
THE DEPOSITOR OR PAINEWEBBER INCORPORATED, ANY OTHER TRUST OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE CERTIFICATES ARE DIFFERENT FORM, AND SHOULD NOT BE
DEEMED TO BE A SUBSTITUTE FOR, DIRECT OWNERSHIP OF THE UNDERLYING ASSETS OF THE
TRUST.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Certificates may be sold by the Depositor through agents designated
from time to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone, as more fully
described under "Plan of Distribution" and in the related Prospectus Supplement.
If underwriters or agents are involved in the offering of the Certificates of
any series offered hereby, the name of the managing underwriter or underwriters
or agents will be set forth in the related Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
OFFERED HEREBY UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is March 16, 1999.
<PAGE> 23
(Continued from previous page)
The property of each Trust will include securities (the "Bonds") that
will be identified in the related Prospectus Supplement and will be debt
securities issued by corporations that are subject to the information
requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports and other information with the Securities and Exchange Commission.
Each Trust will be formed pursuant to a series trust deposit agreement
(the "Trust Agreement") to be entered into between Corporate Asset Backed
Corporation, as Depositor (the "Depositor"), and the Trustee specified in the
related Prospectus Supplement (the "Trustee").
The Certificates of each class of any series will represent the right
to receive a specified amount or allocation of payments of principal and
interest on the related Bonds in the manner described herein and in the related
Prospectus Supplement. The Certificates will represent fractional undivided
interests in some or all of the interest and principal payments on the Bonds in
the related Trust.
Each series of Certificates will represent the right to receive
payments or distributions in the amounts, at the rates, and on the dates set
forth in the related Prospectus Supplement. The rate of payment in respect of
principal of Certificates of any series will depend on the timing of payments on
the related Bonds.
There will be no secondary market for the Certificates prior to the
offering thereof. While PaineWebber Incorporated intends to make a secondary
market in the Certificates, it is not obligated to do so. There can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. The Certificates may or may not be listed
on a securities exchange. If the Certificates are listed on a securities
exchange, the name of such exchange will be disclosed in the related Prospectus
Supplement.
Certificates will be issued in book-entry form or as Definitive
Certificates. Each class of Certificates initially issued in book-entry form
will be represented by a single physical certificate registered in the name of
Cede & Co., the nominee of The Depository Trust Company ("DTC"). The interests
of owners of such Certificates will be represented by book entries on the
records of DTC and participating members thereof. Definitive Certificates will
be available only under limited circumstances.
2
<PAGE> 24
AVAILABLE INFORMATION
Corporate Asset Backed Corporation, as depositor of each Trust, has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement (together with all amendments and exhibits thereto,
referred to herein as the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Certificates
offered pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, omits certain information contained in such Registration
Statement pursuant to the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement which may be
inspected and copied at the public reference facilities maintained by the
Commission at its Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549 (information on the operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330), and at its Regional
Offices located at: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 6066; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such materials can also be obtained
electronically through the Commission's Internet Web Site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by a Trust pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
subsequent to the date of this Prospectus and prior to any termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus. Any statement contained herein or incorporated by
reference herein shall be deemed to be modified or superseded to the extent that
any subsequently filed document which is incorporated by reference herein
modifies or supersedes such statement.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, annual unaudited
reports containing information concerning the related Bonds 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
"Certain Information Regarding the Certificates -- Book-Entry Registration" and
"-- Reports to Certificateholders." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Each Trust will file with the Commission such periodic reports as are required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder.
3
<PAGE> 25
TABLE OF CONTENTS
PROSPECTUS....................................................................1
AVAILABLE INFORMATION.........................................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................3
REPORTS TO CERTIFICATEHOLDERS.................................................3
PROSPECTUS SUMMARY............................................................6
THE TRUSTS...................................................................10
General ...........................................................10
The Trustee.........................................................10
Office for Registration of Transfer and Exchange....................10
THE BONDS....................................................................11
General ...........................................................11
AVAILABLE INFORMATION REGARDING THE CORPORATE OBLIGORS.......................11
Bondholder Communications...........................................11
USE OF PROCEEDS..............................................................12
THE DEPOSITOR................................................................12
THE CERTIFICATES.............................................................12
General ...........................................................12
Distributions of Interest and Principal Amount......................13
CERTAIN INFORMATION REGARDING THE CERTIFICATES...............................13
Book-Entry Registration.............................................13
Definitive Certificates.............................................15
Defaults and Remedies...............................................16
Issuance and Delivery...............................................17
Termination of Trust Agreement......................................17
Reports to Certificateholders.......................................17
Accounts ...........................................................17
Distributions.......................................................18
Termination of Book-Entry Registration in Connection with
Suspension of Exchange Act Reporting by Corporate
Obligor....................................................18
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS....................................18
Classification of the Trust.........................................19
Taxation of Certificateholders......................................19
Trust Assets, Income and Expense...........................19
Interest, Discount and Premium.............................19
4
<PAGE> 26
Unstripped Certificates....................................20
Stripped Certificates......................................21
Constant Yield Election....................................22
Disposition and Retirement.................................22
Additional Tax Considerations.......................................22
Backup Withholding.........................................22
Tax Information Reporting..................................23
Non-United States Holders..................................23
State and Other Tax Considerations..................................24
CERTAIN ERISA CONSIDERATIONS.................................................24
General ...........................................................24
Exempt Plans........................................................25
Plan Assets.........................................................25
Prohibited Transactions.............................................27
Ineligible Purchasers...............................................28
PLAN OF DISTRIBUTION.........................................................29
LEGAL OPINIONS...............................................................29
5
<PAGE> 27
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Certificates contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Certificates. Certain capitalized terms used in this Prospectus
Summary are defined elsewhere in this Prospectus and in the related Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms."
<TABLE>
<S> <C>
Issuer .................................................... With respect to each series of Certificates, the
Trust to be formed by the Depositor and the
Trustee pursuant to the Trust Agreement. Each
Trust will be established for the primary purpose
of issuing Certificates of a single series and
using the net proceeds therefrom to acquire the
Bonds to be described in the related Prospectus
Supplement for such series.
Depositor.................................................. Corporate Asset Backed Corporation.
Trustee.................................................... The Trustee specified in the related Prospectus
Supplement.
The Certificates........................................... Each series of Certificates will include one or
more classes of Certificates issued pursuant to a
Trust Agreement between the Depositor and the
Trustee.
The Certificates will be available for purchase
in minimum denominations of $25 and integral
multiples of $25 in excess thereof, and will be
available in book-entry form or in the form of
Definitive Certificates, as specified in the
related Prospectus Supplement. Certificateholders
of a series initially issued in book-entry form
will be able to receive Definitive Certificates
only in the limited circumstances described
herein. See "Certain Information Regarding the
Certificates -- Definitive Certificates."
Each class of Certificates will have a stated
principal amount (as defined in the related
Prospectus Supplement) and will accrue interest
on such principal amount as set forth in the
related Prospectus Supplement.
The Trust Property......................................... The property of each Trust will include
securities (the "Bonds") acquired by the
</TABLE>
6
<PAGE> 28
<TABLE>
<S> <C>
Depositor from PaineWebber Incorporated
("PaineWebber"), an affiliate of the Depositor,
in exchange for the Certificates. The Bonds will
be identified in the related Prospectus
Supplement and will be debt securities issued by
a corporation eligible to offer and sell
securities registered on a registration statement
on Form S-3 promulgated under the Securities Act
of 1933, as amended (the "Act"), which
corporation will also be a reporting company
under Section 12 or Section 15(d) of the
Securities Exchange Act of 1934 at the time the
Bonds are deposited in the Trust. Each of the
Bonds will have originally been issued in a
transaction registered pursuant to the Act.
PaineWebber will have previously purchased the
Bonds in the secondary market. PaineWebber will
not have purchased the Bonds from the issuer
thereof or any of its affiliates, and the Bonds
will not have been purchased by PaineWebber as
part of the initial distribution thereof. After
the date of issuance by each Trust of the related
Certificates (the "Issuance Date"), such Trust
will not purchase or otherwise acquire any
additional securities and will not dispose of or
create any lien on its assets, other than, upon
termination of such Trust.
Payments .................................................. Subject to timely receipt of payments on the
Bonds, payments in respect of the Certificates
will be paid or distributed at such times and in
such manner as described in the related
Prospectus.
Certain Federal Income Tax Considerations.................. Upon the issuance of each series of Certificates,
Sidley & Austin, as counsel to the Depositor,
will deliver an opinion to the effect that, for
federal income tax purposes: (1) the Trust will
be a grantor trust and not a partnership or an
association taxable as a corporation; and (2) the
Certificates will be interests in a grantor
trust. See "Certain Federal Income Tax
Considerations."
ERISA Considerations....................................... As more fully described under "Certain ERISA
Considerations," a particular Certificate may or
may not be eligible for purchase by an "employee
benefit plan" as described in and
</TABLE>
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<TABLE>
<S> <C>
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or a
"plan" as defined in and subject to Section 4975
of the Internal Revenue Code (the "Code") (each
such employee benefit plan or plan, a "Plan").
Section 406 of ERISA and Section 4975 of the Code
prohibit certain transactions involving assets of
a Plan with persons who are "parties-in-interest"
(within the meaning of Section 3(14) of ERISA) or
"disqualified persons" (within the meaning of
Section 4975 of the Code) with respect to such
Plan. Violations of these prohibited transaction
rules can result in excise taxes and other
liabilities. An investment in a Certificate by or
on behalf of a Plan will cause the Certificate to
be treated as an asset of the Plan for purposes
of Title I of ERISA and Section 4975 of the Code.
Therefore, a Certificate may not be purchased by
a Plan if PaineWebber, the Depositor, the
Trustee, the Corporate Obligor of the related
Bonds, or any of their respective affiliates is a
party-in-interest or a disqualified person with
respect to the Plan, unless a prohibited
transaction exemption applies and the conditions
thereof are satisfied. In addition, unless the
Certificate is a "publicly-offered security"
within the meaning of a final regulation issued
by the Department of Labor (the "DOL Regulation")
or another exception set forth in the DOL
Regulation applies to the Certificates, an
investment in a Certificate by a Plan may cause
the underlying assets of the Trust to which such
Certificate relates (i.e., the related Bonds) to
also be treated as assets of such Plan for
purposes of Title I of ERISA and Section 4975 of
the Code. If the underlying assets of the Trust
are so treated as Plan assets, the Plan's
investment in the Certificate and certain
transactions relating to the underlying assets of
the Trust could violate the prohibited
transaction rules under ERISA and the Code. It is
anticipated that certain classes of Certificates
within a series of Certificates may qualify as
publicly-offered securities under the DOL
Regulation. Whether a particular Certificate is
expected to qualify as a publicly-offered
security under the DOL Regulation will be
specified in the Prospectus Supplement concerning
such
</TABLE>
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<TABLE>
<S> <C>
Certificate, if applicable. If a Certificate is
not a publicly-offered security and no other
exception set forth in the DOL Regulation applies
to the Certificate, then a Certificate may not be
purchased by a Plan unless a prohibited
transaction exemption applies to the purchase of
the Certificate and the transactions relating to
the underlying assets of the related Trust and
the conditions of such exemption are satisfied.
It is uncertain whether the existing prohibited
transaction exemptions would apply to all
transactions involving the underlying assets of
the Trust. Accordingly, fiduciaries of Plans
considering the purchase or holding of
Certificates by or on behalf of a Plan should
consult their counsel prior to making such a
purchase. See "Certain ERISA Considerations"
herein and in the related Prospectus Supplement.
Rating of the Certificates................................. It is a condition to the issuance of each series
of Certificates that they be rated investment
grade, that is, in one of the four highest rating
categories (without taking into account any
subcategories) by at least one nationally
recognized statistical rating organization (the
"Rating Agency"). The ratings applicable to the
Certificates of each series will be as set forth
in the related Prospectus Supplement.
A security rating should be evaluated
independently of similar ratings of different
types of securities. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning rating organization.
There can be no assurance that a rating will not
be lowered or withdrawn by a rating organization
if circumstances so warrant.
</TABLE>
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THE TRUSTS
GENERAL
With respect to each series of Certificates, the Depositor will
establish a Trust by depositing the Trust Property (as defined below) in the
Trust without recourse. After the Issuance Date with respect to each Trust, such
Trust will not purchase or otherwise acquire any additional securities and will
not dispose of or create any lien on its assets, other than upon termination of
the Trust.
The trust property will consist of the Bonds, all monies due or
received in respect thereof, certain accounts and the proceeds thereof, in each
case as described in the related Prospectus Supplement (as so described, the
"Trust Property"). The Certificates will evidence ownership interests in the
related Trust Property.
The location of the principal office of each Trust will be specified in
the related Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the Certificates is limited solely to the express obligations of such Trustee
set forth in the related Trust Agreement. A Trustee may resign at any time, in
which event the Depositor will be obligated to appoint a successor trustee. Any
resignation or removal of a Trustee and appointment of a successor trustee will
not become effective until acceptance of the appointment by the successor
trustee.
The Trust Agreement will provide that the Trustee must comply with
Section 310(b) of the Trust Indenture Act of 1939, as amended (the "TIA"),
provided that there will be excluded from the operation of TIA Section 310(b)(1)
any series trust deposit agreements under which other securities are outstanding
evidencing ownership interests in bonds of the Corporate Obligor of the Bonds if
the requirements for exclusion set forth in TIA Section 310(b)(1) are met.
The Trust Agreement will provide that, except during the continuance of
an event of default on the Bonds, the Trustee will perform only such duties as
are specifically set forth in the Trust Agreement. During the existence of an
event of default on the Bonds, the Trustee will be required to exercise the
rights and powers vested in it by the Trust Agreement and use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
OFFICE FOR REGISTRATION OF TRANSFER AND EXCHANGE
The designated office of the Trustee for the registration of transfer
or exchange of Certificates is 114 West 47th Street, New York, NY 10036-1532.
Notwithstanding the foregoing, under the DTC Book Entry Only System, transfers
and exchange of Certificates will be accomplished as described under "The Trust
Certificates--DTC Book Entry Only System" in the Prospectus Supplement.
Any holder presenting Certificates for surrender or registration of
transfer or exchange may be required to pay any applicable service charge of the
Trustee and a sum sufficient for reimbursement of
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any tax or governmental charge, to file such proof of residence, or other
matters or information, to execute such certificates and to make such
representations and warranties and such assurances, including a signature
guaranty, as the Trustee may reasonably deem necessary or proper. The Trustee
may withhold the delivery or delay the surrender of a registration of transfer
or exchange of any Certificates until such payment is made and proof or other
information is filed, such certificates are executed or such representations and
warranties are made.
THE BONDS
GENERAL
The Bonds to be purchased by each Trust will be debt securities issued
by a corporation or corporations (each such corporation, a "Corporate Obligor")
eligible to offer and sell securities registered on a registration statement on
Form S-3 promulgated under the Securities Act of 1933, as amended (the "Act"),
which Corporate Obligor will also be a reporting company under Section 12 or
Section 15(d) of the Securities Exchange Act of 1934 at the time the Bonds are
deposited in the Trust. Each of the Bonds will have originally been issued in a
transaction registered pursuant to the Act. The Bonds will have been acquired by
the Depositor from PaineWebber Incorporated ("PaineWebber") in exchange for the
Certificates. PaineWebber will have previously purchased the Bonds in the
secondary market. PaineWebber will not have purchased the Bonds from the issuer
thereof or any of its affiliates, and the Bonds will not have been purchased by
PaineWebber as part of the initial distribution thereof. The specific terms and
conditions of the Bonds to be purchased by each Trust will be set forth in the
related Prospectus Supplement.
AVAILABLE INFORMATION REGARDING THE CORPORATE OBLIGORS
The Corporate Obligors will be corporations that at the time of deposit
of Bonds into a Trust are subject to the information requirements of the
Securities Exchange Act of 1934 and in accordance therewith file reports and
other information with the Commission. Such reports, proxy and information
statements and other information filed by the Corporate Obligors with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located at: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Chicago, Illinois
6066; and New York Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such materials can also be obtained electronically through the
Commission's Internet Web Site (http://www.sec.gov). If the Bonds are listed on
the New York Stock Exchange, the material described above and other information
with respect to the Corporate Obligor will also be available for inspection at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York.
BONDHOLDER COMMUNICATIONS
Upon the receipt by the Trustee of any bondholder communications from a
Corporate Obligor, the Trustee will transmit such communications to the
beneficial owners of the Certificates (each, a "Certificateholder") upon receipt
from the Corporate Obligor of assurances that the Trust's reasonable expenses
will be reimbursed by the Corporate Obligor. In addition, upon receipt by the
Trustee of bondholder communications from a third party (other than the
Corporate Obligor), the Trustee will transmit such bondholder communications
only to the Certificateholders upon receipt from such third
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party of assurances that the Trustee's reasonable expenses will be reimbursed by
such third party. In either case, if the Trustee does not receive such
assurances, then the Trustee, at the sole discretion of the Depositor and at the
expense of the Trust, will transmit or cause to be transmitted any such
bondholder communications to such Certificateholders.
USE OF PROCEEDS
The Certificates will be transferred by the Depositor to PaineWebber in
exchange for the Bonds, and there will be no cash proceeds received by the
Depositor from the sale of the Certificates. PaineWebber will use the proceeds
from the sale of the Certificates to acquire the Bonds and, to the extent there
are any excess proceeds after acquisition of the Bonds, for its general
corporate purposes.
THE DEPOSITOR
The Depositor, a wholly owned indirect subsidiary of PaineWebber, was
incorporated in the state of Delaware on November 22, 1993. The Depositor is
organized for the limited purpose of acquiring Bonds from PaineWebber, forming
Trusts, transferring Bonds to the Trusts, and engaging in related activities.
The assets of the Depositor and its affiliates are not available to satisfy
obligations of any Trust. The principal executive offices of the Depositor are
located at 1285 Avenue of the Americas, New York, New York 10019.
THE CERTIFICATES
GENERAL
With respect to each Trust, the Certificates will be issued pursuant to
the terms of a Trust Agreement, a form of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The terms and
conditions of the Certificates include those stated in the Trust Agreement and
those made part of the Trust Agreement by reference to the TIA. The Certificates
are subject to all such terms and conditions, and reference is made to the Trust
Agreement and the TIA for a statement thereof. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Certificates and the Trust Agreement.
Where particular provisions or terms used in the Trust Agreement are referred
to, the actual provisions (including definitions of terms) are incorporated by
reference as part of this summary.
Each class of Certificates of a series of Certificates issued in
book-entry form will initially be represented by a single Certificate registered
in the name of DTC. The Certificates will be available for purchase in minimum
denominations of $25 and integral multiples of $25 in excess thereof. The
Depositor has been informed by DTC that DTC's nominee will be Cede. Accordingly,
Cede is expected to be the holder of record of the Certificates issued in
book-entry form. For Certificates initially issued in book-entry form, unless
and until Definitive Certificates are issued under the limited circumstances
described herein, no Certificateholder will be entitled to receive a physical
certificate representing a Certificate. All references herein to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants and all references herein to distributions, notices, reports and
statements to Certificateholders refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Certificates, as the
case may be, for distribution to
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Certificateholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
DISTRIBUTIONS OF INTEREST AND PRINCIPAL AMOUNT
The timing, priority, amount, allocation and/or rate of distributions
on the Certificates of each class of any series will be described in the related
Prospectus Supplement. Distributions of interest and principal on the
Certificates will be made on the dates specified in the related Prospectus
Supplement. Interest on the Certificates will be calculated as specified in the
related Prospectus Supplement, which may be on the basis of a 360-day year
consisting of twelve 30-day months or on some other basis.
CERTAIN INFORMATION REGARDING THE CERTIFICATES
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates (such
electronic book-entry system, the "DTC Book Entry Only System"). Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC Book Entry Only System also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Certificateholders of book-entry Certificates that are not Participants
or Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, such Certificates may do so only through
Participants and Indirect Participants. In addition, such Certificateholders
will receive all distributions of principal and interest through DTC
Participants. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or such
Certificateholders. Except for the Depositor, it is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificateholders will not
be recognized by the Trustee as Certificateholders as such term is used in the
Trust Agreement, and Certificateholders will be permitted to exercise the rights
of Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Certificates among Participants on whose behalf it acts with respect to the
Certificates and to receive and transmit distributions of principal of and
interest on Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificateholders. Accordingly, although
Certificateholders will not possess Certificates, the Rules provide a mechanism
by which beneficial owners will receive payments and will be able to transfer
their Certificate interests.
The Physical Certificates delivered to the Trustee will be registered
in the name of Cede, as nominee for DTC. The Owners, as purchasers of
Certificates under the DTC Book Entry Only System, will not receive physical
certificates representing their Certificates. Instead, the ownership interests
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of the Owners will be recorded, directly or indirectly, through the records of
the respective Participants and Indirect Participants. Transfers among Owners
will be accomplished through and reflected on the records of DTC and the
Participants or Indirect Participants of which those Owners are customers. DTC
will maintain records for the payment, transfer and exchange of Certificates
held by DTC Participants on behalf of Owners, but will not make payments
directly to Owners or record specific transfers of Certificates from one Owner
to another.
Payments on the Bonds that are received by the Trustee from the Issuer,
including payments upon redemption of the Bonds, will be paid to DTC as the
registered holder of the related Certificates. DTC, under its current practices,
would credit those payments to the accounts of the Participants in accordance
with their respective holdings of Certificates as shown on DTC's records.
Payments by Participants and Indirect Participants to Owners will be governed by
standing instructions and customary practices, and will be the responsibility of
each such Participant or Indirect Participant and not of DTC or the Trustee,
subject to any statutory and regulatory requirements as may be in effect from
time to time.
With respect to any Certificate, on or after each interest payment
date, if the Corporate Obligor will have paid in full and the Trustee will have
received the interest payment due on such interest payment date on the Bonds,
the Trustee will pay to DTC as the registered holder of the Certificate as of
the applicable record date, in lawful money of the United States of America, by
credit of same day funds to the account of DTC, the entire amount of such
interest payment, less any taxes or governmental charges required to be withheld
from such payment by the Trustee.
With respect to any Certificate, if the Corporate Obligor will have
paid in full and the Trustee will have received the principal due upon maturity
of the underlying Bond, or if the Corporate Obligor will have paid in full and
the Trustee will have received the principal and redemption premium, if any,
payable upon the earlier redemption of such Certificate, the Trustee will pay to
DTC as the registered holder of the Certificates as of the applicable record
date, in lawful money of the United States of America, by credit of same day
funds to the account of DTC, the entire amount of such principal and premium, if
any, less any taxes or governmental charges required to be withheld from such
payment by the Trustee.
Amounts received by the Trustee before 2:00 p.m. on any day will be
credited to DTC that same day. Amounts received by the Trustee after 2:00 p.m.
will be credited to DTC on the next business day.
DTC may determine to discontinue the DTC Book Entry Only System with
respect to the Certificates at any time by giving notice to the Trustee and the
Depositor and discharging its responsibilities with respect thereto. In
addition, the Depositor may cause the removal of DTC (or a successor or
substitute depository) if the Depositor determines such removal is in the best
interests of the Owners or is in the best interests of the Depositor as long as
the removal will not adversely affect the Owners. If DTC (or a successor or
substitute depository) is removed and the Depositor, after a good faith effort,
is unable to procure the services of a successor depository, the Trustee will
serve as depository of the Bonds.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
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DTC has advised the Depositor that it will take any action permitted to
be taken by a Certificateholder under the related Trust Agreement only at the
direction of one or more Participants to whose accounts with DTC the
Certificates are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interest.
Except as required by law, the Trustee will not have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interest of the Certificates of any series held by Cede, as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DEFINITIVE CERTIFICATES
Certificates may be issued in book-entry or in Definitive Certificate
form. Certificates initially issued in book-entry form will be issued in fully
registered, certificated form ("Definitive Certificates") to Certificateholders
or respective nominees, rather than to DTC or its nominee, only if (i) the
Depositor advises the appropriate trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to such Certificates and the Depositor is unable to locate a qualified
successor, (ii) the Depositor, at its option, elects to terminate the book-entry
system through DTC (iii) after the occurrence of an Event of Default, holders
representing at least a majority of the voting rights relating to the
outstanding Certificates advise the appropriate trustee through DTC in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interest of the holders of such securities, or
(iv) under the circumstances described under "--Termination of Book-Entry
Registration in Connection with Suspension of Exchange Act Reporting by
Corporate Obligor" below.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify DTC of its intent to make
Definitive Certificates available. Upon surrender by DTC of the Physical
Certificates representing the securities and receipt of instructions for
re-registration, the Trustee will reissue such securities as Definitive
Certificates to the holders thereof.
Distributions of principal of, and interest on, the Definitive
Certificates will thereafter be made in accordance with the procedures set forth
in the related Trust Agreement directly to holders of Definitive Certificates in
whose names the Definitive Certificates were registered at the close of business
on the day before the related Payment Date. Such distributions will be made by
check mailed to the address of such holder as it appears on the register
maintained by the Trustee. The final payment on any Definitive Certificate,
however, will be made only upon presentation and surrender of such Definitive
Certificate at the office or agency specified in the notice of final
distribution to the holders of such class.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or of a registrar named in a notice delivered to holders
of Definitive Certificates. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
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DEFAULTS AND REMEDIES
With respect to each Trust, the Trust Agreement will provide that if
there is an event of default (as defined in the indenture for the Bonds) with
respect to the Bonds and such event of default is known to the Trustee, the
Trustee will promptly give notice to DTC or, if the Certificates are not then
held by DTC or any other depository, directly to the registered holders of the
Certificates then outstanding and unpaid as provided in the Trust Agreement (and
in the manner and to the extent provided in TIA Section 313(c)) within ninety
days after such event of default occurs. Such notice will set forth (a) the
identity of the issue of Bonds, (b) the date and nature of such default, (c) the
face amount of the interest or principal in default, (d) the identifying numbers
of the class of Certificates, or any combination, as the case may be, evidencing
the interest or principal described in the preceding clause, if applicable, and
(e) any other information that the Trustee may deem appropriate. Except in the
case of a default in the payment of principal or interest, the Trustee may
withhold the notice to holders of Certificates if and so long as a committee of
its responsible officers in good faith determines that withholding the notice is
in the interests of the holders of the Certificates.
With respect to each Trust, the Trust Agreement will provide that if
(a) default is made in the payment of any interest on any Bond when due and
payable continue for the period specified in the indenture for the Bonds (or, if
no such period is specified, five days), or (b) default is made in the payment
of the principal of or any installment of the principal of any Bond when due and
payable continue for the period specified in the indenture for the Bonds (or, if
no such Period is specified, thirty days), in each case after receipt by the
Corporate Obligor of notice thereof from the Trustee or receipt by the Corporate
Obligor and the Trustee of notice thereof from holders of outstanding
Certificates representing at least twenty five percent of the voting rights with
respect to the Certificates, and the Corporate Obligor shall, after demand of
the Trustee, fail to pay the Trustee the whole amount due and payable on the
Bonds for Principal and interest, then the Trustee, in its own name and as
trustee of an express trust, subject to provision being made for indemnification
against costs, expenses and liabilities in a form satisfactory to the Trustee,
will institute a proceeding for the collection of the sums so due and unpaid,
and will prosecute such proceeding to judgment or final decree or settlement,
and will enforce the same against the Corporate Obligor or other obligor upon
the Bonds and collect in the manner provided by law out of the property of the
Corporate Obligor or other obligor upon the Bonds, whenever situated, the moneys
adjudged or decreed to be payable, unless otherwise directed by holders of
outstanding Certificates representing not less than a majority of the voting
rights.
In the event the Trustee receives money or other property in respect of
the Bonds (other than scheduled payments) as a result of a payment default on
the Bonds, the Trustee will promptly give notice as provided in the Trust
Agreement to DTC, or for any Certificates that 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 thirty days
after the receipt of such moneys or other property, the Trustee will distribute
such moneys or other property to the holders of the outstanding Certificates pro
rata by face amount or, if there is more than one class of Certificates under
the Trust Agreement, in proportion to the accreted value of each class of
outstanding Certificates, and within each class pro rata by face amount.
Interest and principal payments and premium, if any, on the Bonds, are
payable solely by the Corporate Obligor.
The Bonds may be or become subject to laws permitting bankruptcy,
moratorium, reorganization or other actions that, in the event of financial
difficulties of the Corporate Obligor, could
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result in delays in payment or in nonpayment of the Certificates related to a
Bond. In such cases, the treatment accorded certain classes of Certificates may
be less favorable than the treatment accorded other classes of Certificates.
Holders of Certificates will have no recourse against the Depositor or
the Trustee for payment defaults on the Bonds.
The Depositor will be required to furnish to the Trustee not less than
annually a statement as to the performance by the Depositor of its obligations
under the Trust Agreement and as to any default in such performance.
ISSUANCE AND DELIVERY
With respect to each Trust, the Trust Agreement will provide that the
Depositor will, by book-entry credit or otherwise, irrevocably deliver or cause
to be delivered the Bonds to the Trustee and, concurrently therewith, the
Trustee will execute and deliver to the Depositor, or such person or persons as
the Depositor may designate by written instruction, the classes of Certificates
identified in the Trust Agreement, evidencing the aggregate amount, in
authorized denominations, of the Bonds so delivered to the Trustee. No
Certificate will be entitled to the benefits of the Trust Agreement or be valid
or obligatory for any purpose unless it shall have been executed manually by the
Trustee by the signature of a duly authorized signatory.
TERMINATION OF TRUST AGREEMENT
With respect to each Trust, the Trust Agreement will terminate one year
following the payment upon maturity (or any earlier redemption) by the
respective Corporate Obligor(s) of the entire principal amount (and any
redemption premium) of the Bonds or, in the event of a default on the Bonds, one
year following receipt by the holders of the Certificates of all amounts that
they are entitled to receive in such a case pursuant to the Trust Agreement.
Upon termination of the Trust Agreement, the Depositor will be discharged from
all obligations under the Trust Agreement (other than with respect to certain
expenses of the Trustee).
REPORTS TO CERTIFICATEHOLDERS
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of each Trust, the Trustee will
mail to each person who at any time during such calendar year has been a
Certificateholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Certificateholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Considerations."
ACCOUNTS
With respect to each Trust, there will be established and maintained
with the Trustee one or more trust accounts, in the name of the Trustee on
behalf of the Certificateholders, into which all payments made on or with
respect to the related Bonds will be deposited.
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DISTRIBUTIONS
With respect to each Trust, beginning on the Payment Date specified in
the related Prospectus Supplement, distributions of principal and interest on
each series of Certificates entitled thereto will be made by the Trustee to the
Certificateholders. The timing, calculation, allocation, order, source,
priorities of and requirements for all payments to each class of
Certificateholders will be set forth in the related Prospectus Supplement.
TERMINATION OF BOOK-ENTRY REGISTRATION IN CONNECTION WITH SUSPENSION OF EXCHANGE
ACT REPORTING BY CORPORATE OBLIGOR
Subsequent to the deposit of its Bonds into a Trust, a Corporate
Obligor which has no class of security listed on a national securities exchange
or held of record by 300 or more holders could elect to suspend its Exchange Act
reporting requirements. In such event, such Corporate Obligor would no longer be
required to make available under the Exchange Act the public information
referred to under the caption "Available Information Regarding the Corporate
Obligors". The Depositor will cause each Trust to undertake to provide, in the
Trust's own Exchange Act reports for as long as such reports are required to be
filed, quarterly and annual financial statements and other information of the
type required to be filed on Form 8-K under the Exchange Act with respect to any
Corporate Obligor which suspends its Exchange Act reporting requirements, to the
extent such reports and information are then available to the Trust.
If such financial statements are not available to the Trust, then,
unless the Trust has earlier suspended its own Exchange Act reporting
requirements for the Certificates of such series, the Certificates of such
series will, by their terms, generally be required to be removed from the DTC
book entry system, and definitive physical certificates representing the
Certificates of such series will be issued to the beneficial owners of the
Certificates of such series. Furthermore, the Corporate Obligor for the Bonds
will be notified that the Bonds are held pursuant to the Trust Agreement and
that the holders of the Certificates constitute record holders of the Bonds. The
issuance of such definitive physical certificates representing the Certificates
is intended to increase the likelihood that there will then be more than 300
holders of record of the Bonds, requiring the Corporate Obligor to resume filing
Exchange Act reports, in light of Rule 12g5-1(b)(1) under the Exchange Act,
which appears to require a Corporate Obligor with actual knowledge that its
Bonds are held pursuant to a Trust Agreement to treat holders of record of
certificates or other evidences of interest issued by the Trust as holders of
record of the underlying Bonds.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of Certificates. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
as well as final, temporary and proposed Treasury regulations and administrative
and judicial decisions. Legislative, judicial and administrative changes may
occur, possibly with retroactive effect, affecting the accuracy of the
statements set forth herein.
This summary does not purport to address all federal income tax matters
that may be relevant to every investment in Certificates. For example, it deals
only with Certificates held as capital assets within the meaning of Section 1221
of the Code. It does not address tax consequences that may be relevant to
particular holders subject to special treatment under federal income tax law
(e.g., banks and other financial institutions, life insurance companies, dealers
in securities or currencies, tax-exempt
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entities, taxpayers holding Certificates as a hedge, or whose "functional
currency" is not the United States dollar). Except as indicated, this summary is
directed to prospective purchasers in the initial offering described herein, and
not to subsequent purchasers of Certificates. Consequently, purchasers of
Certificates should consult their own tax advisors concerning the tax
consequences to them under federal income tax law, as well as the tax law of any
state, local or foreign jurisdiction, of the purchase, ownership and disposition
of Certificates.
CLASSIFICATION OF THE TRUST
Upon the issuance of each series of Certificates, Sidley & Austin will
deliver an opinion to the effect that the Trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code and not as a
partnership or an association taxable as a corporation. As a result of such
classification, each Certificateholder will be treated for federal income tax
purposes as an owner of an undivided beneficial ownership interest in all or a
portion of the Trust assets consisting of the Bonds. As a grantor trust, the
Trust will not be subject to federal income tax, although holders of
Certificates will be subject to the tax treatment discussed below.
TAXATION OF CERTIFICATEHOLDERS
TRUST ASSETS, INCOME AND EXPENSE
Each Certificateholder will be treated as owning an undivided interest
in all or specified assets of the Trust. As such, each Certificateholder will be
required to report on its federal income tax return its pro-rata share of the
entire gross income from such assets for the period during which it owns a
Certificate, generally in accordance with such holder's applicable method of tax
accounting. Because of stripped interests, market discount or original issue
discount ("OID"), or premium, the amounts includible in income on account of an
investment in a Certificate may differ significantly from the amounts
distributable thereon.
Consistent with its applicable method of tax accounting, a
Certificateholder will be entitled to deduct its pro-rata share of fees paid or
incurred by the Trust. Certificateholders who are individuals, estates or trusts
will be allowed to deduct such fees subject to various limitations on itemized
deductions.
INTEREST, DISCOUNT AND PREMIUM
For purposes of the following discussion, a Certificate representing an
interest in the principal of Bonds comprising a Trust together with all interest
payable thereon is referred to as an "Unstripped Certificate." A Certificate
representing an undivided interest in the principal of Bonds comprising a Trust
but less than all interest payable thereon is a "Stripped Bond Certificate"
(including Certificates so denominated in the Prospectus Supplement as well as
those denominated "Principal Certificates" therein), a Certificate representing
solely an interest in interest payable on Bonds is a "Stripped Coupon
Certificate" (including Certificates so denominated in the Prospectus Supplement
as well as those denominated "Coupon Certificates" therein) and such
Certificates collectively are "Stripped Certificates."
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UNSTRIPPED CERTIFICATES
A purchaser of an Unstripped Certificate generally will be required to
report its share of the interest income on Bonds in accordance with such
purchaser's applicable method of tax accounting. Such purchaser also generally
will be required to report its share of OID to the extent the Certificate
evidences an interest in Bonds issued with OID. A Certificateholder required to
report OID in income must do so although no cash attributable to such discount
will be received until a later date.
The amount treated as OID attributable to a Bond generally is equal to
the excess of its "stated redemption price" over its "issue price." The stated
redemption price of a Bond generally is the aggregate amount payable thereunder
excluding any "qualified stated interest," i.e., interest payable
unconditionally at least annually at a single fixed or qualifying variable rate.
The Depositor anticipates that all interest payable on Bonds will be qualified
stated interest. The amounts payable (including interest and redemption premium,
as applicable) with respect to a callable Bond are determined with reference to
the call or maturity date and call price that produces the lowest yield. The
issue price of a Bond generally is the initial offering price at which a
substantial amount of that particular class of Bonds was sold.
OID is includible in income on a daily basis, based on a constant yield
to maturity over the term of the related Bond. The yield to maturity of a
callable Bond is determined with reference to the call or maturity date and call
price that produces the lowest yield. The constant yield compounds at the end of
each "accrual period," within which OID is allocated ratably to each day. The
accrual periods utilized by a purchaser must each be no longer than one year,
and must be such that each payment will occur at the beginning or end of an
accrual period. OID attributable to Bonds bearing a variable rate of interest
will be determined by assuming that such rate will remain constant from the date
of issuance, while changes in the actual rate will be accounted for in the
period to which they relate.
OID may be reduced to the extent that an interest in a Bond issued with
OID is acquired by a purchaser of an Unstripped Certificate with "acquisition
premium." Acquisition premium is the excess of such Bond's allocable purchase
price over its "adjusted issue price," which in turn is the sum of the Bond's
issue price and previous accruals of OID. OID otherwise includible in income may
be reduced in the proportion that the acquisition premium bears to OID remaining
to be accrued on the Bond.
To the extent that the allocable purchase price paid by a purchaser of
an Unstripped Certificate for its interest in a particular Bond exceeds the
holder's interest in such Bond's remaining principal balance, that interest will
be acquired with amortizable bond premium. The Certificateholder may elect to
amortize such premium as an offset to interest income, generally using a
constant yield method compounding over the term of the Bond. A callable Bond
will be treated for this purpose as maturing with reference to the call or
maturity date and amount, as applicable, that produces the smallest premium. Any
such election will apply to debt instruments held by the Certificateholder
during the year in which the election is made, and to all debt instruments
acquired thereafter.
A purchaser of an Unstripped Certificate alternatively may acquire an
interest in a Bond at a "market discount," i.e., the excess of such Bond's
adjusted issue price, or its issue price in the case of a Bond issued without
OID, over its allocable purchase price. If a Certificateholder acquires an
interest in a Bond having market discount, the Certificateholder will be
required to treat any gain on the sale of a Certificate as ordinary income to
the extent of the holder's share of any previously unrecognized accrued market
discount on such Bond. Moreover, such a Certificateholder may be required to
defer a portion of its otherwise deductible interest expense allocable to
borrowings related to the Certificate
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until disposing of the Certificate in a taxable transaction. A holder may elect
to include market discount in income currently in lieu of treating gain as
ordinary income and deferring interest deductions; any such election is
irrevocable, and applies to all market discount bonds acquired during and after
the year of election.
STRIPPED CERTIFICATES
A purchaser of a Stripped Principal Certificate or Stripped Interest
Certificate will be treated as having purchased an interest in the underlying
"stripped bonds" or "stripped coupons," respectively. Under the "coupon
stripping" rules of the Code, such purchasers generally will be subject to the
OID rules discussed above, and will be required to report their share of OID
with respect to each such underlying stripped bond or stripped coupon although
again no cash attributable to such discount will be received until a later date.
The amount treated as OID attributable to a stripped bond or stripped
coupon generally is equal to the excess of the "stated redemption price" over
its allocable purchase price. In the case of a stripped bond, the stated
redemption price generally is the aggregate amount payable thereunder; the
stated redemption price of a stripped coupon is the amount payable when due. The
purchase price allocable to a stripped bond or stripped coupon will be
determined on the basis of their respective fair market values on the date of
the Certificate purchase.
OID is includible in income on a daily basis, based on a constant yield
to maturity over the term of the related stripped bond or stripped coupon, as
applicable. The constant yield compounds at the end of each "accrual period,"
within which OID is allocated ratably to each day. The accrual periods utilized
by a purchaser must each be no longer than one year, and must be such that each
payment will occur at the beginning or end of an accrual period. OID
attributable to stripped Bonds bearing a variable rate of interest will be
determined by assuming that such rate will remain constant from the date of
stripping, while changes in the actual rate will be accounted for in the period
to which they relate. In certain circumstances the OID Regulations permit a
Certificateholder to recognize OID under a method that differs from that used by
the Trustee.
In the case of callable stripped bonds, the amounts payable (including
interest, as applicable) and the yield to maturity are determined with reference
to the call or maturity date, as applicable, that produces the lowest yield. It
is unclear, however, whether such call or maturity date producing the lowest
yield should be determined with or without regard to interest stripped from the
stripped bond. Interest payable on a stripped bond after such date until the
final maturity or actual call date should be includible in income under the
purchaser's applicable method of tax accounting.
The Internal Revenue Service ("IRS") could contend that certain
Stripped Principal Certificates should be treated as having amortizable bond
premium, in which case failure to make a premium amortization election could
cause a holder to recognize income from such a Certificate more rapidly. Such a
failure also could cause a holder to recognize more taxable income over the
holding period, if the holder's basis in the Certificate attributable to such
premium ultimately proved non-deductible because it resulted in capital loss. A
Stripped Principal Certificate purchased at a price in excess of its face amount
and treated as having a stated redemption price that excluded associated
interest payments as "qualified stated interest" could be so treated, producing
the foregoing possible consequences. Prospective purchasers of such Certificates
should consult their own tax advisors with regard to the advisability of a
premium amortization election.
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CONSTANT YIELD ELECTION
The OID Regulations permit a Certificateholder to elect to accrue all
interest, original issue discount, market discount, and premium in income as
interest, based on a constant yield method. If a Certificateholder made this
election for a Certificate representing an interest in Bonds having market
discount, such Certificateholder would be deemed to have made an election to
currently include market discount in income with respect to all debt instruments
having market discount acquired by such Certificateholder during the taxable
year of the election or thereafter. Similarly, a Certificateholder making this
election for a Certificate representing an interest in Bonds having amortizable
bond premium would be deemed to have made an election to amortize bond premium
with respect to all debt instruments having bond premium that such
Certificateholder owns or acquires. Each of these elections would be
irrevocable; holders considering any such election should consult their own tax
advisors.
DISPOSITION AND RETIREMENT
Upon the sale, exchange or retirement of a Certificate, a holder will
recognize taxable gain or loss in respect of its interest in each Trust asset
underlying such Certificate. Such gains and losses generally will be long-term
capital gains and losses if the Certificate has been held for more than one
year. However, some or all gain may be treated as ordinary income (i) to the
extent of any accrued and unrecognized market discount, (ii) if a Certificate is
held as part of a "conversion transaction" as defined in Code section 1258, or
(iii) if a Certificateholder has made an election under Code section 163(d)(4)
to have net capital gains taxed as investment income at ordinary income rates.
Net long-term capital gains of individuals are subject to taxation at reduced
capital gains tax rates, whereas capital losses of all taxpayers are subject to
limited deductibility.
Gain or loss with respect to each underlying Trust asset is equal to
the difference between the allocable amount realized and the holder's allocable
adjusted basis therein. The amount realized in respect of a disposition or
retirement of a Certificate is allocable among the underlying Trust assets in
accordance with their relative fair market values; a Certificateholder
determines its basis in each such asset by allocating its purchase price among
those assets on the basis of their relative fair market values as of the date of
purchase. A Certificateholder's basis in its Certificate and each underlying
Trust asset generally would be increased by any original issue or market
discount and decreased by any premium amortization previously taken into account
in determining the holder's taxable income, and further decreased by amounts
paid other than qualified stated interest.
If Certificates identified as Callable Principal Certificates or
Callable Stripped Bond Certificates in any applicable Prospectus Supplement
(each, the "Callable Certificates") are retired in exchange for Bonds, the
holders of such Certificates should not recognize gain or loss with respect to
their receipt of Bonds in exchange for their interest in the Trust.
ADDITIONAL TAX CONSIDERATIONS
BACKUP WITHHOLDING
Payments of interest (including OID) and principal, as well as proceeds
from disposition or retirement of Certificates, may be subject to a "backup"
withholding tax of 31 percent if a recipient fails to furnish to the payor
certain identifying information. Certain penalties also may be imposed by the
IRS on a recipient of payments who is required to supply information, but fails
to do so in the proper manner.
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Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
Holders should consult their own tax advisers with respect to qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption. Any amounts deducted and withheld would be allowed as a credit
against such recipient's federal income tax.
TAX INFORMATION REPORTING
Within a reasonable time after the end of each calendar year, the
Trustee will furnish each Certificateholder (DTC or other holders of definitive
Certificates) such customary information as the Trustee deems necessary or
desirable to enable Certificateholders to prepare their tax returns. The Trustee
will furnish comparable information to the IRS as and when required by law to do
so. Because the rules for accruing discount and amortizing premium with respect
to Certificates are uncertain in various respects, there is no assurance that
the IRS will agree with information reports of such items of income and expense.
Moreover, even if otherwise accepted as accurate by the IRS, such information
reports will be based on the original issue price of the Certificates, and in
the case of Certificateholders who purchased their Certificates after their
initial issuance or at a price different from the original issue price, those
reports will require adjustment to account for such Certificateholders' holding
periods and purchase prices. Certificateholders who hold their Certificates
through DTC participants should consult the party from whom they receive tax
reports concerning the Certificates to determine whether such reports reflect
such adjustments. Certificateholders who hold definitive Certificates should
consult their tax advisors concerning the method for making any such required
adjustments.
NON-UNITED STATES HOLDERS
A Non-United States Holder is a beneficial owner of a Certificate other
than a United States citizen or resident, a domestic partnership or corporation,
or a trust or estate subject to U.S. income tax on income regardless of its
source. Under present federal income and estate tax law:
(a) No withholding of federal income tax will be required
with respect to the payment of interest or OID
attributable to a Certificate owned by a Non-United
States Holder, provided that such holder (i) does not
actually or constructively own 10 percent or more of
any issuer of Bonds, (ii) is not a controlled foreign
corporation related to any such issuer, and (iii) in
accordance with specified procedures, supplies the
person otherwise required to withhold with a
certification to the effect that the beneficial owner
is not a United States person, citizen or resident.
In certain circumstances, the requisite certification
may be provided by or through a bank or other
financial institution.
(b) No withholding of federal income tax will be required
with respect to any gain realized by a Non-United
States Holder upon the sale, exchange or retirement
of a Certificate, except gains realized by certain
nonresident alien individuals present in the United
States for 183 days or more during the taxable year.
(c) A Certificate beneficially owned by an individual who
at the time of death is a Non-United States Holder
will not be subject to federal estate tax as a result
of such individual's death, provided that the
payments with respect to such
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Certificate are not effectively connected with a
United States trade or business of such individual.
Notwithstanding the foregoing, Non-United States Holders may be subject
to income tax withholding and estate taxation with respect to any Bonds that
were issued before July 19, 1984. Further, a Non-United States Holder engaged in
a trade or business within the United States whose income from a Certificate is
effectively connected with that trade or business generally will be subject to
regular United States federal income tax on such income and gain in the same
manner as if it were a United States holder. In addition, if such a Non-United
States Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30 percent of its effectively connected earnings and profits for
the taxable year, subject to adjustments.
Backup withholding will not apply to payments on a Certificate to a
Non-United States Holder if the holder has certified as to its foreign status
under penalty of perjury (or has otherwise established an exemption) and certain
other requirements are met. Payments on the sale, exchange or other disposition
of a Certificate to or through a foreign office of a broker will not be subject
to back-up withholding; payments to or through the United States office of a
broker will be subject to backup withholding unless the Non-United States Holder
makes the certification or otherwise establishes an exemption under the
conditions previously described.
Non-United States Holders should consult their own tax advisors
regarding the application of United States federal income tax law to their
particular situations.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of 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. Therefore, prospective purchasers should consult
their own tax advisors with respect to such matters.]
CERTAIN ERISA CONSIDERATIONS
GENERAL
Summarized below are certain consequences under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the
Internal Revenue Code of 1986 (the "Code"), that a fiduciary of an "employee
benefit plan" (as defined in and subject to ERISA) or of a "plan" (as defined in
and subject to Section 4975 of the Code) who has investment discretion should
consider before deciding to invest the plan's assets in Certificates (such
"employee benefit plans" and "plans" being referred to herein as "Plans," and
such fiduciaries with investment discretion being referred to herein as "Plan
Fiduciaries"). Furthermore, all potential investors in Certificates should read
the following summary because it describes certain issues that could affect the
Trust as a consequence of Plans investing in Certificates. The following summary
is intended only to be a summary of certain issues under ERISA and Section 4975
of the Code which are likely to be raised by an investor's own counsel.
In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code refer to any plan or account of
various types which provide retirement
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<PAGE> 46
benefits or welfare benefits to an individual or to an employer's employees and
their beneficiaries. Plans include corporate pension and profit-sharing plans,
"simplified employee pension plans," Keogh plans for self-employed individuals
(including partners in a partnership), individual retirement accounts described
in Section 408 of the Code and medical benefit plans. For the purposes of the
following discussion, the term "Plan" also includes any entity whose assets
constitute assets of any Plan for purposes of Title I of ERISA or Section 4975
of the Code as discussed in the "Plan Assets" section of this summary below, and
the term "Plan Fiduciary" includes any person who is a fiduciary with respect to
any such entity that is a Plan.
Each Plan Fiduciary must give appropriate consideration to the facts
and circumstances that are relevant to an investment in Certificates, including
the role that an investment in Certificates plays in the Plan's investment
portfolio. Each Plan Fiduciary, before deciding to invest in Certificates, must
be satisfied that an investment in Certificates is a prudent investment for the
Plan, that the investments of the Plan, including the investment in
Certificates, are diversified so as to minimize the risks of large losses and
that an investment in Certificates complies with the Plan and related trust
documents.
Each Plan considering acquiring Certificates should consult its own
legal and tax advisors before doing so.
EXEMPT PLANS
ERISA and Section 4975 of the Code do not apply to governmental plans
and certain church plans, each as defined in Section 3 of ERISA and Section
4975(g) of the Code. However, fiduciaries with respect to these plans may be
subject to federal, state or other laws similar in effect to ERISA and Section
4975 of the Code. The discussion below does not purport to address
considerations under such federal, state or other laws.
PLAN ASSETS
When a Plan invests in a Certificate, not only does the Certificate
become an asset of the Plan, but, unless an exception applies, the investment in
a Certificate by a Plan will cause, for purposes of Title I of ERISA and Section
4975 of the Code, the Bonds owned by the related Trust to be treated as assets
of that Plan. A regulation (the "DOL Regulation") issued under ERISA by the
United States Department of Labor (the "DOL") contains rules for determining
when an investment by a Plan in an entity (such as the Trust) will cause the
underlying assets of the entity to be treated as assets of that Plan for
purposes of Title I of ERISA and Section 4975 of the Code ("plan assets"). The
DOL Regulation provides, with respect to a Plan's purchase of an equity
interest, such as a Certificate, of an entity, that the assets of the entity
will be plan assets of the Plan unless (i) the equity interest purchased is a
"publicly-offered security" (the "Publicly-Offered Security Exception"), (ii)
the investment by all "benefit plan investors" is not "significant" (the
"Participation Exception") or (iii) certain other exceptions, not relevant here,
apply.
The Publicly-Offered Security Exception applies if the equity interest
purchased by the Plan is a security that is (1) "freely transferable," (2) part
of a class of securities that is "widely held" and (3) either (a) part of a
class of securities registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, or (b) sold to the Plan as part of a public offering
pursuant to an effective registration statement under the Securities Act of 1933
and the class of which such security is a part is registered under the
Securities Exchange Act of 1934 within 120 days (or such later time as may be
allowed by the Securities and Exchange Commission) after the end of the fiscal
year of the issuer in
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<PAGE> 47
which the offering of such security occurred. The DOL Regulation states that the
determination of whether a security is "freely transferable" is to be made based
on all relevant facts and circumstances. The DOL Regulation specifies that, in
the case of a security that is part of an offering in which the minimum
investment is $10,000 or less, the following requirements, alone or in
combination, ordinarily will not affect a finding that the security is freely
transferable: (i) any requirement that not less than a minimum number of shares
or units of such security be transferred or assigned by any investor, provided
that such requirement does not prevent transfer of all of the then remaining
shares or units held by an investor; (ii) a requirement that no transfer or
assignment of the security or rights in respect thereof be made to an ineligible
or unsuitable investor; (iii) any restriction on, or prohibition against, any
transfer or assignment which would violate any state or federal statute,
regulation, court order, judicial decree or rule of law; (iv) a requirement that
no transfer or assignment be made without advance written notice being given to
the entity that issued that security; or (v) any requirement that reasonable
transfer or administrative fees be paid in connection with a transfer or
assignment. Under the DOL Regulation, a class of securities is "widely held"
only if it is of a class of securities owned by 100 or more investors
independent of the issuer and of each other, but a class of securities will not
fail to be widely-held solely because subsequent to the initial offering the
number of independent investors falls below 100 as a result of events beyond the
control of the issuer. It is anticipated that for certain series of
Certificates, one or more classes of Certificates in those series will satisfy
the Publicly-Offered Security Exception. The Prospectus Supplement for each
series of Certificates will specify whether any or all classes of Certificates
in such series are expected to satisfy the Publicly-Offered Security Exception.
The Participation Exception applies with respect to the assets of an
entity in which a Plan purchases an equity interest if, immediately after the
most recent acquisition of any interest in the entity, less than 25% of the
value of each class of equity interests in the entity is held by "benefit plan
investors" on such date, determined by not including the investments (a) of
persons with discretionary authority or control over the assets of such entity,
(b) of any person who provides investment advice for a fee (direct or indirect)
with respect to such assets and (c) of "affiliates" (within the meaning of the
DOL Regulation) of such persons. For this purpose, the term "benefit plan
investors" includes all plans and accounts of the types described above under
"--General" as employee benefit plans or plans, whether or not subject to ERISA
or Section 4975 of the Code, as well as entities whose assets constitute plan
assets due to investments made in such entities by any such plans or accounts.
Generally, for any class or series of Certificates there is no restriction on
the percentage of the value of that class or series of Certificates that may be
owned by benefit plan investors and, thus, usually there is no assurance that
investment by benefit plan investors will not be significant. Accordingly, it is
not expected that the Participation Exception will apply with respect to any
series of Certificates.
Therefore, unless the Prospectus Supplement for any particular series
of Certificates specifies that the Participation Exception or the
Publicly-Offered Security Exception is expected to apply to such Certificates,
it should be assumed that the Bonds owned by the Trust to which the Certificates
relate will be treated as plan assets of Plans that invest in such Certificates.
In addition, it should be noted that ERISA and the Code may place
restrictions on the purchase of Certificates by insurance companies. In
particular, insurance companies considering the purchase of Certificates should
consult their own counsel with respect to the United States Supreme Court
decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings
Bank and any subsequent legislation or other guidance that has or may become
available relating to that decision, including the retroactive and prospective
exemptive relief granted by the DOL for transactions
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<PAGE> 48
involving insurance company general accounts in prohibited transaction class
exemption 95-60, Section 401(c) of ERISA and regulations issued under Section
401(c) of ERISA.
PROHIBITED TRANSACTIONS
Section 406 of ERISA prohibits "parties in interest" with respect to a
Plan from engaging in certain transactions involving the Plan and its assets
unless a statutory or administrative exemption applies to the transaction. For
instance, Section 406 of ERISA prohibits a "party in interest" with respect to a
Plan from selling a Certificate to such Plan unless a statutory or
administrative exemption applies. In addition, if the Bonds are plan assets,
Section 406 of ERISA will prohibit the Trustee, among others, from causing the
assets of the Trust to be involved, directly or indirectly, in certain types of
transactions with "parties in interest" with respect to investing Plans unless a
statutory or administrative exemption applies. If the prohibited transaction
restrictions of Section 406 of ERISA are violated, ERISA generally provides for
civil penalties upon the Plan Fiduciary and possibly other persons. Section 4975
of the Code generally imposes an excise tax on "disqualified persons" who
engage, directly or indirectly, in similar types of transactions with the assets
of Plans subject to such Section (except that an individual retirement account
that engages in a prohibited transaction may instead forfeit its tax-exempt
status) and also requires rescission of such transactions.
PaineWebber, the Depositor, the Trustee, the Corporate Obligor of the
Bonds owned by the Trust to which a Certificate relates, and certain other
persons and certain affiliates thereof might be considered or might become a
party in interest or disqualified person with respect to a Plan. If so, the
acquisition, holding or disposition of an investment in Certificates by or on
behalf of such Plan could give rise to one or more "prohibited transactions"
within the meaning of Section 406 of ERISA or Section 4975 of the Code unless an
exemption described below or some other exemption is available. In particular,
the sale by PaineWebber to such a Plan of a Certificate regardless of whether
the related Bonds are plan assets, and the services provided by the Trustee to
the Trust or the loans from the Trust to the issuer(s) of the related Bonds if
the related Bonds are plan assets, would appear in certain circumstances to be
prohibited transactions unless an exemption applies.
There are numerous exemptions to the prohibited transaction
restrictions of Section 406 of ERISA and Section 4975 of the Code, and the
applicability of any particular exemption depends upon the circumstances. An
investment in a Certificate may not be purchased by or on behalf of a Plan
unless (i) the Prospectus Supplement governing the Certificate provides that the
Participation Exception or Publicly-Offered Security Exception applies to such
Certificate or (ii) a prohibited transaction exemption (such as one of the
following Prohibited Transaction Class Exemptions ("PTCEs")) applies and the
conditions thereof are satisfied:
i. PTCE 84-14, which provides an exemption if the purchase is
made on behalf of the Plan by a "qualified professional asset
manager." In general, a qualified professional asset manager
is an investment adviser registered under the Investment
Advisers Act of 1940, a bank, as defined in such Act or an
insurance company, each of which meets a certain financial
requirements.
ii. PTCE 90-1, which provides an exemption if the purchase is made
on behalf of an insurance company pooled separate account in
which the assets of no Plan (when aggregated with the assets
of any other Plan maintained by the same employer or employee
organization) in the pooled separate account exceed 10% of the
total assets in the pooled separate account.
27
<PAGE> 49
iii. PTCE 91-38, which provides an exemption if the purchase is
made on behalf of a bank collective investment fund in which
the interest of no Plan (when aggregated with the interests of
any other Plan maintained by the same employer or employee
organization) in the collective investment fund exceeds 10% of
the total assets in the collective investment fund.
iv. PTCE 95-60, which provides an exemption if the purchase is
made on behalf of an insurance company general account in
which the reserves and liabilities held by no Plan (when
aggregated with the reserves and liabilities of any other Plan
maintained by the same employer, an affiliate thereof or the
same employee organization) in the insurance company general
account exceed 10% of the total reserves and liabilities of
the general account plus surplus.
v. PTCE 96-23, which provides an exemption if the purchase is
made on behalf of the Plan by an "in-house asset manager." In
general, an in-house asset manager is a subsidiary of a Plan
sponsor or of such Plan sponsor's parent corporation or a
membership nonprofit corporation the majority of whose members
are officers of a Plan sponsor or of such Plan sponsor's
parent corporation, each of which meets certain financial
requirements.
The PTCEs described above contain numerous technical requirements that
must be satisfied as a condition of reliance thereon and may not provide relief
for all transactions involving the Bonds, even if they would otherwise apply to
a purchase of a Certificate by a Plan. Before purchasing a Certificate, a Plan
Fiduciary should consult with its legal counsel and determine whether there
exists any prohibition to the acquisition and continued ownership of such
Certificate. In particular, a Plan Fiduciary should determine whether
PaineWebber, the Corporate Obligor of the Bonds owned by the Trust to which the
Certificate relates, the Trustee or the Depositor are parties in interest with
respect to the Plan and whether any prohibited transaction exemptions, such as
PTCE 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23, apply.
INELIGIBLE PURCHASERS
Regardless of whether the Participation Exception, the Publicly-Offered
Security Exception or the PTCEs described above apply, a Plan generally may not
purchase a Certificate if PaineWebber, the Depositor, the Trustee, the Corporate
Obligor of the related Bonds, or any of their respective affiliates either: (a)
has investment discretion with respect to the investment of such Plan assets;
(b) has authority or responsibility to give or regularly gives investment advice
with respect to such Plan assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such Plan assets and that such advice will be based on
the particular investment needs of the Plan; or (c) is an employer maintaining
or contributing to such Plan.
BY ITS PURCHASE OF A CERTIFICATE, EACH PURCHASER WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED THAT ITS ACQUISITION AND OWNERSHIP OF SUCH CERTIFICATE
DOES NOT AND WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA
OR THE CODE AND, TO THE EXTENT THAT THE RELATED BONDS CONSTITUTE "PLAN ASSETS,"
THE TRANSACTIONS INVOLVING THE RELATED BONDS WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT
28
<PAGE> 50
PROHIBITED TRANSACTION AS A RESULT OF SUCH PURCHASER'S ACQUISITION OR OWNERSHIP
OF SUCH CERTIFICATES.
EACH PLAN FIDUCIARY SHOULD CONSULT WITH ATTORNEYS AND FINANCIAL
ADVISORS AS TO THE PROPRIETY OF SUCH AN INVESTMENT IN LIGHT OF THE CIRCUMSTANCES
OF THE PARTICULAR PLAN AND CURRENT TAX LAW.
PLAN OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus
Supplement will be offered in series through one or more of the methods
described below. The Prospectus Supplement prepared for each series will
describe the method of offering being utilized for that series and will state
the net proceeds, if any, to the Depositor from such sale. The Certificates will
be transferred to PaineWebber in exchange for the Bonds, and there will be no
cash proceeds received by the Depositor from the sale of the Certificates.
Any Certificates acquired by PaineWebber in exchange for Bonds as
described above will be acquired by PaineWebber for its own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If any
underwriters other than PaineWebber participate as co-managers in the
distribution of the Certificates of a particular series, their names and
PaineWebber's will be set forth on the cover of the Prospectus Supplement
relating to such series and the members of the underwriting syndicate, if any,
will be named in such Prospectus Supplement.
In connection with any sale of the Certificates in which PaineWebber is
not the sole underwriter, the other underwriters may receive compensation from
PaineWebber or from purchasers of the Certificates in the form of discounts,
concessions or commissions. Underwriters and dealers participating in the
distribution of the Certificates may be deemed to be underwriters in connection
with such Certificates, and any discounts or commissions received by them from
PaineWebber and any profit on the resale of Certificates by them may be deemed
to be underwriting discounts and commissions under the Securities Act of 1933,
as amended.
It is anticipated that the underwriting agreement pertaining to the
sale of any series of Certificates will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis), and that the Depositor will indemnify the several underwriters and the
underwriters will indemnify the Depositor against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or will
contribute to payments required to be made in respect thereof.
LEGAL OPINIONS
Certain legal matters relating to the Certificates and certain federal
income tax matters will be passed upon for the Depositor and PaineWebber by
Sidley & Austin, counsel to the Depositor and PaineWebber.
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<PAGE> 51
INDEX OF TERMS
Act ............................................................... 7, 11
Bonds ............................................................. 2, 6
Callable Certificates ............................................. 22
Cede .............................................................. 3
Certificateholder ................................................. 11
Certificates ...................................................... 1
Code .............................................................. 8, 18, 24
Commission ........................................................ 3
Corporate Obligor ................................................. 11
Coupon Certificates ............................................... 19
Definitive Certificates ........................................... 15
Depositor ......................................................... 2
DOL ............................................................... 25
DOL Regulation .................................................... 8, 25
DTC ............................................................... 2
DTC Book Entry Only System ........................................ 13
ERISA ............................................................. 8, 24
Exchange Act ...................................................... 3
Index of Terms .................................................... 6
Indirect Participants ............................................. 13
IRS ............................................................... 21
Issuance Date ..................................................... 7
OID ............................................................... 19
PaineWebber ....................................................... 7, 11
Participation Exception ........................................... 25
Plan .............................................................. 8
plan assets ....................................................... 25
Plan Fiduciaries .................................................. 24
Plans ............................................................. 24
Principal Certificates ............................................ 19
Prospectus Supplement ............................................. 1
PTCEs ............................................................. 27
Publicly-Offered Security Exception ............................... 25
Rating Agency ..................................................... 9
Registration Statement ............................................ 3
Rules ............................................................. 13
Securities Act .................................................... 3
Stripped Bond Certificate ......................................... 19
Stripped Certificates ............................................. 19
Stripped Coupon Certificate ....................................... 19
TIA ............................................................... 10
Trust ............................................................. 1
Trust Agreement ................................................... 2
Trust Property .................................................... 10
Trustee ........................................................... 2
Unstripped Certificate ............................................ 19
30
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CABCO TRUST FOR
J.C. PENNEY DEBENTURES
2,000,000 TRUST CERTIFICATES
(PRINCIPAL AMOUNT $25 PER TRUST CERTIFICATE)
----------------------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------------------
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
, 1999
UNTIL JUNE , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS AND PROSPECTUS SUPPLEMENT. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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