<PAGE>
As filed with the Securities and Exchange Commission on May 29, 1996
Registration No. 333-83818
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
(Exact name of Registrant as specified in its charter)
on behalf of itself and trusts with respect to which it is the depositor
<TABLE>
<S> <C> <C>
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Delaware (212) 909-2000 13-3752880
(State or other jurisdiction of (Address, including zip code, and telephone number, (I.R.S. Employer
incorporation or organization) including area code, of registrant's principal Identification No.)
executive offices)
</TABLE>
Gina Hubbell
President and Chief Executive Officer
CS First Boston Structured Products Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(212) 909-2000
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
------------------
Copy to:
James D. Johnson
Sidley & Austin
875 Third Avenue
New York, New York 10022
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Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY __, 1996
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PROSPECTUS
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CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
COLLATERALIZED BOND OBLIGATIONS AND TRUST CERTIFICATES
BACKED BY CERTAIN UNDERLYING SECURITIES
AND OTHER UNDERLYING ASSETS DESCRIBED HEREIN
(ISSUABLE IN SERIES)
This Prospectus relates to Collateralized Bond Obligations (the "Bonds")
and Trust Certificates (the "Trust Certificates") (collectively, the
"Securities") that may be issued from time to time in one or more series (each a
"Series") under this Prospectus and the related Prospectus Supplement. The
Securities of each Series will be (i) Bonds representing indebtedness of CS
First Boston Structured Products Corporation (the "Company") or of a trust (a
"Trust") established or controlled by the Company, (ii) certificates ("Trust
Certificates") evidencing beneficial ownership interests in the Underlying
Assets (as defined below) deposited into a Trust by the Company or an affiliate
thereof or (iii) a combination of Bonds and Trust Certificates.
Certain assets (the "Underlying Assets") will secure or otherwise underlie
the Securities of each Series. The Underlying Assets will consist of any
combination of one or more of (i) bonds, debentures, notes and other debt
securities ("Underlying Securities") issued by corporations, partnerships,
trusts, limited liability companies and other types of domestic entities (each
an "Underlying Issuer") that, in each case, (a) are eligible to issue securities
registered on a registration statement on Form S-3 by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and (b) file
periodic reports with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, as of the closing date for the
Securities offered pursuant to the related Prospectus Supplement, (ii) credit or
liquidity enhancement ("Underlying Enhancement") consisting of surety bonds or
insurance policies issued by one or more insurance companies ("Financial
Guaranty Insurance"), letters of credit ("Letters of Credit"), other credit
enhancement and/or liquidity facilities (in addition to any
overcollateralization, senior/subordinated structures and other structural
elements of Securities of a Series ("Structural Enhancement")), (iii) interest
rate swap agreements, interest rate cap agreements and interest rate floor
agreements ("Swap Agreements") and/or (iv) cash or guaranteed investment
contracts ("Guaranteed Investment Contracts"), all as described in the related
Prospectus Supplement.
The Securities will be sold from time to time under this Prospectus on
terms established for each Series at the time of sale and described in the
related Prospectus Supplement. See "Certain Information To Be Set Forth In The
Prospectus Supplement".
The Bonds of a Series will be non-recourse obligations of the issuer
thereof (the "Issuer") and Trust Certificates of a Series will evidence an
interest in the related Trust only. The Securities will not be insured or
guaranteed by any governmental agency or instrumentality or by any person
affiliated with the Company or the Issuer thereof, unless otherwise specified in
the related Prospectus Supplement. It is not expected that the Issuer will have
any significant assets other than the Underlying Assets and other assets backing
the issuance of other securities. The Securities are different from, and should
not be deemed to be a substitute for, direct ownership of the Underlying Assets.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH
HEREIN UNDER "RISK FACTORS".
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 ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The Securities offered by this Prospectus and by the related Prospectus
Supplement may be sold to or through underwriters, through dealers or agents or
directly to purchasers. This Prospectus may not be used to consummate sales of
Securities offered hereby unless accompanied by the related Prospectus
Supplement.
CS FIRST BOSTON
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The date of this Prospectus is ___________, 1996.
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities. The Company will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the SEC. This
Prospectus, which forms a part of the Registration Statement, omits certain
information contained in such Registration Statement pursuant to the rules and
regulations of the SEC. The Registration Statement and the exhibits thereto can
be inspected and copied at the public reference facilities maintained by the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
certain regional offices of the SEC located as follows: Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. It is not
intended that any Issuer will send any financial or other reports to Holders of
Securities (other than as described under "The Indenture -- Reports to
Bondholders" and "The Trust Agreement -- Reports to Trust Certificateholders").
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed incorporated by reference herein shall be deemed
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of CS First Boston Structured Products
Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055.
Telephone requests for such copies should be directed to the Secretary of CS
First Boston Structured Products Corporation at (212) 909-2000.
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CERTAIN INFORMATION TO BE SET FORTH
IN THE PROSPECTUS SUPPLEMENT
GENERAL
The Prospectus Supplement relating to a Series will, among other things,
set forth certain terms of such Securities and will describe certain aspects of
the Underlying Assets. In addition, the Prospectus Supplement may contain
statements that supplement, modify or supersede the related provisions of this
Prospectus with respect to such Series; accordingly, the Prospectus should be
read in conjunction with, and may with respect to such Series be supplemented
by, the Prospectus Supplement. For definitions of certain capitalized terms,
see "Glossary".
TERMS OF SERIES
The Prospectus Supplement relating to a Series will set forth the following
terms of such Series: (i) whether such Securities are Bonds, Trust Certificates
or a combination thereof; (ii) the initial aggregate principal amount and the
Bond Interest Rate or Trust Certificate Interest Rate (or method for determining
such rate) and authorized denominations of each Class of such Series; (iii) the
circumstances, if any, in which the Securities of such Series are subject to
redemption or to an Optional Call Right or other retirement prior to maturity or
repurchase; (iv) the Final Scheduled Payment Date of each Class of such Series;
(v) the method used to calculate the aggregate amount of principal, if any,
available and required to be applied to the Securities of such Series on each
Payment Date, the timing of the application of principal, if any, and the order
of priority of the application of such principal to the various Classes and the
allocation of the principal to be so applied; (vi) whether such Securities are
to be issued in Classes, describing the relationship between/among such Classes,
including the extent and terms of subordination of any Subordinated Securities,
and the specific terms of each; (vii) the identity of each Class of Accrual
Securities, Variable Interest Securities, Subordinated Securities, Retail
Securities, Zero Coupon Securities, Principal-Only Securities, Interest-Only
Securities and Participating Securities included in such Series, if any, or
other type of Class of Securities, if any, included in such Series; (viii) the
Payment Dates for the various Classes of Bonds or Trust Certificates; (ix) the
Assumed Reinvestment Rate, if any, and (if applicable) the percentage of Excess
Cash Flow to be applied to payments of principal of the Series; (x) the plan of
distribution of such Series; (xi) whether the Securities are to be issuable in
registered form or bearer form or both, and if Securities in bearer form are
issued, whether bearer Securities may be exchanged for registered securities and
the circumstances and places for such exchange, if permitted; (xiii) with
respect to the federal income tax consequences of such Series, certain elections
or intended treatment thereof; (xiv) the currency or currency unit in which the
Securities are denominated, if other than U.S. dollars; (xv) if applicable, the
terms on which the Trust may issue any indebtedness; (xvi) whether all or any
portion of the Underlying Assets may be loaned or pledged to the Company, any
affiliate of the Company or any other person (and, if so, the terms or
conditions of any such loan or pledge); (xvii) the restrictions on the
transferability of Securities; (xviii) whether such Series may be held through
CEDEL and/or Euroclear and, if so, how such Series will be held with such
clearing
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<PAGE>
agencies; and (xix) any other material terms of such Series or material
information relating to the offering thereof.
UNDERLYING ASSETS
The Prospectus Supplement relating to a Series will set forth the following
aspects of the Underlying Assets, to the extent applicable: (i) with respect to
the Underlying Securities included therein, (A) the title of each Underlying
Security, (B) the aggregate principal amount and type of such Underlying
Securities, (C) the stated interest rate, if any, borne by each of such
Underlying Securities, (D) the weighted average of such interest rates, (E) the
stated maturity date of each of such Underlying Securities, (F) the weighted
average stated maturity date of such Underlying Securities, (G) the identity of
each Underlying Issuer (including any guarantor and any provider of credit
support), (H) certain credit characteristics of such Underlying Issuer,
including such Underlying Issuer's rating, if any, and any special risk factors,
(I) the existence and extent of any guaranty of or credit support with respect
to such Underlying Securities, (J) the conditions under which, and the terms on
which, such Underlying Securities may be prepaid or redeemed prior to the stated
maturity thereof, (K) the terms, if any, on which the Trustee or its agent may
exchange or sell any Underlying Security and (L) the type of information that is
made publicly available by each Underlying Issuer, including how purchasers of
Securities may obtain such publicly available information with respect to each
Underlying Issuer; (ii) certain terms of any Underlying Enhancement included
therein, including certain contractual terms of the Underlying Enhancement and
the identity and rating, if available, of each issuer thereof; (iii) certain
terms of any Swap Agreements included therein, including certain contractual
terms of the Swap Agreements and the identity and rating (if such rating is
available) of each counterparty thereto and any guarantor thereof; (iv) certain
characteristics of any other Underlying Assets and (vi) the terms, if any, on
which the Trustee or its agent may exchange or sell any Underlying Asset.
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<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
Prospectus Supplement with respect to the Series offered thereby and to the
Indenture or the Trust Agreement relating thereto (as described below), together
with any other agreements or instruments related thereto. For definitions of
certain capitalized terms, see "Glossary".
SECURITIES OFFERED The Securities of each Series will be (i) Bonds
representing indebtedness of the Company or a Trust
established or controlled by the Company, (ii) Trust
Certificates evidencing beneficial ownership interests in
assets deposited into a Trust by the Company or an
affiliate thereof or (iii) a combination of Bonds and
Trust Certificates. Certain "Underlying Assets",
described below, will secure or otherwise underlie the
Securities.
Bonds The Bonds may be issued from time to time in separately
secured Series pursuant to the Indenture. Each Series
will consist of one or more Classes, one or more of which
may be Classes of Accrual Bonds, Variable Interest Bonds,
Retail Bonds, Zero Coupon Bonds, Principal-Only Bonds,
Interest-Only Bonds, Participating Bonds, Senior Bonds or
Subordinated Bonds. The respective Classes may differ
with respect to, among other things, the amounts
allocated to, timing and the priority of principal and
interest payments, if any, Final Scheduled Payment Date,
Payment Dates and Bond Interest Rates. The Prospectus
Supplement will describe the forms in which the Bonds
will be issued and maintained (i.e., in fully registered
form, in book-entry form through the facilities of DTC or
another depository or in bearer form or a combination
thereof) and the authorized denominations thereof. Bonds
in bearer form will be offered only outside the United
States to non-United States persons and to offices
located outside the United States of certain United
States financial institutions.
Trust Certificates The Trust Certificates are issuable from time to time in
separate Series pursuant to the Trust Agreement. Each
Trust Certificate of a Series will evidence a beneficial
ownership interest in the Trust for such Series. Each
Series of Trust Certificates will consist of one or more
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Classes of Trust Certificates, one or more of which may
be Classes of Accrual Trust Certificates, Variable
Interest Trust Certificates, Zero Coupon Trust
Certificates, Principal-Only Trust Certificates,
Interest-Only Trust Certificates, Participating Trust
Certificates, Subordinated Trust Certificates or Senior
Trust Certificates. The respective Classes may differ
with respect to, among other things, the amount,
percentage and timing of distributions of principal,
interest or both. The Prospectus Supplement will
describe the form in which the Trust Certificates will be
issued and maintained (i.e., in fully registered form, in
book-entry form through the facilities of DTC or another
depository or in bearer form or a combination thereof).
Holders of Trust Certificates will have the right to
receive distributions based on their pro rata interests
in the related Trust. Such distributions will be
scheduled in the manner of payments of interest and/or
principal on a debt security and, accordingly, the
discussion in this Prospectus and the related Prospectus
Supplement will use the terms interest and principal to
describe such distributions on Trust Certificates even
though such distributions may not constitute principal or
interest on debt securities.
CERTAIN TERMS OF THE
SECURITIES
Available Funds Interest and principal payments on a Series of Securities
are payable solely from Available Funds on each Payment
Date in the amounts and priorities described in the
related Prospectus Supplement. If Available Funds are
insufficient on any Payment Date to make required
interest and principal payments, Securityholders will not
be paid the full amount of such payments and will suffer
losses, unless the related Prospectus Supplement provides
that such shortfalls will be carried over and sufficient
Available Funds exist on a subsequent Payment Date to pay
such shortfalls. There can be no assurance that
Available Funds on any Payment Date will be sufficient to
make all required interest and principal payments to
Securityholders. Unless otherwise specified in the
related Prospectus Supplement, no amount of Available
Funds (including Reinvestment Income, if any, on
distributions received by the Issuer in respect of the
Underlying Securities) will be payable to the Issuer.
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Interest Each Class of a Series of Securities (other than a
Class of Zero Coupon Securities or Principal-Only
Securities and other than as set forth in the following
paragraph) will accrue interest at the interest rate set
forth in the related Prospectus Supplement (or, in the
case of Variable Interest Securities, as determined by
the method described therein). The interest rate will be
fixed or variable. If the interest rate is variable, the
interest rate may be based on an Index or otherwise may
change by reference to the Underlying Assets or as
otherwise specified in the related Prospectus Supplement.
The Index may be, among other things, LIBOR, a Prime
Rate, COFI, a Commercial Paper Rate, a Federal Funds Rate
or an index based on the price of certain commodities
(such as crude oil, natural gas, gold, silver or coffee)
or the value of certain intangibles (such as stock
indices, bond indices, foreign exchange rates or the
Consumer Price Index).
In the case of certain Trust Certificates, distributions
will be based on distributions and other payments in
respect of the related Underlying Assets so that such
Trust Certificates may not be entitled to any specified
fixed or variable rate of interest or specified principal
amount.
Interest on all Securities which bear interest, other
than Accrual Securities, will be due and payable on the
Payment Dates specified in the related Prospectus
Supplement. However, to the extent set forth in the
related Prospectus Supplement, failure to pay interest on
a current basis may not necessarily be an Event of
Default with respect to a particular Series of
Securities. Payments of interest on a Class of Variable
Interest Securities will be made on the Variable Interest
Payment Dates set forth in the related Prospectus
Supplement. Interest on any Class of Accrual Securities
will not be paid currently, but will accrue and the
amount of interest so accrued will be added to the
principal thereof on each Payment Date through the
Accrual Termination Date specified in the related
Prospectus Supplement. Following the applicable Accrual
Termination Date, interest payments on such Securities
will be made on the Compound Value thereof.
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Interest-Only Securities may be assigned a "Notional
Principal Amount" that is used for convenience in
expressing the calculation of interest and not to
indicate any entitlement to payment of such Notional
Principal Amount. The Notional Principal Amount will be
determined at the time of issuance of such Securities
based on the principal balances or Discounted Amounts of
the Underlying Assets attributable to the Securities of a
Series entitled to receive principal and will be adjusted
periodically over the life of the Securities based on
adjustments to the principal balances or Discounted
Amounts of such Underlying Assets.
Principal-Only Securities will not accrue interest and
will not be entitled to receive any distributions in
respect of interest. Holders of Zero Coupon Securities
will not receive payment of interest prior to the Final
Scheduled Payment Date of such Securities.
Additionally, if so specified in the related Prospectus
Supplement, interest accrued for an Interest Accrual
Period for one or more Classes may be calculated on the
assumption that principal payments (and additions to
principal of the Securities), and allocations of losses
on the Underlying Assets (if so specified in the related
Prospectus Supplement), are made on the first day of the
preceding Interest Accrual Period and not on the Payment
Date for such preceding Interest Accrual Period when
actually made or added. Such method would produce a
lower effective yield than if interest were calculated on
the basis of the actual principal amount outstanding.
With respect to any Class of Variable Interest
Securities, the related Prospectus Supplement will set
forth: (i) the initial Bond Rate or Trust Certificate
Interest Rate (or the manner of determining such rate);
(ii) the method by which the Bond Rate or Trust
Certificate Interest Rate will be determined from time to
time, including any related Index; (iii) the periodic
intervals at which such determination will be made; (iv)
the Maximum Variable Interest Rate or the Minimum
Variable Interest Rate, if any, for such Variable
Interest Securities; (v) the Variable Interest Period and
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(vi) any other material terms relevant to such Class of
Securities.
Principal Except with respect to Zero Coupon Securities, Accrual
Securities and Interest-Only Securities and as described
in the second paragraph under "-Interest" above, on each
Payment Date, principal payments will be made from
Available Funds on the Securities of each Series in the
amount and as specified in the related Prospectus
Supplement. If the Series of Securities has a Class of
Accrual Securities, additional principal payments on the
Securities of other Classes will be made on each Payment
Date in an amount equal to the interest accrued, but not
then payable, on such Accrual Securities for the related
Interest Accrual Period. All payments of principal of a
Series of Securities will be allocated among the Classes
of such Series at the times, in the manner and in the
priority (which may, in certain cases, include allocation
by random lot) set forth in the related Prospectus
Supplement.
Final Scheduled The Final Scheduled Payment Date for each Class of
Payment Date Securities of a Series is the date after which no
Securities of such Class are scheduled to remain
outstanding, assuming timely payments or distributions
are made on the Underlying Securities in accordance with
their terms. The Final Scheduled Payment Date of a Class
may correspond to the maturity date of the Underlying
Securities that have the latest stated maturity or will
be determined as described herein and in the related
Prospectus Supplement.
The actual final payment date for each Class of
Securities of a Series will depend primarily upon the
rate of payments (including redemptions and prepayments)
of the Underlying Securities. The rate of payments of the
Underlying Securities for a Class will depend on a
variety of factors, including the terms of the Underlying
Securities and the prevailing level of interest rates
from time to time and other factors. No assurance can be
given as to the actual payment (including redemption or
prepayment) experience with respect to a Class. See
"Risk Factors -- Certain Yield, Redemption and Prepayment
Considerations".
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Redemption of Bonds If specified in the related Prospectus Supplement, Bonds
of a Series will be subject to special redemption, in
whole or in part, if, as a result of principal payments,
if any, on, and/or redemptions, if any, of, the related
Underlying Securities or low reinvestment yields, or
both, the Trustee determines (based on assumptions, if
any, specified in the Indenture and after giving effect
to the amounts, if any, available to be withdrawn from
any Reserve Fund and any other Underlying Enhancement for
such Series) that the amount anticipated to be available
in the Collection Account, if any, assuming minimum
reinvestment rates, for such Series on the date specified
in the related Prospectus Supplement will be insufficient
to meet debt service requirements on any portion of the
Bonds. Any such redemption would be limited to the
aggregate amount of all principal payments on (and/or
redemption payments with respect to) the Underlying
Securities received since the last Payment Date or
Special Redemption Date, whichever is later, and may
shorten the maturity of any Bond so redeemed by no more
than the period between the date of such special
redemption and the next Payment Date for such Bonds.
Special redemptions of Bonds of a Series will be made in
the same priority and manner as principal payments are
made on a Payment Date. Unless otherwise specified in
the related Prospectus Supplement, Bonds subject to
special redemption will be redeemed on the applicable
Special Redemption Date at a Redemption Price equal to
100% of their unpaid principal amount plus accrued
interest on such principal, or on the Notional Principal
Amount, if applicable, to the date specified in such
Prospectus Supplement. To the extent described in such
Prospectus Supplement, Bonds of a Series may be subject
to special redemption in whole or in part following
certain defaults under the related Underlying Enhancement
Agreement or in certain other circumstances.
To the extent, if any, specified in the related
Prospectus Supplement, one or more Classes of any Series
of Bonds may be redeemed in whole or in part, at the
Issuer's option, on any Payment Date on or after the
date(s) and at the Redemption Price(s) specified in the
related Prospectus Supplement.
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If specified in the related Prospectus Supplement for a
Series, the Bonds of one or more Classes of Retail Bonds
may be subject to mandatory redemptions by lot or by such
other method set forth in the Prospectus Supplement. The
related Prospectus Supplement relating to a Series of
Bonds with Retail Bonds will set forth Class priorities,
if any, and conditions with respect to redemptions.
Retail Bonds to be redeemed will be selected by random
lot in $1,000 units, after making all permitted
redemptions requested by Holders of Retail Bonds or by
such other method as may be set forth in the Prospectus
Supplement.
Optional Call Right
With Respect to Bonds If specified in the related Prospectus Supplement, any
Class of Bonds may be subject to the right of the
Optionholder, at the time or times specified in such
Prospectus Supplement, upon 30 days' written notice to
the Trustee, to purchase all, but not less than all, of
such Bonds for a cash purchase price equal to the
Aggregate Outstanding Principal of such Bonds, together
with that portion, if any, of the next scheduled
distribution (other than any amount of such distribution
representing principal) on such Bonds that is then
accrued and unpaid.
Optional Call Right
With Respect to Trust
Certificates If specified in the related Prospectus Supplement, any
Class of Trust Certificates may be subject to the right
of the Optionholder, at the time or times specified in
such Prospectus Supplement, upon 30 days' written notice
to the Trustee, to purchase all, but not less than all,
of such Trust Certificates or the Underlying Assets of
the related Trust for a cash purchase price equal to,
unless otherwise specified in the related Prospectus
Supplement, the Aggregate Outstanding Principal of such
Trust Certificates together with that portion, if any, of
the next scheduled distribution (other than any amount of
such distribution representing principal) on such Trust
Certificates that is then accrued and unpaid.
Optional and Special
Termination of Trust If so specified in the Prospectus Supplement related to a
Series of Trust Certificates, the Company, or such other
entity that is specified in the related Prospectus
Supplement, may, at its option, cause an early
termination of the related Trust by repurchasing all of
the Underlying Securities remaining in the Trust, at a
purchase price of not
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less than par (unless otherwise specified in such
Prospectus Supplement), on or after a specified date, or
on or after such time as the aggregate principal balance
of the Trust Certificates of any Class of the Series is
less than the amount or percentage specified in the
related Prospectus Supplement.
If specified in the related Prospectus Supplement, any
Class of the Trust Certificates may be subject to
repurchase at the request of the Holders of such Class or
to mandatory repurchase by the Company (including by
random lot) upon the terms and conditions so specified.
UNDERLYING ASSETS The Prospectus Supplement will describe the Underlying
Securities, any Underlying Enhancements and any Swap
Agreements, as well as any miscellaneous assets, that
will constitute the Underlying Assets with respect to the
related Series.
Underlying Securities Underlying Securities for a Series will consist of any
combination of bonds, debentures, notes and other debt
securities issued by Underlying Issuers. Each Underlying
Issuer will, as of the date of issuance of the Securities
of a Series, be (i) eligible to issue securities
registered on a registration statement on Form S-3
promulgated by the SEC under the Securities Act and (ii)
a reporting person under Section 12 or Section 15(d) of
the Exchange Act. Each of the Underlying Securities will
as of such date have been (i) originally issued in a
transaction either (x) registered pursuant to the
Securities Act or (y) not registered pursuant thereto, if
such unregistered Underlying Security is freely
transferable by the Issuer of such Series under paragraph
(k) of Rule 144 promulgated by the SEC under the
Securities Act, and (ii) previously purchased by the
Company or any of its affiliates in the secondary market
(i.e., not from the Underlying Issuer or any of its
affiliates, and not as part of the initial distribution
thereof).
The Prospectus Supplement will specify, to the extent
applicable: (i) the title of each Underlying Security;
(ii) the aggregate principal amount of the Underlying
Securities; (iii) the stated interest rate, if any,
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of such Underlying Securities; (iv) the weighted average
of such interest rates; (v) the stated maturity date of
each of the Underlying Securities; (vi) the weighted
average stated maturity date of such Underlying
Securities; (vii) the identity of each Underlying Issuer
(including any guarantor or provider of credit support);
(viii) certain credit characteristics of such Underlying
Issuer, including such Underlying Issuer's rating, if
any, and any special risk factors; (ix) the existence and
extent of any guaranty or credit support with respect to
the Underlying Securities; (x) the conditions under
which, and the terms on which, any Underlying Security
may be prepaid or redeemed prior to its stated maturity
date; (xi) the terms, if any, on which the Trustee or its
agent may exchange or sell any Underlying Securities; and
(xii) the type of information that is made publicly
available by each Underlying Issuer, including how
purchasers of Securities may obtain such publicly
available information with respect to each Underlying
Issuer.
Underlying
Enhancements Underlying Enhancements for a Series may consist of
Reserve Funds, Financial Guaranty Insurance, Letters of
Credit or other types of credit support or liquidity
facilities that are intended to enhance the cash flows
derived from the Underlying Securities. Structural
Enhancements, discussed below, are not considered part of
the Underlying Assets but are enhancements resulting from
the structural elements of the Securities of the
applicable Series, such as overcollateralization or
senior/subordinated structures.
- -- Reserve Funds Reserve Funds may consist of cash, Letters of Credit,
Eligible Investments, demand notes or a combination
thereof in the aggregate amount, if any, specified in the
related Prospectus Supplement. Any Reserve Funds for a
Series may also be funded over time through application
of a specified amount of cash flow, to the extent
described in the related Prospectus Supplement. Such a
Reserve Fund may be established to increase the
likelihood of the timely distributions on the Securities
of such Series or to reduce the likelihood of a special
redemption with respect to any Series. Reserve Funds may
be established to provide protection against certain
losses or delinquencies in addition to or in lieu of
other credit support.
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Additional information concerning any Reserve Funds,
including the circumstances under which moneys therein
will be applied with respect to Securities, the balance
required to be maintained in such Reserve Funds, the
manner in which such required balance will decrease over
time and the manner of funding any such Reserve Fund,
will be set forth in the related Prospectus Supplement.
- -- Financial Guaranty
Insurance If so specified in the related Prospectus Supplement,
credit support for a Series may be provided by Financial
Guaranty Insurance issued by one or more insurance
companies. Such Financial Guaranty Insurance may
guarantee timely payments of interest, principal and
other amounts on the basis of a schedule of principal
distributions to the extent set forth in or determined in
the manner specified in the related Prospectus
Supplement.
- -- Letters of Credit A Letter of Credit may provide limited protection against
certain losses in addition to or in lieu of other credit
support. The Letter of Credit Issuer will be obligated
to honor demands with respect to such Letter of Credit,
to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to such
conditions as are specified in the related Prospectus
Supplement. The liability of the Letter of Credit Issuer
under its Letter of Credit may be reduced by the amount
of unreimbursed payments thereunder.
The maximum liability of a Letter of Credit Issuer under
its letter of credit will generally be an amount equal to
the Letter of Credit Percentage specified in the related
Prospectus Supplement. The maximum amount available at
any time to be paid under a Letter of Credit will be
determined in the manner specified in the related
Prospectus Supplement.
- -- Other Underlying
Enhancements Certain terms of any other Underlying Enhancements, which
may include guaranties, credit support or liquidity
facilities, will be set forth in the related Prospectus
Supplement.
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Swap Agreements The Underlying Assets with respect to a Series may
include Swap Agreements consisting of interest rate swap
agreements, interest rate cap agreements, interest rate
floor agreements and other instruments relating to
interest rates of the Underlying Securities or the
Securities of such Series. The related Prospectus
Supplement will specify the means by which each
counterparty to a Swap Agreement receives consideration
for its obligations (for example, cash flows from other
Underlying Assets, in specified amounts, may be payable
to such counterparty or a single upfront payment may be
made to such counterparty at the time of issuance of such
Series).
Guaranteed Investment
Contracts The Issuer may obtain and deliver to the Trustee
Guaranteed Investment Contracts pursuant to which moneys
held in the funds and accounts established for such
Series will be invested at a specified rate for the
Series. The principal terms of any such Guaranteed
Investment Contract, including provisions relating to the
timing, manner and amount of payments thereunder and
provisions relating to the termination thereof, will be
described in the Prospectus Supplement for the related
Series. Additionally, the related Prospectus Supplement
may provide certain information with respect to the
issuer of such Guaranteed Investment Contract.
Other Underlying
Assets If so specified in the related Prospectus Supplement, the
Trust will own other Underlying Assets described therein.
STRUCTURAL
ENHANCEMENTS Structural Enhancements for a Series may consist of
overcollateralization, senior/subordinated structures,
groupings of Underlying Assets and other structural
elements of the Series.
Overcollateralization To the extent specified in the related Prospectus
Supplement, a Series may be structured such that the
outstanding principal balances or Aggregate Discounted
Amount of the Underlying Assets relating to a Series may
exceed the Aggregate Outstanding Principal of such
Series, thereby resulting in intended
overcollateralization. See "Underlying Assets --
Discounted Amount" below.
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Senior/Subordinated
Structures A Series of Securities may include one or more Classes of
Subordinated Securities. The rights of Holders of such
Subordinated Securities to receive distributions on any
Payment Date will be subordinated in right and priority
to the rights of Holders of Senior Securities of the
Series to the extent described in the related Prospectus
Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event of
certain types of losses not covered by Underlying
Enhancement or other Structural Enhancement. Such
subordination may be in lieu of providing Underlying
Enhancement with respect to losses arising from such
events.
The related Prospectus Supplement will set forth
information concerning the amount of subordination of a
Class or Classes of Subordinated Securities in a Series,
the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of
subordination will decrease over time, the manner of
funding any related Reserve Fund and the conditions under
which amounts in any related Reserve Fund will be used to
make payments to Holders of Senior Securities and/or to
Holders of Subordinated Securities or be released.
Groupings of Underlying
Assets If the Underlying Assets are divided into separate
Groups, each securing or supporting a separate Class or
Classes of a Series, credit support may be provided by a
cross-support feature or cross-collateralization, as
specified in the related Prospectus Supplement. Pursuant
to a cross-support feature, on any Payment Date,
distributions will be made with respect to Senior
Securities relating to one Group prior to distributions
to Subordinated Securities relating to another Group.
Pursuant to cross-collateralization, Subordinated
Securities will be allocated losses and shortfalls from
one or more Groups before such losses are allocated to
the Senior Securities relating to such Group or Groups,
and Subordinated Securities will be subordinated in right
of payment to one or more Classes of Securities relating
to one or more Groups.
Discounted Amount If provided in the related Prospectus Supplement, each
Underlying Security will be assigned an initial
Discounted
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Amount. The initial Aggregate Discounted Amount will not
be less than the original Aggregate Outstanding Principal
of such Series. The Aggregate Discounted Amount of
Underlying Securities relating to any Series of
Securities is intended to represent the principal amount
of Securities of such Series that, based on certain
assumptions stated in the related Prospectus Supplement,
can be supported by payments on such Underlying
Securities, together with, depending on the type of
Underlying Securities and the method used to determine
their Aggregate Discounted Amount, Reinvestment Income,
if any, at the related Assumed Reinvestment Rate, if any,
and amounts in any Reserve Fund established for that
Series and any values ascribed to any other Underlying
Assets relating to such Series. No assurance can be given
that such Aggregate Discounted Amount will in fact
represent such principal amount of Securities of such
Series and no third party will pass upon the validity of
the assumptions referred to above.
Other Structural
Enhancements The Prospectus Supplement will specify any additional
Structural Enhancement applicable to Securities of a
Series with respect to, for example, shortfalls arising
due to cross-collateralization, differences in the
Indices on the Securities of a Series and the interest
rates on the Underlying Assets, insufficient cash flows
from the Underlying Assets or for other reasons.
THE ISSUER; LIMITED
RECOURSE It is not expected that the Issuer of any Series of
Securities will have any assets available for payments on
such Series, other than the related Underlying Assets.
The Bonds will be non-recourse obligations of such
Issuer. The Indenture for a particular Series of Bonds
may permit the Underlying Assets pledged to secure such
Bonds to be transferred by the Issuer to a trust or other
limited purpose affiliate of the Company, subject to the
obligations of such Bonds, thereby relieving the Issuer
of its obligations with respect to such Bonds. The Trust
Certificates will represent a beneficial ownership
interest in the Underlying Assets of the related Trust.
Each Series of Bonds will be separately secured, and no
Series of Bonds will have any claim against or security
interest in the Underlying Assets relating to any other
Series of Securities (other than with respect to
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Underlying Enhancement in the case of a Covered Series).
Similarly, no Series of Trust Certificates will have a
beneficial ownership interest in Underlying Assets
relating to any other Series of Securities (other than
with respect to Underlying Enhancement in the case of a
Covered Series).
THE COMPANY The Company is a special-purpose Delaware corporation
organized for the purpose of (i) acting as originator,
settlor or depositor with respect to Trusts formed to
issue Securities, (ii) issuing securities (including the
Securities and other securities backed by underlying
obligations of various types) and (iii) acting as settlor
or depositor with respect to trusts, custody accounts or
similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not
expected that the Company will have any significant
assets other than the Underlying Assets and other assets
backing the issuance of other securities. The Company is
an affiliate of CSFB. Neither CSFB nor any of its
affiliates (other than, to the extent specified in the
related Prospectus Supplement with respect to any Series,
the Company) has guaranteed, will guarantee or is or will
be otherwise obligated with respect to any Series of
Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
CERTAIN FEDERAL INCOME The federal income tax consequences of an investment in a
TAX CONSIDERATIONS; Security of any Series will depend on the
CERTAIN OTHER TAX characterization of that Security (such as a debt
CONSIDERATIONS obligation, an interest in a grantor trust or an equity
interest in a trust characterized as a partnership for
federal income tax purposes) and the nature of the
related Underlying Assets. Prospective investors should
read "Certain Federal Income Tax Consequences" herein and
any comparable information in the Prospectus Supplement
and consult their own tax advisors regarding the federal
income tax consequences to them of investing in the
Securities, and should also consider any other tax
consequences applicable to them.
CERTAIN ERISA Persons investing assets of employee benefit plans
subject
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CONSIDERATIONS to ERISA or of plans as defined in Section 4975 of the
Code should read "Certain ERISA Considerations" and
consult their own legal advisors to determine whether and
to what extent the Securities of any Series constitute
permissible investments for such employee benefit plans.
LEGAL INVESTMENT Investors the investment authority of which is subject to
legal restrictions should consult their own legal
advisors to determine whether and to what extent the
Securities of any Series constitute legal investments for
them.
USE OF PROCEEDS The Issuer will use the net proceeds from the sale of
each Series (i) to purchase the related Underlying
Assets, (ii) to repay indebtedness that has been incurred
to acquire Underlying Assets, (iii) to establish any
Reserve Funds described in the related Prospectus
Supplement, (iv) to pay costs of structuring,
guaranteeing and issuing such Securities or (v) for other
purposes set forth in the Prospectus Supplement. If so
specified in the related Prospectus Supplement, the
purchase of the related Underlying Assets may be effected
by an exchange of Securities with the seller of such
Underlying Assets.
RATINGS It will be a condition to the issuance of any Securities
offered by this Prospectus and the related Prospectus
Supplement that they be rated in one of the four highest
applicable rating categories by at least one Rating
Agency. The rating or ratings applicable to Securities
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
security rating does not address the effect of
redemption, prepayment or reinvestment rates on
investors' yields. 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.
RISK FACTORS Prospective investors should carefully consider the risk
factors described herein under "Risk Factors" and any
similar information in the Prospectus Supplement.
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RISK FACTORS
Prospective investors should consider, together with the other information
contained in this Prospectus and the related Prospectus Supplement, the
following risk factors in connection with the purchase of the Securities.
Certain risk factors relating to Underlying Securities and the related
Underlying Issuers may also apply in various respects to other Underlying Assets
(such as Underlying Enhancement and Swap Agreements) and the related obligors or
counterparties with respect thereto.
PASSIVE HOLDING AND DEFICIENCY ON SALE OF UNDERLYING ASSETS
The Issuer or Trustee will generally hold to maturity and not dispose of
any Underlying Securities, regardless of adverse events, financial or otherwise,
that may affect the value of the Underlying Securities or the related Underlying
Issuer. If there is a payment default on any Underlying Securities or any other
default that may result in acceleration of the Underlying Securities, the
defaulted Underlying Securities will be disposed of or otherwise dealt with in
the manner provided in the related Governing Document. Such arrangements may
not result in full payment of principal or interest or full distributions to
Holders of Securities and may affect the weighted average life of the
Securities. If the Underlying Securities were sold upon an Event of Default
with respect to the related Series of Securities or upon other conditions
specified in the related Prospectus Supplement, there is no assurance that the
proceeds of the sale would pay in full the principal of or interest on or
amounts distributable with respect to the Securities of such Series or would
otherwise recoup investors' investments therein. The value of the Underlying
Securities upon such a sale would depend on their credit quality, prevailing
interest rates and other factors.
CONCENTRATION OF CREDIT RISK
A Series of Securities with respect to which there are only a limited
number of Underlying Issuers will be subject to credit risks greater than those
incurred by investing in many other asset-backed securities, because the
reduction of credit risk relating to the underlying assets through
diversification generally present in such transactions will not exist. Such
Series will be subject particularly to the credit risk of each such Underlying
Issuer. In particular, the Securities may be subject to greater risk with
respect to such factors as the industry type or geographic location of such
Underlying Issuer, including any special local economic or business
characteristics of the Underlying Issuer as well as economic factors relevant to
its industry generally. These risks may be particularly acute in the case of
Underlying Securities that have low ratings or that are unrated. The related
Prospectus Supplement will contain certain information relating to such credit
risk and will provide or incorporate by reference financial information with
respect to each Underlying Issuer the Underlying Securities of which comprise
10% or more of the pool of Underlying Securities of the Series.
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If an Underlying Issuer were to become a debtor in a Bankruptcy Case, a
delay or substantial reduction in payments on the related obligation may occur,
and the Underlying Issuer might have insufficient funds to make all required
payments on such obligation. Such event would likely delay or impair payments
on the related Securities.
AVAILABLE INFORMATION REGARDING THE UNDERLYING ISSUERS
This Prospectus relates only to the Securities offered hereby and does not
relate to the Underlying Securities. All disclosures contained in this
Prospectus regarding the Underlying Securities are derived from publicly
available documents. Neither the Issuer nor any of the underwriters of the
Securities has participated in the preparation of such documents, or made any
due diligence inquiry with respect to the information provided therein. There
can be no assurance that all events occurring prior to the date hereof
(including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the Underlying Securities
or the Underlying Issuers have been publicly disclosed.
In addition, there can be no assurance that an Underlying Issuer will not
elect to suspend its Exchange Act reporting after the date hereof if such
Underlying Issuer no longer has a class of security listed on a national
securities exchange or held of record by 300 or more holders. In such event,
information (including financial information) then available to the Issuer with
respect to such Underlying Issuer will not be as extensive, timely or readily
available as that previously made available under the Exchange Act.
Accordingly, in such event, the information with respect to any such Underlying
Issuer that the Issuer can include in its Exchange Act reports will be similarly
limited.
SUBSTANTIAL LEVERAGE
The Underlying Issuers may be highly leveraged. This could adversely
affect Holders of the Securities because under such circumstances (i) an
Underlying Issuer's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes will be restricted; (ii) a significant portion of an
Underlying Issuer's cash flow from operations must be dedicated to the payment
of principal and interest on its indebtedness, thereby reducing the funds
available to the Underlying Issuer for such operations; (iii) certain of an
Underlying Issuer's borrowings may be at variable rates of interest, which could
result in higher interest expense in the event of an increase in interest rates;
and (iv) if such indebtedness contains financial and restrictive covenants, the
failure to comply may result in events of default which, if not cured or waived,
could have a material adverse effect on the Underlying Issuer's ability to make
payments to holders of the Underlying Securities such as the Issuer, thereby
having a material adverse effect on Holders of Securities.
UNSECURED AND SUBORDINATED STATUS OF UNDERLYING SECURITIES
The Underlying Securities may be general unsecured obligations of the
Underlying Issuers and may be subordinated in right of payment to the individual
Underlying Issuer's existing and future senior indebtedness. In the event of a
bankruptcy involving an
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Underlying Issuer or any default in the payment of any secured indebtedness of
the Underlying Issuer, Holders of such secured indebtedness will be entitled to
payment in full from all assets (and proceeds thereof) of the Underlying Issuer
pledged to secure such indebtedness prior to any payment of such assets (or
proceeds) to Holders of the Underlying Securities such as the Issuer, thereby
having a material adverse effect on Holders of Securities. In addition, in the
event of such bankruptcy of an Underlying Issuer or any default of any senior
indebtedness of the Underlying Issuer to which the Underlying Securities may be
subordinated, holders of such senior indebtedness may be entitled to payment in
full prior to any payments to holders of the Underlying Securities, with a
material adverse effect on Holders of Securities.
STRUCTURAL SUBORDINATION OF UNDERLYING SECURITIES
Direct creditors or preferred stockholders of any subsidiary of a
particular Underlying Issuer, although not Holders of senior indebtedness of the
Underlying Issuer, will have a direct claim on the assets and cash flows of such
subsidiary, prior to the claims of holders of the Underlying Securities.
Therefore, all existing and future liabilities (if any) of the Underlying
Issuer's subsidiaries will be effectively senior to the Underlying Securities.
To the extent that assets of such an Underlying Issuer, which would otherwise be
available to pay holders of the related Underlying Securities, are owned by the
Underlying Issuer's subsidiary, such structural subordination may adversely
affect the holders of such Underlying Securities, including the Issuer and
thereby the Holders of Securities.
ABSENCE OR INEFFECTIVENESS OF CONTRACTUAL PROTECTIONS
The Underlying Securities may not contain any significant contractual
protections (such as financial covenants, restrictions on changes of control of
the Underlying Issuer or rights of redemption upon changes of control of the
Underlying Issuer, restrictions on sales of assets or dividends, limitations on
incurrence of secured indebtedness or of indebtedness by subsidiaries of the
Underlying Issuer (with concomitant structural subordination of the Underlying
Securities) or, in the case of subordinated Underlying Securities, against
subordination of such Underlying Securities to additional senior indebtedness)
against actions by or events affecting the Underlying Issuer. The occurrence of
such actions or events could materially adversely affect the value and
likelihood of repayment of the Underlying Securities. Such actions or events
could include significant changes in the debt-to-equity ratio or capitalization
of the Underlying Issuer caused by a change of control, a sale of assets,
extraordinary dividend or other restructuring, the incurrence of significant
amounts of debt secured by existing assets of the Underlying Issuer or
structural or other subordination of the Underlying Securities.
In addition, any contractual protection provided with respect to the
Underlying Securities may not effectively provide significant protection for the
Holders of Securities if, for instance, the enforcement of such protections
requires the affirmative vote of Holders of a majority in outstanding amount of
such Underlying Securities or other joint vote requirement and such affirmative
vote requirement is not satisfied. To the extent that the Underlying Securities
of a Series represent a small portion of the class of such Underlying
Securities, the Issuer's ability to influence any such vote will be
correspondingly limited.
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LIMITED OBLIGATIONS AND INTERESTS
The Securities will not represent a recourse obligation of or interest in
the Company or any of its affiliates. The Securities of each Series will not be
insured or guaranteed by any government agency or instrumentality, the Company,
any person affiliated with the Company or the Issuer, or any other Person. The
obligations, if any, of the Company with respect to the Securities of any Series
will only be pursuant to certain limited representations and warranties, which
will relate primarily to the transfer of the Underlying Assets to the Issuer
free and clear of liens and encumbrances. The Company does not have, and is not
expected in the future to have, any significant assets with which to satisfy any
claims arising from a breach of any representation or warranty. If, for
example, the Company were required to repurchase an Underlying Asset with
respect to which the Company has breached a representation or warranty, its only
sources of funds to make such repurchase would be from funds obtained from the
enforcement of a corresponding obligation, if any, on the part of the seller of
such Underlying Asset to the Company, or from a reserve fund established to
provide funds for such repurchases. The Company has no obligation to establish
or maintain any such reserve fund.
LIMITED UNDERLYING ASSETS
Holders of Securities of each Series must rely solely upon distributions on
the Underlying Assets with respect to such Series. If such Underlying Assets
are insufficient to make required payments or distributions with respect to such
Securities, no other assets of the Company or the Issuer will be available for
payment of the deficiency. The Securities of one Series will generally not have
any claim against or security interest in the Underlying Assets relating to the
Securities of any other Series.
In addition, certain amounts held for the benefit of Securities of any
Series remaining in one or more funds or accounts, including any Collection
Account and any Reserve Fund, may be withdrawn under certain specified
conditions and circumstances described in the related Prospectus Supplement. In
the event of such withdrawal, these amounts will not be pledged to, or available
for, future payment of principal of or interest on or distribution of amounts
with respect to the Securities of such Series. Because payments of principal
and interest and distributions with respect to the Underlying Securities may, if
so provided in the related Prospectus Supplement, be applied to Classes of
Securities of a Series in the priority specified in the related Prospectus
Supplement, a deficiency that arises after Securities of any such Series having
higher priority in payment have been fully or partially repaid will have a
disproportionately greater effect on the Securities of Classes having lower
priority in payment.
LIMITED LIQUIDITY
There will be no market for the Securities of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market for the
Securities of any Series will develop or, if it does develop, that it will
provide Holders with liquidity of investment or
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will continue for the life of the Securities of such Series. The Securities will
not be redeemable unless otherwise provided in the Prospectus Supplement.
Although CS First Boston Corporation, directly or through one or more
affiliates, may make a secondary market in the Securities of a Series, it has no
obligation to do so and any such market making, if commenced, may be
discontinued at any time without notice.
CERTAIN YIELD, REDEMPTION AND PREPAYMENT CONSIDERATIONS
Underlying Securities with respect to a Series may be redeemable and the
Securities may be subject to special, optional or mandatory redemption or
prepayment or an Optional Call Right, all as specified in the related Prospectus
Supplement. Such redemptions, prepayments or Optional Call Right would shorten
the average life and could adversely affect the yield of any Securities of such
Series. The rate of redemptions or prepayments of Underlying Securities may be
dependent on the financial or other condition of the related Underlying Issuer,
from time to time may be influenced by a variety of economic, tax, legal and
other factors and may not be measurable against any readily available model of
prepayments. There can be no assurance as to the rate of redemptions or
prepayments on the Underlying Securities, or as to when exercise of any Optional
Call Right will occur. As a result, the actual maturity of or final
distribution on any Security could occur significantly earlier than its Final
Scheduled Payment Date. The actual maturity of or final distribution on the
Securities of any Series also will be affected by the extent to which Excess
Cash Flow is applied to payments or distributions of principal on the
Securities. A Series of Securities may include Classes of Securities with
priorities of payment and, as a result, yields on other Classes of Securities of
such Series may be more sensitive to redemptions or prepayments of Underlying
Securities.
A Series may include a Class offered at a significant premium or discount.
Yields on such Class of Securities will be sensitive, and in some cases
extremely sensitive, to redemptions or prepayments of Underlying Securities or
exercise of any Optional Call Right and, in the case of a Class sold at a
premium, where the amount of interest payable with respect to such Class is
extremely disproportionate to principal, a holder might, in some redemption,
prepayment or call scenarios, fail to recoup its original investment. If the
purchaser of a Security offered at a discount calculates its anticipated yield
to maturity or final distribution based on an assumed rate of distributions of
principal that is faster than that actually experienced on the related
Underlying Securities, the actual yield to maturity or final distribution will
be lower than that so calculated. Conversely, if the purchaser of a Security
offered at a premium calculates its anticipated yield to maturity or final
distribution based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Underlying Securities, the actual
yield to maturity or final distribution will be lower than that so calculated.
See "Certain Yield and Redemption Considerations".
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INTEREST AND EXCHANGE RATE RISK
Securities of certain Series will be particularly subject to interest or
exchange rate risk. Fluctuations in interest or exchange rates will have a
significant effect on the yield to maturity of such Securities and may, under
certain circumstances, result in a negative yield. Such reduced or negative
yields would adversely affect the yields to maturity of Holders of such
Securities.
RATE DIFFERENCES BETWEEN SECURITIES AND UNDERLYING SECURITIES
With respect to certain Series of Securities, the Underlying Securities may
have interest rates based on an Index specified in the related Prospectus
Supplement. Such Underlying Securities may bear interest at rates which also
vary inversely with respect to one or more Indices. However, such Securities
and such Underlying Securities may bear interest based on different interest
rates, commodities or intangibles. It is possible that the rate borne by the
Underlying Securities will be below the rate borne by the Securities. Such a
situation might continue to exist indefinitely, and could adversely affect the
yield on the Securities. The related Prospectus Supplement will describe the
extent of any such rate differences.
REMEDIES FOLLOWING DEFAULT
The market value of the Underlying Securities of any Series may fluctuate
as general interest rates fluctuate or otherwise. Following an Event of Default
with respect to a Series of Securities, there is no assurance that the market
value of such Underlying Securities, giving effect to related Enhancements and
Swap Agreements, will be equal to or greater than the unpaid principal and
accrued interest due on such Securities, together with any other expenses or
liabilities payable thereon. If such Underlying Securities are sold following
an Event of Default, the proceeds of such sale may be insufficient to pay in
full the principal of and interest on such Securities. In addition, in certain
events there may be restrictions on selling the Underlying Securities securing a
Series. See "The Indenture - Events of Default".
In addition, upon an Event of Default with respect to a Series and a
resulting sale of the Underlying Securities securing such Series, the proceeds
of such sale will be applied to the payment of certain amounts due to the
Trustee and certain other administrative and other expenses prior to the payment
of accrued interest on, and then to the payment of the then principal balance
of, such Series. Consequently, in the event of any such Event of Default and
sale of Underlying Securities, any Classes on which principal payments have
previously been made may have, in the aggregate, a greater proportion of their
principal repaid than will Classes on which principal payments have not
previously been made.
If the principal of the Securities of a Series is declared due and payable,
the Holders of any such Securities issued at a discount from par ("original
issue discount") may be entitled, under applicable provisions of the Federal
Bankruptcy Code, to receive no more than an amount equal to the unpaid principal
amount thereof less unamortized original issue discount
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("accreted value"). There is no assurance as to how such accreted value would be
determined if such event occurred.
INTERMEDIATE OWNERSHIP ARRANGEMENTS
If any Underlying Securities of any Series consist of interests in trust,
custodial or other arrangements for the holding of other Underlying Securities,
the rights of the Issuer or Trustee with respect to such Series to receive
payments on such Underlying Securities and to take possession of such Underlying
Securities may be affected by various factors, including any claims arising in
relation to the transfer of such Underlying Securities into such trust,
custodial or other arrangement, any bankruptcy, receivership or similar risks
relating to such trust, custodial or other arrangement and the contractual terms
of such trust, custodial or other arrangement (which may, for instance, restrict
the withdrawability of the Underlying Securities or impose majority other joint
voting requirements with respect to decisions made by Holders of such interests
in such trust, custodial or other arrangements).
SWAP AGREEMENTS
The Underlying Assets may include various Swap Agreements, such as interest
rate swaps, interest rate caps and interest rate floors. Interest rate swaps
involve the exchange by one party with another party of their respective
commitments to pay or receive amounts computed by reference to a fixed rate or a
floating rate index and a notional principal amount (the reference amount with
respect to which such obligations are determined, although no actual exchange of
such amount occurs), e.g., an exchange of floating rate payments for fixed rate
payments. An interest rate cap entitles the purchaser thereof, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments computed by reference to a fixed rate or a floating rate index and a
notional principal amount from the party selling such interest rate cap. An
interest rate floor entitles the purchaser thereof, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
computed by reference to a fixed rate or a floating rate index and a notional
principal amount from the party selling such interest rate floor. Fluctuations
in interest rates may have a significant effect on the yield to maturity of such
Swap Agreements or the levels of support that Swap Agreements can provide to the
Securities. In addition, the protection provided by such Swap Agreements may be
limited to cover only certain interest rate or other risks to which the
Securities may be subject. Continued payments on the Swap Agreements may be
affected by the financial condition of the counterparties thereto (or, in some
instances, the guarantor thereunder). There can be no assurance that such
counterparties will be able to perform their obligations thereunder (or that any
related obligations of the Issuer to dedicate any portion of the cash flow from
other Underlying Assets will necessarily be effectively terminated or that any
such termination will be on a basis that is economically equivalent to the
counterparty's continuing performance). Such counterparties will generally not
provide any significant contractual protection (such as financial covenants,
change of control provisions or restrictions on sales of assets, dividends or
incurrence of secured indebtedness) in connection with their obligations under
the Swap Agreements and, accordingly, the financial condition of such
counterparties may be subject to adverse changes. Failure by a counterparty (or
the related guarantor, if any) to make the payments required under the Swap
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Agreements may result in the delay or failure to make payments on the related
Securities. Such failure might result from generalized marketplace defaults
resulting from the substantial amount of Swap Agreements entered into by each
participant in the marketplace therefor. In addition, the notional amounts on
which payments are made may vary under certain circumstances and may not bear
any correlation to principal amounts of the related Securities.
REGULATORY UNCERTAINTY RELATING TO CERTAIN SWAP AGREEMENTS
Although the Company will not include as Underlying Assets securing or
underlying the Securities of any Series any Swap Agreements that it believes
will be subject in any material respect to CFTC regulations, there may be
regulatory uncertainty with respect to certain types of Swap Agreements. Among
other matters, it is sometimes uncertain whether a Swap Agreement is subject to
regulation at all, and if it is, whether the appropriate regulatory authority is
the SEC or the CFTC. Criteria promulgated by the CFTC that provide a safe
harbor from CFTC regulation can be ambiguous in certain circumstances.
Furthermore, the scope of the exemption from CFTC regulation outside the safe
harbor is unclear in some situations. In addition, Congress, the SEC and the
CFTC are currently examining the regulation of Swap Agreements generally and may
impose additional adverse requirements. There can be no assurance of the
correctness of any assessment of the regulatory status of any Swap Agreement or
that such regulations and exemptions will not be modified in the future.
LIMITED NATURE OF RATING
Any rating assigned to the Securities by a Rating Agency will reflect such
Rating Agency's assessment solely of the likelihood that Holders of such
Securities will receive payments required to be made to them. In the case of
Series of Securities secured by Underlying Securities, such rating will not
constitute an assessment of the likelihood that prepayments or redemptions of
the Underlying Securities will be made by the related obligors, or of the degree
to which the rate of such prepayments or redemptions might differ from that
originally anticipated. Such rating will not address the possibility that
prepayments or redemptions at higher or lower rates than anticipated by an
investor may cause such investor to experience a lower than anticipated yield or
that investors purchasing a Security at a significant premium might fail to
recoup their initial investment under certain prepayment or redemption
scenarios.
The amount of Underlying Assets required to support a Series of Securities
will be determined on the basis of criteria established by each Rating Agency
rating such Series. Such criteria are sometimes based on actuarial analysis of
the behavior of assets in a group that is larger than the pool securing the
Series. There can be no assurance that the historical data supporting such
actuarial analysis will accurately reflect future experience generally or that
the data derived from a large pool of assets will accurately predict the
delinquency or loss experience of any particular pool of Underlying Securities.
In most cases, such analysis may be based on the value of the property
underlying the Underlying Securities. There can be no assurance that such value
will accurately reflect the future value of the property and, therefore, whether
or not the Securities will be paid in full.
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ENHANCEMENT LIMITATIONS
The amount, type and nature of Underlying Enhancement and Structural
Enhancement required with respect to the Securities of any Series will be
determined on the basis of criteria established by each Rating Agency rating
such Series. Such criteria are sometimes based on an actuarial analysis of the
behavior of assets in a group that is larger than the pool securing the Series.
Such analysis is often the basis on which each Rating Agency determines the
amount of Enhancement required with respect to each Series of Securities. There
can be no assurance that the historical data supporting any such actuarial
analysis will accurately reflect future experience or that the data derived from
a large pool of assets accurately predicts the delinquency or loss experience of
any particular pool of Underlying Securities.
In addition, if principal payments on or with respect to the Securities of
a Series are made in a specified order of priority, any limits with respect to
the aggregate amount of available Enhancement may be exhausted before the
principal of the lower priority Classes has been repaid. As a result, the
impact of significant losses may bear primarily on the Securities of the later
maturing Classes.
Moreover, Enhancement may not cover all potential losses or risks; for
example, Underlying Enhancement may or may not cover fraud or negligence by the
Underlying Issuers or other parties. Also, if a form of Underlying Enhancement
covers more than one Series of Securities, Holders of Securities of each Covered
Series will be subject to the risk that such Underlying Enhancement will be
exhausted by the claims of other Covered Series before such Covered Series
receives any coverage. The obligations of the issuers of any credit support
will not be guaranteed or insured by the United States, or by any agency or
instrumentality thereof. A Series of Securities may include a Class or multiple
Classes of Subordinated Securities to the extent described in the related
Prospectus Supplement. Although such subordination is intended to reduce the
risk of delinquent distributions or ultimate losses to Holders of Senior
Securities the amount of subordination will be limited and will decline under
certain circumstances, and any related Reserve Fund could be depleted in certain
circumstances.
OVERCOLLATERALIZATION AND SUBORDINATION
To provide Holders of Securities of each Series with a degree of protection
against loss, the related Underlying Securities may have an Aggregate Discounted
Amount in excess of the principal amount or stated amount of the Securities or
Excess Cash Flow may be applied to create overcollateralization. Alternatively,
a Series of Securities may include one or more Classes of Subordinated
Securities. Such overcollateralization or subordination will be at amounts
established in consultation with the Rating Agency rating the Series based on an
assumed level of defaults, delinquencies, other losses, application of Excess
Cash Flow or other factors. However, there can be no assurance that the loss
experience on such Underlying Securities will not exceed such assumed levels,
adversely affecting the ability of the Issuer to meet debt service or
distribution requirements on the Securities. Although overcollateralization and
subordination are intended to reduce the risk of delinquent payments or losses
to Holders of Senior Securities, the amount of overcollateralization or
subordination, as the case may be,
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will be limited and will decline under certain circumstances and any related
Reserve Fund could be depleted in certain circumstances.
THE SECURITIES
The following summaries describe certain provisions common to each Series.
Certain terms used below are used with the meanings ascribed to them in the
Indenture or the Trust Agreement.
THE BONDS -- GENERAL
The Bonds will be issued in separate Series pursuant to the Indenture. A
copy of a form of Indenture has been filed with the SEC as an exhibit to the
Registration Statement. A copy of the Series Supplement for a Series, if any,
will be filed with the SEC as an exhibit to a Current Report on Form 8-K to be
filed with the SEC within 15 days of issuance of the Bonds of the related
Series.
The Indenture will not limit the amount of Bonds that can be issued
thereunder and provides that any Series may be issued thereunder up to the
aggregate principal amount specified in the related Series Supplement that may
be authorized from time to time by the Issuer. Each Series will consist of one
or more Classes, one or more of which may be Accrual Bonds, Variable Interest
Bonds, Retail Bonds, Zero Coupon Bonds, Principal-Only Bonds, Interest-Only
Bonds or Participating Bonds. A Series may also include one or more Classes of
Subordinated Securities. If so specified in the related Prospectus Supplement,
such Subordinated Securities may be offered hereby and by the related Prospectus
Supplement. Each Class of a Series will be issued in registered or bearer form,
as designated in the related Prospectus Supplement for a Series, in the minimum
denominations specified in the related Prospectus Supplement. See "Registered
Securities and Bearer Securities". Bonds of a Series may be issued in whole or
part in book-entry form.
Except as may be otherwise provided in the related Prospectus Supplement,
commencing on the date specified in the related Prospectus Supplement payments
of principal of and interest on the Bonds will be made on each Payment Date as
set forth in the related Prospectus Supplement.
To the extent applicable to a Series of Securities, the Trustee will
include with each payment on a Bond a statement showing, among other things, the
allocation of such payment to interest, if any, and principal, if any, and the
remaining unpaid principal amount of a Bond of each Class having the minimum
denomination for Bonds of such Class, any realized losses on the Underlying
Assets, and on each Payment Date prior to the commencement of principal payments
on a Class of Accrual Bonds, the aggregate unpaid principal amount of each Class
of Bonds, the interest accrued since the prior Payment Date and added to the
principal of
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an Accrual Bond having the minimum denomination for Bonds of such Class and the
new principal of such Bond.
THE TRUST CERTIFICATES - GENERAL
The Trust Certificates will be issued in separate Series pursuant to
separate Series Supplements to the Master Trust Agreement between the Company
and Trustee named in the related Prospectus Supplement (the "Trust Agreement").
A form of Trust Agreement has been filed as an exhibit to the Registration
Statement. The Series Supplement relating to each Series of Trust Certificates
will be filed as an exhibit to a report on Form 8-K to be filed with the SEC
within 15 days following the issuance of such Series of Trust Certificates. The
following summaries describe certain provisions common to each Series of Trust
Certificates.
Each Series of Trust Certificates will consist of one or more Classes, one
or more of which may consist of Accrual Trust Certificates, Variable Interest
Trust Certificates, Interest-Only Trust Certificates, Principal-Only Trust
Certificates and Zero Coupon Trust Certificates. A Series of Trust Certificates
may also include one or more Classes of Subordinated Trust Certificates. Trust
Certificates are not debt securities and Holders of Trust Certificates are not
entitled to payments of interest and principal as such. Rather, Holders of
Trust Certificates will have the right to receive distributions based on their
pro rata interests in the related Trust. Such distributions may be scheduled in
the manner of payments of interest and/or principal on a debt security and,
accordingly, the discussion in this Prospectus and the related Prospectus
Supplement will use the terms interest and principal to describe distributions
on Trust Certificates. In the case of certain Trust Certificates, distributions
generally will be based on the distributions and other payments in respect of
the Underlying Assets, and such Trust Certificates may not be entitled to any
specified rate of interest and may not have any specified principal amount.
Each Series will be issued in fully registered form or bearer form, in the
minimum original amount or notional amount for Trust Certificates of each Class
specified in the related Prospectus Supplement. The transfer of the Securities
may be registered, and the Securities may be exchanged, upon the payment of a
reasonable service charge to the Trustee, together with any tax or governmental
charge payable in connection with such registration of transfer or exchange,
except as otherwise provided in the Prospectus Supplement. If specified in the
related Prospectus Supplement, one or more Classes of a Series may be available
in book-entry form only. See "Registered Securities and Bearer Securities".
Except as may be otherwise provided in the related Prospectus Supplement,
commencing on the date specified in the related Prospectus Supplement,
distributions of principal and interest on the Trust Certificates will be made
on each Payment Date as set forth in the related Prospectus Supplement.
To the extent applicable to a Series of Securities, the Trustee will
include with each distribution on a Trust Certificate a statement showing, among
other things, the allocation of such payment to interest, if any, and principal,
if any, and the remaining unpaid
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principal amount of a Trust Certificate of each Class having the minimum
denomination for Trust Certificates of such Class, any realized losses on the
Underlying Assets, if applicable, and on each Payment Date prior to the
commencement of principal payments on a Class of Accrual Securities, the
aggregate unpaid principal amount of each Class of Trust Certificates, the
interest accrued since the prior Payment Date and added to the principal of an
Accrual Trust Certificate having the minimum denomination for Trust Certificates
of such Class and the new principal balance of such Trust Certificate. See "The
Trust Agreement - Reports to Trust Certificateholders".
REGISTERED SECURITIES AND BEARER SECURITIES
The Prospectus Supplement will specify whether the Securities of the
related Series will be issuable as registered Securities without coupons, as
bearer Securities with coupons attached or as both registered Securities without
coupons and bearer Securities with coupons. It is not currently contemplated
that Trust Certificates of any Series will be issuable as bearer Securities. If
any Trust Certificates of any Series are to be issuable as bearer Securities,
the terms and limitations relating to issuance of such Trust Certificates as
bearer Securities will be set forth in the applicable Prospectus Supplement.
Unless otherwise provided under applicable law at the time of issuance of
any bearer Securities, in connection with the sale during the restricted period
described below under "Limitations on Issuance of Bearer Securities", no bearer
Security will be mailed or otherwise delivered to any location in the United
States (as defined under "Limitations on Issuance of Bearer Securities"). A
bearer Security in definitive form may be delivered to a location in the United
States only if, prior to such delivery, the owner of such Security or a
financial institution or clearing organization through which the owner holds
such Security, directly or indirectly, provides a written certificate in the
form required by the Indenture to the effect that: (a) such Security is owned by
a Person (other than a financial institution for purposes of resale during the
restricted period) who is not a United States Person (as defined below under
"Limitations on Issuance of Bearer Securities"); (b) such Security is owned by a
United States Person (other than a financial institution for purposes of resale
during the restricted period) who is (i) a foreign branch of a United States
financial institution or (ii) a United States Person who acquired such Security
through the foreign branch of a United States financial institution and who for
purposes of such certification holds such security through such financial
institution on the date of certification and, in either case, such United States
financial institution has agreed, by execution and delivery of the appropriate
certificate or certificates, to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code and the regulations thereunder; or (c) such
Security is owned by a financial institution for purposes of resale during the
restricted period and such financial institution certifies that it has not
acquired such Security for purposes of resale directly or indirectly to a United
States Person or to a Person within the United States. See "Limitations on
Issuance of Bearer Securities".
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EXCHANGE, REGISTRATION AND TRANSFER
Registered Securities
Registered Securities of any Series will be exchangeable for other
registered Securities of the same Series of any authorized denominations and of
a like aggregate principal amount and tenor. Registered Securities may be
presented for exchange and registration of transfer (with the form of transfer
thereon duly endorsed) at the office of the transfer agent designated by the
Issuer in the applicable Prospectus Supplement (or any duly appointed successor
to such transfer agent). Except as otherwise described herein or in the
applicable Prospectus Supplement, such exchange or transfer of registered
Securities will be effected upon payment of a reasonable service charge to the
Trustee (or such transfer agent), together with any applicable taxes and other
governmental charges and upon the Trustee (or such transfer agent) being
satisfied with the documents of title and identity of the Person making the
request.
The Trustee (or such transfer agent) will maintain a register (the
"Security Register") for the exchange and transfer of registered Securities and
the Trustee (or such transfer agent) and the Issuer will treat the person in
whose name a registered Security is registered on the Security Register as the
Holder of such registered Security for all purposes, including for purposes of
making payments or distributions with respect to such Security and effecting the
exchange or transfer of such Security. Holders ("Beneficial Owners") of
beneficial interests in registered Securities (including Beneficial Owners of
Book-Entry Securities of which DTC is the Holder, as described below under
"Book-Entry Registration") that are not Holders of record on the Security
Register will not be recognized as Holders, and Beneficial Owners will only be
permitted to exercise the rights of Holders indirectly through the Holders.
Bearer Securities
Bearer Securities of any Series will be exchangeable for other bearer
Securities of the same Series of any authorized denominations and of a like
aggregate principal amount and tenor. If Securities of any Series are issuable
as both registered Securities and as bearer Securities, at the option of the
Holder, on request confirmed in writing, and subject to the terms of the
relevant Governing Document, bearer Securities (with all unmatured coupons,
except as provided below, and all matured coupons in default) of such Series
will be exchangeable into registered Securities of the same Series of any
authorized denominations and of a like aggregate principal amount and tenor.
Registered Securities (including registered Securities received in exchange for
bearer Securities) may not be exchanged for bearer Securities.
Any bearer Security surrendered in exchange for a registered or bearer
Security between the relevant record date and the relevant Payment Date with
respect to any payment of interest shall be surrendered without the coupon
relating to such Payment Date and interest represented by such coupon will not
be payable in respect of the registered Security issued in
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exchange for such bearer Security, but will be payable only to the holder of
such coupon when due in accordance with the terms of the relevant Governing
Document.
Bearer Securities may be presented for exchange at the office of the
Trustee (or another transfer agent designated in the applicable Prospectus
Supplement (or any duly appointed successor to such transfer agent)), without a
service charge and upon payment of any applicable taxes and other governmental
charges.
PAYMENT AND PAYING AGENTS
Registered Securities
Except as may be otherwise provided in the applicable Prospectus
Supplement, distributions of principal of and interest on or amounts
distributable with respect to Securities of a Series in registered form will be
made by transfer of immediately available funds to the respective accounts in
the United States of Securityholders of such Series registered as such on the
close of business on the record date specified in the related Prospectus
Supplement, except that (i) with respect to any Securityholder other than DTC,
if such Securityholder as not provided to the Trustee, at least 15 days prior to
the date of such distribution, information as to an account in the United States
to which such distribution may be wire transferred, such distribution will be
made by check mailed to such Securityholder at the most recent address of such
Securityholder appearing in the Register and (ii) the final distribution in
retirement of a Security will be made only upon presentation and surrender of
such Security at the corporate trust office of the Trustee for such Series or
such other office of the Trustee as specified in the Prospectus Supplement.
Bearer Securities
Provided that the certificate described above under "Registered Securities
and Bearer Securities" has been received, principal of and interest on Bonds
issued as bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agent or Paying Agents outside the
United States and its possessions as the Issuer may designate from time to time,
to the applicable holder, by check or by transfer to an account maintained by
such holder with a financial institution located outside the United States and
its possessions. Payment of interest on bearer Securities on any Payment Date
will be made only against surrender of the coupon relating to such Payment Date.
No payment with respect to any bearer Security will be made at any office
or agency in the United States or by check mailed to any address in the United
States or by transfer to an account maintained with a bank located in the United
States. Notwithstanding the foregoing, payment or distribution of principal of
and interest on bearer Securities denominated and payable in U.S. dollars will
be made at the office of the Paying Agent or Paying Agents designated by the
Issuer in the Borough of Manhattan, The City of New York if, and only if,
payment of the full amount thereof in U.S. dollars at all offices or agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions.
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BOOK-ENTRY REGISTRATION
Book-Entry Securities
If so provided in the applicable Prospectus Supplement, securities of any
Series will be eligible, but will not be required, to be held by the Persons
acquiring such Securities through DTC in the United States or through CEDEL or
Euroclear in Europe (any such Securities, "Book-Entry Eligible Securities"). In
addition, if so provided in the applicable Prospectus Supplement, Securities of
any Series may be issuable on a book-entry only basis and will be required to be
held by the Person acquiring such Securities through DTC in the United States
(any such securities, "Book-Entry Only Securities" and, together with Book-Entry
Eligible Securities, "Book-Entry Securities"). Persons acquiring Book-Entry
Securities may hold such Securities directly through DTC, CEDEL or Euroclear if
such Persons are Participants in such systems or indirectly through Persons that
are Participants in such systems.
Any Holder of a Book-Entry Eligible Security (and any initial purchaser of
a Book-Entry Eligible Security entitled to become a Holder thereof) may elect
for such Security to be transferred to or issued in the name of, and held by,
DTC, CEDEL or Euroclear. Any Beneficial Owner of a Book-Entry Eligible Security
held by DTC, CEDEL or Euroclear may elect to hold such Security directly as
Holder by causing such system to transfer such Security to such Beneficial
Owner. Any such issuance or transfer shall be subject to and effected in
accordance with the applicable rules of DTC, CEDEL or Euroclear and the
applicable provisions relating to issuance and transfer of such Security set
forth in the applicable Governing Document.
Except in the limited circumstances described below under "Issuance of
Definitive Securities for Book-Entry Only Securities", Book-Entry Only
Securities will be held only through DTC, CEDEL or Euroclear and Beneficial
Owners of such Securities will not be entitled to receive certificates
representing such Securities. Bonds will be issued as Book-Entry Only
Securities. See "Global Clearance, Settlement and Tax Documentation
Procedures".
The DTC System
Book-Entry Securities held by DTC will be held in certificated form in the
name of Cede & Co., as nominee for DTC. Book-Entry Securities held by CEDEL or
Euroclear will be held in CEDEL's and Euroclear's names on the books of their
respective depositories which in turn will hold such positions in the
Depositories' names on the books of DTC. Citibank, N.A. will act as depository
for CEDEL, and Morgan Guaranty Trust Company of New York will act as depository
for Euroclear (in such capacities, the "Depositories").
Transfers of Book-Entry Securities between DTC Participants will occur in
the ordinary way in accordance with DTC's rules and operating procedures.
Transfers of Book-Entry Securities between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
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Transfers between DTC Participants, on the one hand, and CEDEL or Euroclear
Participants, on the other hand, will be effected by DTC in accordance with
DTC's rules and operating procedures on behalf of the relevant European
international clearing system by its Depository. Such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the Participants in such system in accordance with such
clearing system's rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly to
the Depositories.
Because of time-zone differences, credits of Securities received by CEDEL
or Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing day and dated the
business day following the DTC settlement date. Such credits or any
transactions in such Securities settled during such processing will be reported
to the relevant Euroclear or CEDEL Participant on such business day. Cash
received in CEDEL or Euroclear as a result of sales of Securities by or through
a CEDEL Participant or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the business day following
settlement in DTC. For additional information regarding clearance and
settlement procedures for Book-Entry Only Securities constituting Bonds, and tax
documentation procedures relating to such Securities, see "Global Clearance,
Settlement and Tax Documentation Procedures".
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities that its Participants deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations (including the
underwriters of any Securities). DTC is owned by a number of its direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct Participant, either directly or indirectly. The
rules applicable to DTC and its Participants are on file with the SEC.
Beneficial Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Book-Entry Securities held by DTC may do so only through Participants and
Indirect Participants. In addition,
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Beneficial Owners will receive all distributions of principal of and interest on
the Securities from the Paying Agent through the Participants, who in turn will
receive them from DTC. Under the book-entry format, Beneficial Owners may
experience some delay in their receipt of payments, since such payments will be
forwarded by the Paying Agent to Cede & Co., as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them to
Indirect Participants or Beneficial Owners.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry Securities held by DTC
and is required to transmit payments of principal of and interest on and
distributions of amounts with respect to such Securities that are actually
received by DTC. Participants and Indirect Participants with which Beneficial
Owners have accounts with respect to such Book-Entry Securities are similarly
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Beneficial Owners. Accordingly, although Beneficial
Owners of Book-Entry Securities held by DTC will not possess Securities,
Beneficial Owners will receive payments and will be able to transfer their
interests in such Securities.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Beneficial
Owner of Book-Entry Securities held by DTC to pledge such Securities to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of such Securities may be limited due to the lack of a physical
certificate for such Securities.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Book-Entry Securities held by DTC under the applicable
Governing Document only at the direction of one or more Participants to whose
account with DTC such Securities are credited. Additionally, DTC has advised
the Company that it will take such actions with respect to specified percentages
of the Beneficial Owners only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such specified
percentages. 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 interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL was founded in 1970 to hold securities for CEDEL Participants
and to facilitate the clearance and settlement of securities transactions
between CEDEL Participants through electronic book-entry changes in accounts of
CEDEL Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its Participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. Internally, CEDEL is overseen by a Board of Directors
comprising the Chairman, the Chief Executive Officer and senior executives drawn
from among its shareholders. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust
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companies, clearing corporations and certain other organizations and may include
the underwriters of any securities. Indirect access to CEDEL is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a CEDEL Participant, either
directly or indirectly.
The Euroclear System was created in 1968 to hold securities for Euroclear
Participants and to clear and settle transactions between Euroclear Participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 30 currencies, including United States dollars. The Euroclear
System includes various other services, including securities lending and
borrowing and interfaces with domestic markets in several countries generally
similar to the arrangements for cross-market transfers with DTC described above.
The Euroclear System is operated by the Euroclear Operator, under contract with
the Cooperative. All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Securities. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Federal Reserve Board and the New York State
Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions. The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants, and has no
record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Securities held thorough CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depository. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. The CEDEL or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Holder of Book-Entry Securities
under the applicable Governing Document on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depository's ability to effect such action on its behalf
through DTC.
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Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time. Neither
the Issuer nor any Paying Agent will have any responsibility for the performance
by DTC, CEDEL or Euroclear or their respective Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations.
Issuance of Definitive Securities for Book-Entry Only Securities
Book-Entry Only Securities of any Series will be issued as Definitive
Securities to Persons other than DTC only if (i) the Issuer advises the Trustee
in writing that DTC (or its successor) is no longer willing or able properly to
discharge its responsibilities as Depository with respect to the Securities, and
the Trustee, the Issuer and the Company are unable to locate a qualified
successor, (ii) the Issuer at its option elects to terminate the book-entry
system through DTC or (iii) after the occurrence of an Event of Default,
Securityholders representing not less than 50% of the aggregate outstanding
principal amount of the Securities of such Series advise the Trustee, the Issuer
and DTC through Participants in writing that the continuation of a book-entry
system through DTC is no longer in the best interests of the Securityholders.
Upon the occurrence of any of such events and surrender by DTC of the
certificate or certificates representing the Securities of such Series and
provision of instruction for re-registration, the Trustee will issue the
Securities in the form of Definitive Securities, and thereafter the Issuer and
the Trustee will recognize the Holders of such Definitive Securities as Holders
under the applicable Governing Document.
DISCOUNTED AMOUNT OF UNDERLYING ASSETS
If stated in the applicable Prospectus Supplement, each Underlying Security
securing a Series or comprising a Trust, as the case may be, will be assigned an
initial Discounted Amount determined in the manner and subject to the
assumptions specified in the related Prospectus Supplement. The initial
Aggregate Discounted Amount of the Underlying Securities pledged to secure a
Series or comprising a Trust, as the case may be, will not be less than the
initial Aggregate Outstanding Principal of the related Series at the date of
issuance thereof.
Unless otherwise specified in the related Prospectus Supplement, the
Discounted Amount of each Underlying Security securing a Series or comprising a
Trust is the principal amount of the related Securities which, based upon
certain assumptions that will be set forth in the related Prospectus Supplement,
can be supported by distributions of principal and interest on such Underlying
Security, together with Reinvestment Income thereon, if any, at the Assumed
Reinvestment Rate, if any, which may be a contractually specified interest rate
pursuant to a Guaranteed Investment Contract, and amounts available to be
withdrawn (if applicable) from any Pledged Fund or Account, all as specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Discounted Amount at any time of an Underlying
Security included in the Underlying Assets securing a
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Series or comprising a Trust will be equal to the lesser of (i) the present
value of an assumed stream of payments of principal and interest on such
Underlying Security together with Reinvestment Income thereon, if any,
discounted with the same frequency as payments are made on Securities of such
Series at the highest interest rate borne by such Securities and (ii) the
product of any collateral value cap set forth in the related Governing Document
and the then outstanding principal amount thereof.
The Assumed Reinvestment Rate, if any, for a Series will be the rate on
which amounts deposited in the Collection Account will be assumed to accrue
interest or a rate insured or guaranteed by means of a surety bond, Guaranteed
Investment Contract, or similar arrangement. If the Assumed Reinvestment Rate
is insured or guaranteed, the related Prospectus Supplement will set forth the
terms of such arrangement.
To the extent, if any, that a Discounted Amount is associated with an
Underlying Asset other than an Underlying Security, the Prospectus Supplement
will describe such Discounted Amount and the method by which it is determined.
No assurance can be given that such Aggregate Discounted Amount will in
fact represent such principal amount of Securities of such Series and no third
party will pass upon the validity of the assumptions referred to above.
INTEREST AND PRINCIPAL PAYMENTS -- GENERAL
Interest and/or principal payments on a Series of Securities are payable
solely from Available Funds on each Payment Date in the amounts and priorities
described in the related Prospectus Supplement. If Available Funds are
insufficient on any Payment Date to make required interest and principal
payments, Securityholders will not be paid the full amount of such payments and
will suffer losses, unless the related Prospectus Supplement provides that such
shortfalls will be carried over and sufficient Available Funds exist on some
subsequent Payment Date to pay such shortfalls. There can be no assurance that
Available Funds on any Payment Date will be sufficient to make all required
interest and/or principal payments to Securityholders. Unless otherwise
specified in the related Prospectus Supplement, no amount of Available Funds
(including Reinvestment Income, if any, on distributions received by the Issuer
in respect of the Underlying Securities) will be payable to the Issuer. The
Prospectus Supplement will describe the procedures for collecting payments on
the Underlying Securities, paying any fees for administrative service and
Underlying Enhancement, and making principal and interest payments to Holders of
Securities.
PAYMENTS OF INTEREST
Each Class of a Series (other than a Class of Zero Coupon Securities or
Principal-Only Securities) will accrue interest at the rate per annum specified,
or in the manner determined and set forth, in the related Prospectus Supplement
(calculated on the basis of a 360-day year of twelve 30-day months). Interest
on all Securities that accrue interest, other than Accrual Securities, will be
due and payable on the Payment Dates specified in the related
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Prospectus Supplement. However, failure to pay interest on a current basis may
not necessarily be an Event of Default with respect to a particular Series of
Securities.
Payment of interest on a Class of Accrual Securities will commence only
following the Accrual Termination Date. Prior to such time, interest on such
Class of Accrual Securities will accrue and the amount of interest so accrued
will be added to the principal thereof on each Payment Date. Following the
applicable Accrual Termination Date, interest payments will be made on such
Class on the Compound Value of such Class. The Compound Value of a Class of
Accrual Securities equals the original principal amount of the Class, plus
accrued and unpaid interest added to such principal amount through the
immediately preceding Payment Date, less any principal payments previously made
on that Class and, if specified in the related Prospectus Supplement, losses
allocable thereto. Each payment of interest on each Class of Securities (or
addition to principal in the case of a Class of Accrual Securities) on a Payment
Date will include all interest accrued during the related Interest Accrual
Period preceding such Payment Date, which Interest Accrual Period will end on
the day preceding each Payment Date or such earlier date as may be specified in
the related Prospectus Supplement. If the Interest Accrual Period for a Series
ends on a date other than a Payment Date for such Series, the yield realized by
the Holders of such Securities may be lower than the yield that would result if
the Interest Accrual Period ended on such Payment Date. Additionally, if so
specified in the related Prospectus Supplement, interest accrued during an
Interest Accrual Period for one or more Classes may be calculated on the
assumption that principal payments (and additions to principal of the
Securities) and allocations of losses on the Underlying Assets (if so specified
in the related Prospectus Supplement) are made on the first day of the preceding
Interest Accrual Period and not on the Payment Date for such preceding Interest
Accrual Period when actually made or added. Such method would produce a lower
effective yield than if interest were calculated on the basis of the actual
principal amount outstanding.
A Series may include one or more Classes of Variable Interest Securities.
The Variable Interest Rate of Variable Interest Securities will be a variable or
adjustable rate, subject to a Maximum Variable Interest Rate and a Minimum
Variable Interest Rate (which Variable Interest Rate, Maximum Variable Interest
Rate or Minimum Variable Interest Rate may be based on an Index). The Variable
Interest Payment Dates or Variable Interest Distribution Dates, as applicable,
for Variable Interest Securities will be set forth in the related Prospectus
Supplement and need not be the same as the Payment Dates for other Securities in
such Series, but may be either more or less frequent. Unless otherwise
specified in the related Prospectus Supplement or herein, references to Payment
Dates include Variable Interest Payment Dates. For each Class of Variable
Interest Securities, the related Prospectus Supplement will set forth the
initial Bond Interest Rate or Trust Certificate Interest Rate (or the method of
determining it), the Variable Interest Period and the formula, index or other
method by which the Bond Interest Rate or Trust Certificate Interest Rate for
each Variable Interest Period will be determined.
Interest-Only Securities or interest weighted securities, among others, may
be assigned a "Notional Principal Amount", which is used for convenience in
expressing the calculation of interest and not to indicate any entitlement to
payment of such Notional Principal Amount. The Notional Principal Amount will
be determined at the time of issuance of such
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Securities based on the principal balances or Discounted Amounts of the
Underlying Assets attributable to the Securities of a Series entitled to receive
principal, and will be adjusted monthly over the life of the Securities based on
adjustments to the principal balances or Discounted Amounts of such Underlying
Assets.
If so specified in the related Prospectus Supplement, if funds in the
Collection Account are insufficient to make required payments of interest on any
Payment Date, amounts available for payment to the Securityholders of each Class
will be allocated pro rata in the proportion in which the outstanding principal
balance of each Security bears to the aggregate outstanding principal balance of
all Securities of such Class, except that Subordinated Securityholders, if any,
will not receive any payments of interest on the Subordinated Securities until
Senior Securityholders receive payment of interest due them (in each case as
described in the related Prospectus Supplement).
PAYMENTS OF PRINCIPAL
On each Payment Date for a Series, the Issuer will make principal payments
to the Holders of the Securities of such Series on which principal is then due
and payable. Payments of principal on a Series will be allocated among Classes
of such Series in the order of priority and amounts specified in the related
Prospectus Supplement. All payments of principal of Securities of a Class will
be applied either on a pro rata or random-lot basis, as specified in the related
Prospectus Supplement. In the case of certain Trust Certificates, distributions
generally will be based on the distributions and other payments in respect of
the Underlying Securities, and such Trust Certificates may not have any
specified principal amount.
The Principal Payment Amount will be determined as specified on the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, on any Payment Date
on which the principal balance of the Underlying Assets is reduced due to losses
on the Underlying Assets, (i) the amount of such losses will be allocated first
to reduce the Aggregate Outstanding Principal of the Subordinated Securities or
otherwise to implement the specified terms of subordination, if any, and,
thereafter, to reduce the Aggregate Outstanding Principal of the remaining
Securities in the priority and manner specified in such Prospectus Supplement
until the Aggregate Outstanding Principal of each Class of Securities so
specified has been reduced to zero or paid in full, thus reducing the amount of
principal payable on each such Class of Securities or (ii) such losses may be
allocated in any other manner set forth in the related Prospectus Supplement.
Such reductions of principal of a Class or Classes of Securities ranking pari
passu will be allocated to the Holders of the Securities of such Class or
Classes pro rata in the proportion which the outstanding principal of each
Security of such Class or Classes bears to the Aggregate Outstanding Principal
of all Securities of such Class.
One or more Classes of a Series may consist of Subordinated Securities.
Subordinated Securities may be included in a Series to provide credit support to
Senior Securities as described under "Structural Enhancement" in lieu of or in
addition to other
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forms of credit support. The extent of subordination of a Class of Subordinated
Securities may be limited as described in the related Prospectus Supplement. If
the Underlying Assets are divided into separate Groups securing separate Classes
of a Series, credit support may be provided by a cross-support feature pursuant
to which distributions will be made to Senior Securities relating to one Group
prior to distributions on Subordinated Securities relating to another Group.
SPECIAL REDEMPTION OF BONDS
If specified in the related Prospectus Supplement, the Bonds of a Series
may be subject to special redemption on the day of any month specified therein
if, as a result of the redemption of the Underlying Assets securing such Bonds
or the low yield available for reinvestment, or both, the Trustee determines
(based on assumptions specified in the Indenture and after giving effect to the
amounts, if any, available to be withdrawn from any Reserve Fund for such
Series) that the amount anticipated to be available in the Collection Account,
on the date specified in the related Prospectus Supplement for such Series, is
anticipated to be insufficient to pay debt service on the Bonds of such Series
on such Payment Date. The principal amount of Bonds of such Series required to
be so redeemed will not exceed the principal amount otherwise required to be
paid on the next Payment Date. Therefore, the primary result of such a special
redemption of Bonds is payment of principal prior to the next scheduled Payment
Date with respect to principal of the Bonds.
To the extent described in the related Prospectus Supplement, Bonds of a
Series may be subject to special redemption in whole or in part following
certain defaults under an Underlying Enhancement, and in certain other
circumstances.
All payments of principal pursuant to any special redemption will be made
in the order of priority and in the manner specified in the related Prospectus
Supplement. Notice of any special redemption will be mailed by the Issuer or
the Trustee prior to the Special Redemption Date. The Redemption Price for any
Bonds so redeemed will be equal to 100% of the principal amount of such Bonds
(or 100% of the Compound Value of any Accrual Bonds) or portions thereof so
redeemed, together with interest accrued thereon to the date specified in the
related Prospectus Supplement.
If Underlying Assets having an Aggregate Value at least equal to the
original Aggregate Outstanding Principal of a Series are not pledged and
delivered to the Trustee on the related Closing Date, the Company or one of its
affiliates will deposit cash or Eligible Investments on an interim basis with
the Trustee on such Closing Date in lieu of such Undelivered Assets. If
Underlying Assets are not subsequently delivered within 90 days of issuance of
the Bonds, the amount of such deposit corresponding to principal may be used to
pay a corresponding amount of principal of the Bonds to the extent set forth,
and on the Payment Dates specified, in the Prospectus Supplement.
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OPTIONAL REDEMPTION OF BONDS
If so specified in the related Prospectus Supplement, the Issuer may, at
its option, redeem, in whole or in part, one or more Classes of any Series on
any Payment Date for such Series of Bonds on or after the dates, if any,
specified in such Prospectus Supplement. Notice of such redemption will be
given by the Issuer or Trustee prior to the Redemption Date. The Redemption
Price for any Bond so redeemed will be specified in the related Prospectus
Supplement.
MANDATORY REDEMPTION OF RETAIL BONDS
If specified in the related Prospectus Supplement, Bonds of one or more
Classes of a Series of Retail Bonds may be subject to mandatory redemption by
lot or by such other method set forth in the Prospectus Supplement. No Bonds of
a particular Class will be redeemed until all Bonds in each Class having a
higher priority of redemption have been paid in full.
Retail Bonds within a Class will be selected for redemption by random lot
in $1,000 units after all redemptions requested by Holders of Retail Bonds in
the Class have been made or by such other method set forth in the Prospectus
Supplement. Procedures relating to optional redemptions requested by Holders of
Retail Bonds and to mandatory redemptions by the Issuer of Retail Bonds and the
Class priorities, if any, and conditions with respect to such redemptions, will
be described in the related Prospectus Supplement.
OPTIONAL TERMINATION OF TRUST
If so specified in the related Prospectus Supplement for a Series, the
Company, or another entity designated in the related Prospectus Supplement, may,
at its option, cause an early termination of a Trust by repurchasing all the
Underlying Assets from such Trust on or after a date specified in the related
Prospectus Supplement, or on or after such time as the aggregate outstanding
principal amount of the Trust Certificates is less than a specified percentage
of their initial aggregate principal amount. See "The Trust Agreement -
Termination".
OTHER REPURCHASES OF TRUST CERTIFICATES
If so specified in the related Prospectus Supplement for a Series, any
Class of the Trust Certificates of such Series may be subject to repurchase at
the request of the Holders of such Class. Any such redemption right at the
request of Holders with respect to a Class of a Series of the Trust Certificates
will be described in the related Prospectus Supplement and will be on terms and
conditions described therein.
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OPTIONAL CALL RIGHT
If specified in the applicable Prospectus Supplement relating to a Series
of Securities, the Optionholder will have an Optional Call Right, at the time or
times specified therein, upon 30 days' written notice to the Trustee (which will
promptly give notice thereof to all affected Securityholders), to purchase all,
but not less than all, the Securities of such Series or, in the case of Trust
Certificates, the Underlying Assets of the related Trust (as specified in such
Prospectus Supplement), in either case at a cash purchase price equal to, unless
otherwise specified in such Prospectus Supplement, the Aggregate Outstanding
Principal of such Securities, together with that portion, if any, of the next
scheduled periodic distribution (other than any amount of such distribution
representing principal) on such Securities that is then accrued and unpaid.
Upon the exercise of an Optional Call Right with respect to any Series of
Securities, the Optionholder will transfer to the Trustee an amount in cash
equal to such purchase price. Such Trustee shall promptly distribute such cash
purchase price received by it to the Holders of such Securities. Such
distribution shall be deemed made in full satisfaction of all rights pertaining
to the Securities of such Series held by such Holders and, immediately after
such distribution has been effected, such Securities shall no longer evidence an
obligation of the related Issuer. Concurrently with such distribution, the
Trustee will (i) if the Optional Call Right applies to Securities rather than
the Underlying Assets of a Trust, issue to the Optionholder a new certificate of
such Series of Securities representing either all the Bonds of such Series then
outstanding or the entire beneficial interest in the related Trust or (ii) if
the Optional Call Right applies to the Underlying Assets of a Trust, transfer to
the Optionholder all such Underlying Assets and terminate the related Trust and
Series Supplement.
WITHDRAWAL OF UNDERLYING ASSETS BY THE COMPANY AND THE TRUSTEE
Unless otherwise specified in the applicable Prospectus Supplement, the
Company and the Trustee may own and deal in securities of the same issue and
maturity as any of the Underlying Assets and may own and deal in Securities of
any Series and withdraw from the lien or custody of the Trustee Underlying
Assets in an amount equal to the interest in the Underlying Assets represented
by Securities of any Series owned by the Company or the Trustee, as applicable,
and, upon effecting such withdrawal, may own and deal in such Underlying Assets.
Profits realized in connection with any such withdrawal shall be for the
exclusive benefit of the Company or the Trustee, as applicable.
RATINGS
It will be a condition to the issuance of any Securities offered by this
Prospectus and the related Prospectus Supplement that they be rated in one of
the four highest applicable rating categories by at least one Rating Agency.
The rating or ratings applicable to Securities 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 security rating does not address the effect of
redemption, prepayment or reinvestment rates on investors' yields. A rating is
not a recommendation
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to buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating organization.
See "Risk Factors - Limited Nature of Rating". Pursuant to the terms of
the Indenture or Trust Agreement, as applicable, the Company may not issue any
Securities which would result in the lowering of the then current ratings of the
outstanding Securities of any Series issued thereunder.
CERTAIN YIELD, REDEMPTION AND PREPAYMENT CONSIDERATIONS
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
If so specified in the related Prospectus Supplement, interest accrued for
an Interest Accrual Period for one or more Classes may be calculated on the
assumption that principal payments or distributions (and additions to principal
of the Securities) and allocations of losses on the Underlying Assets are made
on the first day of the preceding Interest Accrual Period and not on the Payment
Date with respect to such preceding Interest Accrual Period. Such method would
produce a lower effective yield than if interest were calculated on the basis of
the actual principal amount outstanding during such Interest Accrual Period.
REDEMPTIONS AND PREPAYMENTS
The following discussion and related disclosure herein are of particular
relevance to Securities the related Underlying Securities of which are
redeemable or subject to prepayment at the option of the Underlying Issuer
thereof.
The yield to maturity or final distribution on the Securities will be
affected by the rate of redemptions or prepayments of Underlying Securities.
The rate at which redemptions or prepayments occur on such Underlying Securities
will be affected by a variety of factors, including the terms of the Underlying
Securities, the level of prevailing interest rates, the availability of credit
and economic, tax, legal and other factors. The rate of principal payments or
distributions on Securities generally will correspond to the rate of principal
payments, including redemptions or prepayments, on the Underlying Securities.
If the purchaser of a Security offered at a discount calculates its
anticipated yield to maturity or final distribution based on an assumed rate of
distributions of principal that is faster than that actually experienced on the
Underlying Securities, the actual yield to maturity or final distribution will
be lower than that so calculated. Conversely, if the purchaser of a Security
offered at a premium calculates its anticipated yield to maturity or final
distribution based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Underlying Securities, the actual
yield to maturity or final distribution will be lower than that so calculated.
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Changes in the timing of redemptions or prepayments of the Underlying
Securities may significantly affect the actual yield to maturity of an investor
in the Securities even if the average rate of redemptions or prepayments is
consistent with the investor's expectation. In general, the earlier a
redemption payment or prepayment is received on the Underlying Securities and
paid on an investor's Securities, the greater the effect on such investor's
yield to maturity or final distribution. The effect on an investor's yield of
principal payments or distributions occurring at a rate higher (or lower) than
the rate anticipated by the investor during a given period may not be offset by
a subsequent like decrease (or increase) in the rate of principal payments or
distributions.
Redemptions or prepayments of Securities will affect the weighted average
life of and the yield on the Securities. Such redemptions or prepayments may
occur in a declining interest rate environment, during which investors may be
unable to invest proceeds received in such a redemption or prepayment in
comparable instruments at rates similar to those received on the Securities.
INTEREST RATE RISK
Certain Securities, including Interest-Only Securities and Principal-Only
Securities may exhibit special sensitivity to interest rate fluctuations.
Fluctuations in interest rates will have a significant effect on the yield to
maturity of such Securities and may, in certain circumstances, result in a
negative yield. Such reduced or negative yields would adversely affect the
yields to maturity of Holders of Securities issued hereunder. The related
Prospectus Supplement for such a Series may specify the percentage of the pool
of Underlying Assets that are expected to be especially sensitive to interest
rate fluctuations and may list expected yields to maturity of Securityholders
under a variety of interest rate scenarios.
REDEMPTIONS, PREPAYMENTS AND WEIGHTED AVERAGE LIFE
The Final Scheduled Payment Date for a Class is the date specified in the
related Prospectus Supplement, calculated on the basis of the assumptions
applicable to such Series set forth therein, no later than which the entire
Aggregate Outstanding Principal thereof will be fully paid.
The rate on reinvestment of distributions of principal and interest on the
Underlying Securities for a Series, the rates at which principal payments are
received on such Underlying Securities and the rate at which payments are made
from any Reserve Fund or other Underlying Enhancement for such Series may affect
the ultimate maturity of each Class of such Series. Redemptions or prepayments
of the Underlying Securities will accelerate the rate at which principal is paid
or distributed on the Securities, and slower payment rates on the Underlying
Securities will slow the rate at which principal is paid or distributed on the
Securities. High reinvestment rates tend to increase the amount of Excess Cash
Flow, which, to the extent applied to principal payments or distributions on the
Securities, will accelerate principal payments or distributions on such
Securities.
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Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. The weighted average life of the
Securities of a Series will be influenced by the rate at which principal on the
Underlying Securities is paid.
In addition, the weighted average life of the Securities may be affected by
the varying maturities of the Underlying Securities. If any Underlying
Securities of a Series have actual terms to maturity of less than those assumed
in calculating the Final Scheduled Payment Date, one or more Classes of the
Series may be fully paid prior to their respective Final Scheduled Payment
Dates, even in the absence of a reinvestment return higher than the Assumed
Reinvestment Rate, if any. Conversely, if any Underlying Securities of a Series
have actual terms to maturity that are greater than those assumed in calculating
the Final Scheduled Payment Date, one or more Classes of the Series may not be
fully paid by their respective Final Scheduled Payment Dates. Accordingly, the
redemption or prepayment experience of the Underlying Securities will, to some
extent, be a function of the mix of interest rates and maturities of the
Underlying Securities.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Fixed or Adjustable Rate Obligation
The Underlying Securities may consist of fixed or adjustable rate
obligations. The rate of redemptions and prepayments with respect to adjustable
rate obligations has fluctuated in recent years. No assurance can be given as
to the rate of redemptions or prepayments of the Underlying Securities in stable
or changing interest rate environments.
Underlying Issuer Default
If an Underlying Issuer defaults on the related Underlying Securities,
payments to Holders of Securities would be impaired. If the default is not
cured, it may effectively shorten the weighted average life of the Securities.
If the default is cured, it may lengthen the weighted average life of the
Securities. Partial cures will either shorten or lengthen weighted average
life, depending on how much of the defaulted amount was ultimately repaid. No
assurance can be given that no Underlying Issuer will default. If an Underlying
Issuer does default, no assurance can be given as to when such default will
occur and how much of the defaulted amount will ultimately be repaid.
Underlying Enhancements may be intended to mitigate some of the foregoing
effects, but there can be no assurance as to the degree of such mitigation.
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THE UNDERLYING ASSETS
GENERAL
The Prospectus Supplement will describe the Underlying Assets that will (i)
secure the related Series of Bonds (pursuant to a pledge by the Issuer to the
Trustee of all right, title and interest of the Issuer in such Underlying
Assets) and/or (ii) constitute the Trust for the related Series of Trust
Certificates, transferred to the Trustee by the Company or one of its
affiliates. The Underlying Assets will include the Underlying Securities and
may also include Underlying Enhancements, Swap Agreements and miscellaneous
other Underlying Assets, all as specified in the related Prospectus Supplement.
The Trustee or its agents or nominees will have possession of any
Underlying Assets in which a security interest may be perfected by possession,
and will be the registered owner of any registered security that is an
Underlying Asset.
The Underlying Assets for a Series will equally and ratably secure or
underlie each Class of such Series, without priority of one Class over the other
(subject to any subordination of Subordinated Securities of a Series), and the
Underlying Assets with respect to each Series will serve as Underlying Assets
only for that Series.
UNDERLYING SECURITIES
Underlying Securities for a Series will consist of any combination of
bonds, debentures, notes and other debt securities issued by Underlying Issuers.
Each Underlying Issuer will, as of the date of issuance of the Securities of a
Series, be (i) eligible to issue securities registered on a registration
statement on Form S-3 promulgated by the SEC under the Securities Act and (ii) a
reporting person under Section 12 or Section 15(d) of the Exchange Act. Each of
the Underlying Securities will as of such date have been (i) originally issued
in a transaction either (x) registered pursuant to the Securities Act or (y) not
registered pursuant thereto, if such unregistered Underlying Security is freely
transferable by the Issuer of such Series under paragraph (k) of Rule 144
promulgated by the SEC under the Securities Act, and (ii) previously purchased
by the Company or any of its affiliates in the secondary market (i.e., not from
the Underlying Issuer or any of its affiliates, and not as part of the initial
distribution thereof).
Each Underlying Security will be identified in a schedule attached as an
exhibit to the applicable Governing Document and amended from time to time upon
any additions or deletions of Underlying Securities. Such schedule will include
the outstanding principal amount, interest rate, payment terms, maturity,
rating, if any, and certain other information with respect to the Underlying
Securities.
Each Underlying Security (i) will be issued by an Underlying Issuer
satisfying the criteria set forth in the second paragraph preceding this
paragraph; (ii) may bear interest, if any, at a fixed or variable rate (which
variable may be based on an Index
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specified in the related Prospectus Supplement); (iii) will mature on the date
set forth in the related Prospectus Supplement; (iv) may benefit from credit
support such as reserve funds, financial guaranty insurance, letters of credit
or other types of credit support or liquidity facilities that are intended to
enhance the cash flows derived from the assets underlying the Underlying
Security; (v) may benefit from (or be subject to additional risks as a result
of) structural enhancements such as overcollateralization and senior/subordinate
structures; (vi) may be subject to redemption or prepayment prior to the stated
maturity thereof; and (vii) may have such other material terms as are described
in the related Prospectus Supplement.
The Prospectus Supplement will specify, to the extent applicable: (i)
title of each Underlying Security; (ii) the aggregate principal amount of the
Underlying Securities; (iii) the stated interest rate, if any, borne by such
Underlying Security; (iv) the weighted average of such interest rates; (v) the
stated maturity of each Underlying Security; (vi) the weighted average stated
maturity of such Underlying Securities; (vii) the identity of each Underlying
Issuer, including any guarantor or provider of credit support; (viii) certain
credit characteristics of such Underlying Issuer, including such Underlying
Issuer's rating, if any, and any special risk factors; (ix) the existence and
extent of any guaranty or credit support with respect to the Underlying
Securities; (x) the conditions under which, and the terms on which, any
Underlying Security may be redeemed prior to the stated maturity thereof; (xi)
the percentage of the Underlying Securities that are subject to redemption or
prepayment; (xii) the terms, if any, on which the Trustee or its agent may
exchange or sell any Underlying Security; (xiii) the existence and type of
information that is made publicly available by each Underlying Issuer, including
where and how purchasers of Securities may obtain such publicly available
information with respect to each Underlying Issuer; and (xiv) certain financial
information with respect to Underlying Issuers, the Underlying Securities of
which comprise a material part of the related Underlying Assets.
UNDERLYING ENHANCEMENT
General
For any Series, Underlying Enhancement may be provided with respect to one
or more Classes thereof. Underlying Enhancements for a Series may consist of
Reserve Funds, Financial Guaranty Insurance, Letters of Credit or other types of
credit support or liquidity facilities that are intended to enhance the cash
flows derived from the Underlying Securities. If so specified in the related
Prospectus Supplement, any form of Underlying Enhancement may be structured so
as to be drawn on by more than one Series to the extent described therein.
Structural Enhancements, discussed below, are not considered part of the
Underlying Assets but are enhancements resulting from the structural elements of
the Securities of the applicable Series.
Underlying Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Securities and interest thereon. If losses occur which exceed the amount
covered by Underlying Enhancement or which are not covered by the Underlying
Enhancement, Securityholders, as applicable, will bear their
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allocable share of deficiencies. Moreover, if a form of Underlying Enhancement
covers more than one Series of Securities (each, an "Enhanced Series"), Holders
of Securities of another Enhanced Series covered by the same Underlying
Enhancement will be subject to the risk that such Underlying Enhancement will be
exhausted by the claims of such other Enhanced Series before such Enhanced
Series receives any of its intended share of such coverage.
If Underlying Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (i) the amount payable under
such Underlying Enhancement, (ii) any conditions to payment thereunder not
otherwise described herein, (iii) the conditions (if any) under which the amount
payable under such Underlying Enhancement may be reduced and under which such
Underlying Enhancement may be terminated or replaced and (iv) the material
provisions of any agreement relating to such Underlying Enhancement.
Additionally, the related Prospectus Supplement will set forth certain
information with respect to the issuer of any Underlying Enhancement, including
the identity and rating, if any, of such issuer.
Reserve Funds
One or more Reserve Funds may be established with respect to a Series, in
which cash, a letter of credit, Eligible Investments, a demand note or a
combination thereof, in the amounts, if any, so specified in the related
Prospectus Supplement may be deposited. The Reserve Funds for a Series also may
be funded over time by depositing therein a specified amount of the
distributions received on the related Underlying Assets as specified in the
related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner and to the extent specified in the related Prospectus Supplement. A
Reserve Fund may be provided to increase the likelihood of timely payments or
distributions of principal of or interest on the Securities, if required as a
condition to the rating of such Series by each Rating Agency, or to reduce the
likelihood of special redemptions with respect to any Series. If so specified
in the related Prospectus Supplement, Reserve Funds may be established to
provide limited protection, in an amount satisfactory to each Rating Agency,
against certain types of losses not covered by insurance policies or other
credit support, such as losses arising from damage not covered by standard
hazard insurance policies. Following each Payment Date amounts in such Reserve
Fund in excess of any amount required to be maintained therein may be released
from the Reserve Fund under the conditions and to the extent specified in the
related Prospectus Supplement and will not be available for further application.
Moneys deposited in any Reserve Funds will be invested in Eligible
Investments. Any reinvestment income or other gain from such investments will
be credited to the related Reserve Fund for such Series, and any loss resulting
from such investments will be charged to such Reserve Fund.
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Additional information concerning any Reserve Fund will be set forth in the
related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make payments or distributions to Securityholders and use of investment earnings
from the Reserve Fund, if any.
Financial Guaranty Insurance
If so specified in the related Prospectus Supplement, Financial Guaranty
Insurance in the form of an insurance policy or surety bond with respect to a
Series of Securities will be provided by one or more insurance companies. Such
Financial Guaranty Insurance, if any, will guarantee, with respect to one or
more Classes of Securities of the related Series, timely distributions of
interest and full distributions of principal on the basis of a schedule of
principal distributions set forth or determined in the manner specified in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, Financial Guaranty Insurance will also guarantee against any payment
made to a Securityholder which is subsequently recovered as a "voidable
preference" payment under the Bankruptcy Code. A copy of the Financial Guaranty
Insurance for a Series, if any, will be filed with the SEC as an exhibit to a
Current Report on Form 8-K to be filed with the SEC within 15 days of issuance
of the Securities of the related Series.
Letter of Credit
If so specified in the related Prospectus Supplement, the Letter of Credit
with respect to a Series of Securities will be issued by the Letter of Credit
Issuer specified in such related Prospectus Supplement. Under the Letter of
Credit, the Letter of Credit Issuer will be obligated to honor drawings
thereunder in an aggregate fixed dollar amount, net of unreimbursed prior
payments thereunder, equal to the Letter of Credit Percentage specified in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Letter of Credit may permit drawings in the event of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies. The obligations
of the Letter of Credit Issuer under the Letter of Credit for each Series of
Securities will expire at the earlier of the date specified in the related
Prospectus Supplement and the termination of the applicable Governing Document,
as the case may be. A copy of the Letter of Credit for a Series, if any, will
be filed with the SEC as an exhibit to a Current Report on Form 8-K to be filed
within 15 days of issuance of the Securities of the related Series.
SWAP AGREEMENTS
A Series may include Swap Agreements as Underlying Assets; Swap Agreements
may include interest rate swaps, interest rate caps and interest rate floors
relating to the interest rates of the Underlying Securities and the Securities
of the related Series.
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Interest rate swaps involve the exchange by the Issuer with another party
of their respective commitments to pay or receive amounts computed by reference
to a fixed rate or a floating rate index and a notional principal amount (the
reference amount with respect to which such obligations are determined, although
no actual exchange of such amount occurs), such as an exchange of floating rate
payments for fixed rate payments. The payments exchanged by the parties are the
product of the rate commitments of each multiplied by the notional principal
amount, however, no payments of principal are ever made. An interest rate cap
entitles the purchaser thereof, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments computed by reference to a
fixed rate or a floating rate index and a notional principal amount from the
party selling such interest rate cap. An interest rate floor entitles the
purchaser thereof, to the extent that a specified index falls below a
predetermined interest rate, to receive payments computed by reference to a
fixed rate or a floating rate index and a notional principal amount from the
party selling such interest rate floor. Certain of the Swap Agreements may be
contracted with and/or guaranteed by specified affiliates of the Company.
The Issuer will usually enter into Swap Agreements on a net basis: that
is, where the two parties are each required to make a payment, the Issuer will
receive or pay, as the case may be, only the net amount of the two payments.
The Issuer may enter into Swap Agreements with affiliates of the Company, member
banks of the Federal Reserve System, affiliates of members of the New York Stock
Exchange or other entities. The Issuer will therefore be subject to the credit
risk of its counterparties. If such a counterparty should default, the Issuer
will have contractual remedies pursuant to the agreements related to the
transaction but such remedies may be subject to bankruptcy and insolvency laws
which could affect the Issuer's rights as a creditor. The swap market has grown
substantially in recent years, with a large number of banks and financial
services firms acting both as principals and as agents using standardized swap
documentation. As a result, the market for certain common interest rate swaps
has become relatively liquid. Caps and floors are more recent innovations and
are less liquid than swaps. There can be no assurance, however, that the Issuer
will be able to enter into interest rate swaps or to purchase interest rate caps
or floors at prices or on terms that are advantageous to the Issuer. In
addition, although the terms of interest rate swaps, caps and floors may provide
for termination, there can be no assurance that the Issuer will be able to
terminate an interest rate swap or to sell or offset interest rate caps or
floors that it has purchased.
The Swap Agreements to be included in any Series will be contracts that are
expected not to be subject to the Securities Act or the Commodity Exchange Act,
and therefore to be unregulated by the SEC and the CFTC. In addition, it is not
expected that such Swap Agreements will be regulated by the Comptroller of the
Currency or the Federal Reserve Board. However, no assurance can be given that
none of the SEC, the CFTC, the Comptroller of the Currency and the Federal
Reserve Board will assert jurisdiction over such contracts. If the CFTC were to
assert jurisdiction successfully, such contracts could be characterized as
illegal off-exchange futures contracts. In such case, the right to receive
payments under the contracts would be limited or extinguished.
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The 1992 Act amended the CEA to authorize the CFTC to exempt any agreement,
contract or transaction that otherwise would be subject to the CEA, either
unconditionally or on stated terms or conditions or for stated periods, from the
substantive requirements of the CEA. In particular, the CFTC was authorized to
exempt certain derivative instruments from the requirement that they be traded
on exchanges designated by the CFTC (the "exchange-traded requirement"). The
CFTC has promulgated rules exempting from all provisions of the CEA, including
the exchange-traded requirement, certain swap transactions and certain so-called
"hybrid instruments", which have features of both debt or equity securities and
futures or options contracts, except that certain swap transactions remain
subject to certain antifraud provisions. To be exempt from the CEA under this
regulatory safe harbor: (i) the swap must be entered into solely between
eligible swap participants (as defined in the CFTC rules); (ii) the swap must
not be part of a fungible class of agreements that are standardized as to their
material economic terms; (iii) the creditworthiness of the parties must be a
material consideration in entering into or determining the terms of the swap
agreement, including price; and (iv) the swap must not be entered into and
traded on or through a multilateral transaction execution facility. The
regulatory safe harbor is non-exclusive; thus, derivative instruments falling
outside its scope may be exempt from CEA provisions by virtue of other,
potentially broader, safe harbors.
Each Swap Agreement (i) unless otherwise set forth in the related
Prospectus Supplement, will be based upon the standard forms prepared by the
International Swaps and Derivatives Association, Inc., (ii) will provide that
the related counterparty will be obligated to make such payments and the Trust
will be obligated to make such payments, each as are described in the related
Prospectus Supplement, (iii) may be subject to termination by either party
thereto upon the occurrence of certain events, which events, if applicable, will
be described in the related Prospectus Supplement, (iv) may provide for the
payment of certain amounts by the Trust or the counterparty upon the termination
thereof, which amounts, if applicable, will be described in the related
Prospectus Supplement and (v) may include other provisions which, to the extent
applicable and material, will be described in the related Prospectus Supplement.
In addition, the Prospectus Supplement for a Series including Swap
Agreements as Underlying Assets will specify, to the extent applicable: (i) the
types of Swap Agreements included; (ii) a description of each Swap Agreement;
(iii) the aggregate amount, notional or otherwise, of each Swap Agreement; (iv)
the identity of all counterparties and guarantors; (v) the credit
characteristics of any such counterparty or guarantor, including any special
risk factors; (vi) the types of interest rate fluctuations to which each Swap
Agreement is expected to be most sensitive; (vii) the term of each Swap
Agreement; (viii) the means by which each counterparty to a Swap Agreement
receives consideration for its obligations with respect to such Swap Agreement
(for example, a single upfront payment may be made to such counterparty at the
time of issuance of such Series, or cash flows from other Underlying Assets, in
specified amounts, may be payable to such counterparty); (ix) the effect of
inclusion of such Swap Agreements in the Underlying Assets; (x) the existence
and type of information that is made publicly available by certain
counterparties or guarantors, including where and how purchasers of Securities
may obtain such publicly available information with respect to such
counterparties
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or guarantors; (xi) any special risk factors associated with a novel or unique
Swap Agreement; and (xii) certain summary financial information or audited
financial statements (or reference to filings with the SEC containing such
information or statements, if such counterparty or guarantor is eligible to
issue securities pursuant to Instruction I.B.1 of Form S-3 at the time of
issuance of such Series) with respect to a counterparty or guarantor, if the
Swap Agreement to which such counterparty or guarantor is a party comprises more
than 10% or more than 20% respectively, of the value of the Underlying Assets
with respect to such Series (based on the then discounted present value of all
expected cash flows, on a net basis). The calculation of the discounted present
value of the expected cash flows, on a net basis, with respect to any Swap
Agreement will be calculated by the Company in good faith, based on the terms of
the Swap Agreement, using customary methodologies and market practices (e.g.,
with respect to the applicable discount rate, discount period, and other
applicable variables). For the proposes of the foregoing, the Company will
assume that the Swap Agreement is not terminated prior to the expiration of the
term thereof. The Prospectus Supplement also may disclose certain information
relating to the availability of financial information on counterparties and
guarantors, if any.
GUARANTEED INVESTMENT CONTRACT
If specified in the related Prospectus Supplement, on or prior to the
Delivery Date the Issuer will obtain a Guaranteed Investment Contract with a
guarantor acceptable to the Rating Agencies rating the Securities (the
"Guarantor"), pursuant to which certain distributions on the Underlying Assets
will be invested by the Trustee with the Guarantor, and the Guarantor will pay
interest at the rate per annum set forth in such Guaranteed Investment Contract
on amounts invested. Whenever funds are required to be paid to the
Securityholders, the Guarantor will remit such funds to the Trustee.
OTHER UNDERLYING ENHANCEMENTS
Certain terms of any other Underlying Enhancements, which may include
guaranties, credit support and liquidity facilities, will be set forth in the
related Prospectus Supplement.
COLLECTION ACCOUNT
A separate Collection Account for each Series will be established by the
Trustee, or if the Trustee is not also the Paying Agent by the Paying Agent, for
receipt of all monthly principal and interest payments on the Underlying
Securities with respect to such Series and the amount of cash, if any, to be
initially deposited therein by the Issuer, Reinvestment Income, if any, thereon
and any amounts withdrawn from any Reserve Funds for such Series. If specified
in the related Prospectus Supplement, Reinvestment Income, if any, or other gain
from investments of moneys in the Collection Account will be credited to the
Collection Account for such Series and any loss resulting from such investments
will be charged to such Collection Account. See "Investment of Funds" below.
Funds on deposit in the Collection Account will be available for application to
the payment of principal of and interest on the Securities of the
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related Series and for certain other payments to the extent provided for in the
Indenture or Trust Agreement and described in the related Prospectus Supplement.
Unless otherwise provided in the Prospectus Supplement, no amount of Available
Funds will be payable to the Issuer.
OTHER FUNDS OR ACCOUNTS
A Series may also be secured by certain other funds and accounts for the
purpose of, among other things, paying certain administrative fees and operating
expenses and accumulating funds that are credited to the Issuer's account
pending their distribution to the Issuer.
INVESTMENT OF FUNDS
Unless otherwise specified in the related Prospectus Supplement, moneys in
the Collection Account and certain other funds and accounts for a Series are to
be invested by the Trustee, as directed by the Company, in certain Eligible
Investments acceptable to each Rating Agency rating such Series, which will
consist of one or more of the following: (i) obligations of, or guaranteed as
to both full and timely payment of principal and interest by, the United States
or any agency or instrumentality thereof when such obligations are backed by the
full faith and credit of the United States and repurchase agreements with
respect to any such obligations entered into with an Eligible Institution; (ii)
federal funds, certificates of deposit, time deposits and bankers' acceptances,
each of which shall not have an original maturity of more than 90 days, of any
depository institution or trust company incorporated under the laws of the
United States or any state; provided that the short-term obligations of such
depository institution or trust company shall be (a) rated at least A-1+/P-1 by
S&P and Moody's, respectively, (b) if Fitch is a Rating Agency under the
Governing Document, rated at least F-1 (for investments having an original
maturity of 30 days or less) or F-1+ (for investments having an original
maturity of more than 30 days) by Fitch and (c) if Duff & Phelps is a Rating
Agency under the Governing Document, and if Duff & Phelps rates such
obligations, rated at least D-1 by Duff & Phelps; and (iii) commercial paper
(having original maturities of not more than 180 days) of any corporation
incorporated under the laws of the United States or any state thereof; provided
that such commercial paper shall be (a) rated at least A-1+/P-1 by S&P and
Moody's, respectively, (b) if Fitch is a Rating Agency under the Governing
Document, rated at least F-1 (for investments having an original maturity of 30
days or less) or F-1 + (for investments having an original maturity of more than
30 days) by Fitch and (c) if Duff & Phelps is a Rating Agency under the
Governing Document, and if Duff & Phelps rates such commercial paper, rated at
least D-1 by Duff & Phelps; provided, however, that (x) no instrument will be an
Eligible Investment if such instrument evidences a right to receive only
interest payments with respect to the obligations underlying such instrument or
if such instrument has a maturity date after the next scheduled Payment Date and
(y) no overnight instrument will be an Eligible Investment unless it is an
investment in overnight federal funds or in an overnight repurchase agreement
described in clause (i) above.
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Any net income and gain (or loss) from such investments for a Series will
be deemed added to (or deducted from) the Collection Account for such Series and
the Trustee will have no liability therefor.
STRUCTURAL ENHANCEMENT
GENERAL
Structural Enhancements for a Series may consist of overcollateralization,
senior/subordinated structures, groupings of Underlying Assets and other
structural elements of the Series.
OVERCOLLATERALIZATION
To the extent specified in the related Prospectus Supplement, a Series may
be structured such that the Aggregate Discounted Amount of the Underlying Assets
relating to a Series may exceed the Aggregate Outstanding Principal of such
Series, thereby resulting in overcollateralization.
SENIOR/SUBORDINATED STRUCTURES
One or more Classes of a Series may be Subordinated Securities. The rights
of the Holders of Subordinated Securities to receive distributions of principal
and interest from the Collection Account on any Payment Date will be
subordinated to such rights of the Holders of Senior Securities to the extent
specified in the related Prospectus Supplement. The amount of subordination
will decrease whenever amounts otherwise payable to the Holder of Subordinated
Securities are paid to the Holders of Senior Securities (including amounts
withdrawn from any related Reserve Fund and paid to the Holders of Senior
Securities), and will increase whenever there is distributed to the Holders of
Subordinated Securities amounts in respect of which subordination payments have
previously been paid to the Holders of Senior Securities. The related Governing
Document may require a trustee that is not the Trustee to be appointed to act on
behalf of Holders of Subordinated Securities.
A Series may include one or more Classes of Subordinated Securities
entitled to receive cash flows remaining after distributions are made to all
other Classes designated as being senior thereto. Such right will effectively
be subordinate to the rights of other Holders of Senior Securities, but will not
be limited to a specified dollar amount of subordination. If so specified in
the related Prospectus Supplement, the subordination of a Class may apply only
in the event of (or may be limited to) certain types of losses not covered by
insurance policies or other credit support.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a Class or Classes of Subordinated Securities in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the
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amount of subordination will decrease over time, the manner of funding any
related Reserve Fund and the conditions under which amounts in any related
Reserve Fund will be used to make distributions to Holders of Senior Securities
and/or to Holders of Subordinated Securities or be released. If cash flows
otherwise distributable to Holders of Subordinated Securities secured by a Group
will be used as credit support for Senior Securities secured by another Group,
the related Prospectus Supplement will specify the manner and conditions for
applying such a cross-support feature.
GROUPINGS OF UNDERLYING ASSETS
If the Underlying Assets are divided into separate Groups, each securing or
supporting a separate Class or Classes of a Series, and the related Prospectus
Supplement so provides, credit support may be provided by a cross-support
feature or cross-collateralization. Pursuant to a cross-support feature, on any
Payment Date, distributions will be made with respect to Senior Securities
relating to one Group prior to distributions to Subordinated Securities secured
by another Group. Pursuant to cross-collateralization, Securities are allocated
losses and shortfalls from one or more Groups before such losses are allocated
to the Senior Securities relating to such Group or Groups and are subordinate in
right of payment to one or more Classes of Securities relating to one or more
Groups.
OTHER STRUCTURAL ENHANCEMENTS
The Prospectus Supplement will specify any additional enhancement
applicable to Securities of a Series, with respect to, for example, shortfalls
arising due to cross- collateralization, differences in the Indices on the
Securities of a Series and the interest rates on the Underlying Assets,
insufficient cash flows from the Underlying Assets or for other reasons.
THE INDENTURE
The following summaries describe certain provisions of the Indenture.
Certain terms used below are used with the meanings ascribed to them in the
Indenture.
CERTAIN COVENANTS
The Issuer may not liquidate or dissolve, without the consent of the
Holders of at least 66% of the Voting Rights of each Series of Bonds. The
Issuer also may not consolidate or merge with or into any other Person or convey
or transfer its properties and assets substantially as an entirety unless (i)
such consolidation or merger shall have been consented to by Holders of at least
66% of the Voting Rights of each Series of Bonds, (ii) the Person (if other
than the Issuer) formed or surviving such transaction or acquiring such assets
is a Person organized under the laws of the United States of America or any
State and shall have expressly assumed, by supplemental indenture in form
satisfactory to the Trustee, the due and punctual payment of principal of and
interest on all Bonds and the performance of every applicable covenant of the
Indenture to be performed by the Issuer, (iii) immediately after giving effect
to
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such transaction, no Default or Event of Default shall have occurred and be
continuing, (iv) the Trustee shall have received a letter from each Rating
Agency rating any outstanding Bonds to the effect that the rating issued with
respect to such Bonds is confirmed notwithstanding the consummation of such
transaction and (v) the Trustee shall have received from the Issuer an Officers'
Certificate and an Opinion of Counsel, each to the effect that, among other
things, such transaction complies with the foregoing requirements.
The Issuer may not incur, assume, have outstanding or guarantee any
indebtedness except pursuant to the Indenture and subject to the conditions and
limitations set forth therein. No such indebtedness will be secured by any
Underlying Assets of any Series.
MODIFICATION OF INDENTURE
Except as set forth below, with the consent of the Holders of not less than
a majority of the Voting Rights of each Series or Class of such Series of Bonds
to be affected, the Trustee and the Issuer may amend the Indenture or execute a
supplemental indenture to add provisions to or change or eliminate any
provisions of the Indenture relating to such Series or modify the rights of the
Holders of the Bonds of that Series.
Without the consent of the holder of each outstanding Bond affected, except
as provided below, no such amendment or supplemental indenture may (i) change
any Payment Date or the Final Scheduled Payment Date of any Bond or reduce the
principal amount thereof, the Bond Interest Rate for any Bond or the Redemption
Price with respect thereto, or change the provisions of the Indenture relating
to the application of the Trust Estate to payment of principal of or interest on
the affected Bonds, or change any place of payment where, or the coin or
currency in which, any affected Bond or any interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of the
Indenture regarding payment, (ii) reduce the percentage of Voting Rights of the
Bonds of the affected Series (or Class of such Series), the consent of the
Holders of which is required for the authorization of any amendment or
supplemental indenture or for any waiver of compliance with certain provisions
of the Indenture or certain defaults thereunder and their consequences, (iii)
modify or alter the provisions of the Indenture defining the term "Outstanding",
(iv) permit the creation of any lien ranking prior to or on a parity with the
lien of the Indenture with respect to any part of the property subject to the
lien of the Indenture or terminate the lien of the Indenture on any property at
any time subject thereto or deprive the holder of any Bond of the security
afforded by the lien of the Indenture, (v) reduce the percentage of the Voting
Rights of the Bonds of any Series (or Class of such Series), the consent of the
Holders of which is required to direct the Trustee to liquidate the Underlying
Assets for such Series (or Class of such Series), (vi) modify any of the
provisions of the Indenture if such modification affects the calculation of the
amount of any payment of interest or principal due and payable on any Bond on
any Payment Date or to affect the rights of the Holders of Bonds of any Series
(or Class of such Series) to the benefit of any provisions for the mandatory
redemption of Bonds of such Series (or Class of such Series) contained therein
or in the related Series Supplement, or (vii) modify the provisions of the
Indenture regarding any modifications of such Indenture requiring consent of the
Holders of Bonds, except to increase the percentage or number of Holders
required to consent to such
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modification of such Indenture or to provide that additional provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
Bond affected thereby.
The Issuer and the Trustee may also amend the Indenture or enter into
supplemental indentures, without obtaining the consent of Holders of any Series,
(i) to cure any ambiguity, (ii) to correct or supplement any provision of the
Indenture or any supplemental indenture which may be defective or inconsistent
with any other provision therein or in the Prospectus Supplement, (iii), to make
or to amend any other provisions with respect to matters or questions arising
under the Indenture or any supplemental indenture or (iv) to comply with any
requirements of the Securities Act, the TIA, the Investment Company Act or the
Code provided that such amendment pursuant to clause (iii) will not materially
adversely affect the interests of the Holders of the Bonds. Any such amendment
pursuant to clause (iii) of the preceding sentence will be deemed not to
adversely affect in any material respect the interests of any Holder of any
Bonds if the Trustee receives written confirmation from each Rating Agency
rating such Bonds that such amendment will not cause such Rating Agency to
reduce the then current rating thereof. Such amendments may also be made and
such supplemental indenture may also be entered into without the consent of
Bondholders to set forth the terms of and security for additional Series, to
evidence the succession of another person to the Issuer, to add to the
conditions, limitations and restrictions on certain terms of any Series and to
covenants of the Issuer, to surrender any right or power conferred on the
Issuer, to convey, transfer, assign, mortgage or pledge any property to the
Trustee, to correct or amplify the description of any property subject to the
lien of the Indenture to modify the Indenture to the extent necessary to effect
the Trustee's qualification under the TIA or comply with the requirements of the
TIA, to provide for the issuance of Bonds of any Series, to make any amendment
necessary or desirable to maintain the federal income tax status of the Issuer
or the Trust and to amend the provisions of the Indenture relating to
authentication and delivery of a Series with respect to which a supplemental
indenture has not theretofore been authorized or to evidence and provide for the
acceptance of appointment by a successor trustee.
EVENTS OF DEFAULT
An "Event of Default" with respect to any Series is defined in the
Indenture as being: (i) a continuing default for five days in the payment of
interest on any Bond of such Series; (ii) a continuing default for five days in
the payment of principal when due of any Bond of such Series; (iii) the
impairment of the validity or effectiveness of the Indenture or any Grant
thereunder, or the subordination, termination or discharge of the lien of the
Indenture with respect to such Series, or the release of any Person from any
covenants or obligations under the Indenture with respect to such Series, unless
otherwise expressly permitted, or the creation of any lien, charge, security
interest, mortgage or other encumbrance with respect to any part of the property
subject to the lien of the Indenture, or any interest in or proceeds of such
property, unless otherwise expressly permitted, or the failure of the lien of
the Indenture to constitute a valid first priority security interest in the
property subject to the lien of the Indenture and the continuation of any of
such defaults for a period of 30 days after notice to the Issuer by the Trustee
or to the Issuer and the Trustee by the Holders of at least 25% of the Voting
Rights of such Series; (iv) a default in the observance of, or breach of, any
covenant or negative covenant
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of the Issuer made in the Indenture, or a material breach of any representation
or warranty of the Issuer made in the Indenture or in any certificate or other
document delivered pursuant thereto or in connection therewith as of the time
when the same shall have been made, and the continuation of any such default or
breach for a period of 60 days after notice to the Issuer by the Trustee or to
the Issuer and the Trustee by the Holders of at least 25% of the Voting Rights
of such Series (unless the default or breach is with respect to certain
covenants specified in the Indenture not requiring such continuation or notice);
and (v) certain events of bankruptcy, insolvency, receivership or reorganization
of the Issuer. Notwithstanding the foregoing, if a Series includes a Class of
Subordinated Bonds, the Indenture for such a Series may provide that certain
defaults which relate only to such Subordinated Securities will not constitute
an Event of Default with respect to the Bonds, under certain circumstances, and
it may limit the rights of Holders of Subordinated Bonds to direct the Trustee
to pursue remedies with respect to such defaults, or other Events of Default.
Such limitations, if any, will be specified in the related Prospectus
Supplement.
If an Event of Default with respect to any Series occurs and is continuing,
the Trustee may, and on the written request of the Holders of at least 25% of
the Voting Rights of such Series shall, declare all Bonds of such Series to be
due and payable, together with accrued and unpaid interest thereon. Such
declaration may in certain circumstances be rescinded by the Holders of a
majority of the Voting Rights of such Series.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of an Event of Default with respect to a Series, mail to the Holders
of such Series notice of all uncured or unwaived defaults known to it; provided,
however, that, (a) except in the case of an Event of Default in the payment of
the principal or purchase price of or interest on any Bond, the Trustee shall be
protected in withholding such notice if it determines in good faith that the
withholding of such notice is in the interest of the Bondholders of such Series,
and (b) in the case of a default specified in clause (iv) of the first paragraph
of this "Events of Default" subsection, the Trustee is not required to give such
notice until at least 30 days after the occurrence of such default or breach and
that, in the case of any default or breach specified in clause (v) of the first
paragraph of this "Events of Default" subsection, the Trustee is not required to
give such notice until at least 60 days after the occurrence of such default or
breach.
An Event of Default with respect to one Series will not necessarily be an
Event of Default with respect to any other Series, but an Event of Default with
respect to one Class of a Series shall be an Event of Default with respect to
all Classes of such Series.
If, following an Event of Default with respect to any Series, the Bonds of
such Series have been declared to be due and payable, the Trustee in its sole
discretion may, but shall not be obligated to refrain from liquidating the
related Underlying Assets if (i) the Trustee determines that the amounts
receivable with respect to such Underlying Assets will be sufficient to pay (a)
all principal of and interest on the Bonds in accordance with their terms
without regard to the declaration of acceleration and (b) all sums due the
Trustee and any other administrative amounts required to be paid under the
Indenture and (ii) Holders of the requisite percentage of the Bonds of such
Series have not directed the Trustee to sell the related
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Underlying Assets as so specified in the Indenture. In addition, the Trustee is
prohibited from selling the Trust Estate following certain Events of Default
unless (a) the amounts receivable with respect to the Underlying Assets are not
sufficient to pay in full the principal of and accrued interest on the Bonds of
such Series, and to pay sums due the Trustee and other administrative expenses
specified in the Indenture and the Trustee obtains the consent of Holders of
66% of the Voting Rights of such Series or (b) the Trustee obtains the consent
of 100% of the Voting Rights of such Series. The terms of an Underlying
Enhancement or Swap Agreement may also grant to the provider thereof certain
rights that may restrict or prevent the Trustee from selling Underlying Assets.
The proceeds of a sale of assets will be applied to the payment of amounts due
the Trustee and other administrative expenses specified in the Indenture and
then distributed pro rata among the Bondholders of such Series (without regard
to Class, provided that Subordinated Securities will be subordinate to Senior
Securities of the Series to the extent provided in the related Prospectus
Supplement) according to the amounts due and payable on the Bonds for principal
and interest at the time such proceeds are distributed by the Trustee.
The Trustee will not be deemed to have knowledge of any Event of Default or
default described in clauses (iv) through (vi) of the first paragraph of this
"Events of Default" subsection unless an officer in the Trustee's corporate
trust department has actual knowledge thereof. Subject to the provisions of the
Indenture relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the Bondholders of a Series, unless such Bondholders shall
have offered to the Trustee reasonable security or indemnity. Subject to such
provisions for indemnification and certain limitations contained in the
Indenture the Holders of a majority of the Voting Rights of a Series (or of such
Classes specified in the related Prospectus Supplement) will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Series. In addition, the Holders of a majority of
the Voting Rights of a Series (or of such Classes specified in the related
Prospectus Supplement) may, in certain cases, waive any default with respect to
such Series, except a default in payment of principal or interest or in respect
of a covenant or provision which cannot be modified without the consent of all
Bondholders affected.
No holder of Bonds of a Series will have the right to institute any
Proceeding with respect to the Indenture, unless (i) such Holder previously has
given to the Trustee written notice of a continuing Event of Default with
respect to such Series, (ii) the Holders of not less than 25% of the Voting
Rights of such Series have made written request on the Trustee to institute such
Proceeding and have offered satisfactory indemnity, (iii) the Trustee has, for
60 days after receipt of such notice, request and offer of indemnity, failed to
institute any such Proceeding, and (iv) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority of the Voting Rights of such Series; provided, however,
that, if the Trustee receives conflicting requests and indemnities from two or
more groups of Bondholders each representing less than a majority of the Voting
Rights of such Series, the Trustee may in its sole discretion determine what
action with respect to the Proceeding, if any, shall be taken.
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REPORTS TO BONDHOLDERS
Unless otherwise specified in the Prospectus Supplement related to a
Series, the Trustee will prepare and forward to each Bondholder on each Payment
Date (whether or not such Bondholder receives a payment on such date), or as
soon thereafter as is practicable, a statement setting forth, to the extent
applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution
allocable to principal on the Underlying Assets, separately identifying the
aggregate amount of any redemptions or prepayments included therein;
(ii) with respect to a Series, the amount of such distribution
allocable to interest on the Underlying Assets;
(iii) the aggregate outstanding principal balance of the
Underlying Securities as of the opening of business on the immediately
following Due Date, after giving effect to distributions allocated to
principal reported under (i) above and the payment made on the Due Date
immediately preceding such Payment Date;
(iv) the aggregate outstanding principal amount of the Bonds of
such Series as of the immediately following Due Date, after giving effect
to distributions allocated to principal reported under (i) above and the
payment made on the Due Date immediately preceding such Payment Date;
(v) in the case of Variable Rate Bonds, the Variable Interest
Rate applicable to the distribution being made;
(vi) with respect to Accrual Bonds prior to the Accrual
Termination Date, in addition to the information specified in (i) above,
the amount of interest accrued on such Bonds during the related Interest
Accrual Period and added to the Compound Value thereof;
(vii) if applicable, the amount of any shortfall (i.e., the
difference between the aggregate amounts of principal and interest which
Bondholders would have received if there were sufficient Available Funds to
distribute and the amounts actually distributed);
(viii) if applicable, the number and aggregate principal
balances of Underlying Assets delinquent for (a) two consecutive payments
and (b) three or more consecutive payments, as of the close of the business
on the Determination Date to which such distribution relates;
(ix) in the case of any Underlying Enhancement described in the
related Prospectus Supplement, the amount of coverage of such credit
support as of the close of business on the applicable Payment Date;
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(x) in the case of any Series which includes Subordinated Bonds,
the subordinated amount, if any, determined as of the related Payment Date
and if the distribution to the Holders of Senior Bonds is less than their
required distribution, the amount of the shortfall;
(xi) the amount of any withdrawal from any applicable Reserve
Fund included in amounts actually distributed to Bondholders and the
remaining balance of each Reserve Fund, if any, on such Payment Date, after
giving effect to distributions made on such date; and
(xii) such other information as may be specified in the
Indenture.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will furnish to each Bondholder of record at any time
during such calendar year: (A) the aggregate of amounts reported pursuant to
(i) through (iii), (vi), (vii) and (xi) above for such calendar year and (B)
such information specified in the Indenture to enable Bondholders to prepare
their tax returns, including the amount of original issue discount accrued on
the Bonds, if applicable. Information in the Payment Date reports and annual
reports provided to the Bondholders will not have been examined and reported
upon by an independent public accountant.
AUTHENTICATION AND DELIVERY OF BONDS
The Issuer may from time to time deliver Bonds executed by it to the
Trustee and order that the Trustee authenticate such Bonds. On the receipt of
such Bonds and such order and subject to the Issuer's compliance with certain
conditions specified in the Indenture, the Trustee will authenticate and deliver
such Bonds as the Issuer may direct. The Trustee will be authorized to appoint
an Authenticating Agent for purposes of authenticating and delivering any Series
of Bonds.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will be discharged as to a Series (except with respect
to certain continuing rights specified in the Indenture), (i)(a) on the delivery
to the Trustee for cancellation of all the Bonds of such Series other than Bonds
which have been mutilated, lost or stolen and have been replaced or paid and
Bonds for which money has been deposited in trust for the full payment thereof
(and thereafter repaid to the Issuer and discharged from such trust) as provided
in the Indenture, or (b) at such time as all Bonds of such Series not previously
cancelled by the Trustee have become, or within one year will become, due and
payable or called for redemption and the Issuer shall have deposited with the
Trustee an amount sufficient to repay all of the Bonds and (ii) when the Issuer
shall have paid all other amounts payable under the Indenture with respect to
such Series.
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ISSUER'S ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Trustee a
written statement as to fulfillment of its obligations under the Indenture.
PASS THROUGH OF VOTING RIGHTS
The Trustee shall seek instructions from Bondholders of a Series in
connection with any vote, consent or waiver required in respect of any related
Underlying Asset. Except as otherwise provided in the Prospectus Supplement,
the Trustee shall direct any action or cast any vote as the holder of such
Underlying Asset in proportion to the Aggregate Outstanding Principal of Bonds
held by Bondholders of such Series taking the corresponding position. The
Prospectus Supplement will specify whether and under what circumstances voting
in such cases will be by Class.
LIST OF BONDHOLDERS
Three or more Holders of a Series that have each owned the Bonds for
at least six months may, by written application to the Trustee, request access
to the list maintained by the Trustee of all Holders of the same Series or of
all Bonds, as specified in the request, for the purpose of communicating with
other Bondholders with respect to their rights under the Indenture. The Trustee
may choose not to give such Bondholders access to the list of Bondholders if it
wishes to mail the communication on behalf of the requesting Bondholders, at
their expense, to all Bondholders. If the Trustee objects to the proposed
mailing on the grounds that it would be contrary to the best interests of the
Bondholders or a violation of applicable law, it may request permission from the
SEC not to make the proposed mailing.
MEETINGS OF BONDHOLDERS
Meetings of Bondholders may be called at any time and from time to
time to (i) give any notice to the Issuer or to the Trustee, give directions to
the Trustee, consent to the waiver of any Default or Event of Default under the
Indenture, or to take any other action authorized to be taken by Bondholders in
connection therewith, (ii) remove the Trustee and to appoint a successor
Trustee, (iii) consent to the execution of supplemental indentures or (iv) take
any other action authorized to be taken by or on behalf of the Bondholders of
any specified percentage of the Voting Rights of the Bonds. Such meetings may
be called by the Trustee, the Issuer or by the Holders of 10% in Voting Rights
of any such Series.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Bondholders a
brief report relating to its eligibility and qualification to continue as the
Trustee under the Indenture, any amounts advanced by it under the Indenture
which remain unpaid on the date of the report, the amount, interest rate and
maturity date of certain indebtedness owing by the Issuer (or any other obligor
on such Series) to the Trustee in its individual capacity, the property and
funds
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physically held by the Trustee as such, any release or releases and substitution
of property subject to the lien of the Indenture which has not been previously
reported, any additional issuance of Bonds not previously reported and any
action taken by it which materially affects the Bonds and which has not been
previously reported.
THE TRUSTEE
The Trustee will be a bank or trust company qualified under the TIA
and named in the Prospectus Supplement related to a Series. The Issuer may
maintain other banking relationships in the ordinary course of business with the
Trustee. The Trustee's "Corporate Trust Office" will be specified in the
Prospectus Supplement, or at such other addresses as the Trustee may designate
from time to time by notice to the Bondholders and the Issuer. With respect to
the presentment and surrender of Bonds for final payment of principal in
retirement thereof on any Payment Date, Redemption Date, Special Payment Date or
Special Redemption Date, and with respect to any other presentment and surrender
of such Bonds and for all other purposes, such Bonds may be presented at the
Corporate Trust Office of the Trustee or at the office of the Issuer's Paying
Agent, which will be specified in the Prospectus Supplement.
THE TRUST AGREEMENT
The following summaries describe certain provisions of the Trust
Agreement. Certain terms used below are used with the meanings ascribed to them
in the Trust Agreement.
ASSIGNMENT OF ASSETS
The Company will organize each Trust by causing the Trustee to file a
certificate of trust with respect to such Trust in the appropriate offices in
the State of Delaware. Thereafter, the Company or one of its affiliates will
sell, transfer, convey and assign to the Trustee all right, title and interest
of the Company or such affiliate in the Underlying Assets to be included in the
Trust for a Series (other than any of the Underlying Assets to be acquired by
the Trust directly from third parties (e.g., Swap Agreements) ("Directly
Acquired Assets")). Such sale, transfer, conveyance and assignment will include
all principal and interest due on or with respect to the Underlying Securities
after the date specified in the related Series Supplement. Such sale, transfer,
conveyance and assignment will be in consideration either for the Trust
Certificates or for cash in an amount equal to the net proceeds realized by the
Trust upon the sale of the Trust Certificates to investors, less any amounts
paid by the Trust for Directly Acquired Assets. The Trustee will, concurrently
with such assignment, execute and deliver the Trust Certificates. Each
Underlying Asset will be identified in an Asset Schedule in the related Series
Supplement. Such Asset Schedule will specify with respect to each Underlying
Security: the original principal amount and unpaid principal balance; the
current interest rate; the scheduled payments of principal and interest; the
maturity date of the related obligation; if the Underlying Security is an
adjustable rate Underlying Security, the lifetime interest rate cap, if any, and
the Index; and, if the related obligation has other than fixed scheduled
payments and level amortization, the terms thereof.
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The Company or one of its affiliates or designees shall, in connection
with each sale, transfer, conveyance and assignment of Underlying Assets to a
Trust, be deemed to have represented to the Trustee that the Underlying Assets
transferred by it in connection therewith are transferred free and clear of any
right, charge, security interest, lien, pledge, encumbrance or claim of it
(other than the right to have such Underlying Assets held in trust by the
Trustee under the Trust Agreement and to have one or more Trust Certificates
issued to evidence ownership of such Underlying Assets and the other rights and
claims with respect to such Underlying Assets, the proceeds thereof and such
Trust Certificates as provided for in the Trust Agreement).
The Company's only source of funds to effect any cure, repurchase or
substitution will be through the enforcement of the corresponding obligations of
the seller of such Underlying Assets. See "Risk Factors".
REPORTS TO TRUST CERTIFICATEHOLDERS
Unless otherwise specified in the Prospectus Supplement related to a
Series, the Trustee will prepare and forward to each Trust Certificateholder on
each Payment Date (whether or not such Trust Certificateholder receives a
payment on such date), or as soon thereafter as is practicable, a statement
setting forth, to the extent applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution
allocable to principal on the Underlying Assets, separately identifying the
aggregate amount of any redemptions or prepayments included therein;
(ii) with respect to a Series, the amount of such distribution
allocable to interest on the Underlying Assets;
(iii) the aggregate outstanding principal balance of the
Underlying Securities as of the opening of business on the immediately
following Due Date, after giving effect to distributions allocated to
principal reported under (i) above and the payment made on the Due Date
immediately preceding such Payment Date;
(iv) the aggregate outstanding principal amount of the Trust
Certificates of such Series as of the immediately following Due Date, after
giving effect to distributions allocated to principal reported under (i)
above and the payment made on the Due Date immediately preceding such
Payment Date;
(v) in the case of Variable Rate Trust Certificates, the Variable
Interest Rate applicable to the distribution being made;
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(vi) with respect to Accrual Trust Certificates prior to the
Accrual Termination Date, in addition to the information specified in (i)
above, the amount of interest accrued on such Trust Certificates during the
related Interest Accrual Period and added to the Compound Value thereof;
(vii) if applicable, the amount of any shortfall (i.e., the
difference between the aggregate amounts of principal and interest which
Trust Certificateholders would have received if there were sufficient
Available Funds to distribute and the amounts actually distributed);
(viii) if applicable, the number and aggregate principal
balances of Underlying Assets delinquent for (a) two consecutive payments
and (b) three or more consecutive payments, as of the close of the business
on the Determination Date to which such distribution relates;
(ix) in the case of any Underlying Enhancement described in the
related Prospectus Supplement, the amount of coverage of such credit
support as of the close of business on the applicable Payment Date;
(x) in the case of any Series which includes Subordinated Trust
Certificates, the subordinated amount, if any, determined as of the related
Payment Date and if the distribution to the Holders of Senior Trust
Certificates is less than their required distribution, the amount of the
shortfall;
(xi) the amount of any withdrawal from any applicable Reserve
Fund included in amounts actually distributed to Trust Certificateholders
and the remaining balance of each Reserve Fund, if any, on such Payment
Date, after giving effect to distributions made on such date; and
(xii) such other information as may be specified in the Trust
Agreement.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will furnish to each Trust Certificateholder of
record at any time during such calendar year: (A) the aggregate of amounts
reported pursuant to (i) through (iii), (vi), (vii) and (xi) above for such
calendar year and (B) such other information specified in the Trust Agreement to
enable Trust Certificateholders to prepare their tax returns, including the
amount of original issue discount accrued on the Trust Certificates, if
applicable. Information in the Payment Date and annual reports provided to the
Trust Certificateholders will not have been examined and reported upon by an
independent public accountant.
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EVENT OF DEFAULT
An Event of Default under the Trust Agreement for each Series occurs
if an Underlying Issuer, provider of Underlying Enhancement or a Swap Agreement
counterparty defaults on a payment required to be made by it with respect to any
Underlying Asset.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs under the Trust Agreement for a Series,
the Trustee for such Series will have the right to take action to enforce its
rights and remedies and to protect and enforce the rights and remedies of the
Trust Certificateholders of such Series, and Holders of Trust Certificates
evidencing not less than a majority of the Aggregate Outstanding Principal of
the Trust Certificates for such Series (subject to any applicable terms of
subordination among the Classes thereof) may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee. However,
the Trustee will not be under any obligation to pursue any such remedy unless
such Trust Certificateholders have offered the Trustee satisfactory security or
indemnity against the cost, expenses and liabilities which may be incurred by
the Trustee therein or thereby. Also, the Trustee may decline to follow any
such direction if the Trustee determines that the action or proceeding so
directed may not lawfully be taken or is in conflict with the Trust Agreement.
No Trust Certificateholder of a Series, solely by virtue of such
Holder's status as a Trust Certificateholder, will have any right under the
Trust Agreement for such Series to institute any proceeding with respect to the
Trust Agreement, unless (i) the Holders of Trust Certificates evidencing not
less than 25% of the Aggregate Outstanding Principal of the Trust Certificates
for such Series have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity, (ii) the Trustee for 60 days has neglected or refused to
institute any such proceeding and (iii) no direction inconsistent with such
written request has been given by Holders of a majority of the aggregate
outstanding principal amount of the Securities of such Series.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or
trust company named as the Trustee for each Series of Trust Certificates will be
set forth in the related Prospectus Supplement. The entity serving as Trustee
may have normal banking relationships with the Company. In addition, for the
purpose of meeting the legal requirements of certain local jurisdictions, the
Trustee will have the power to appoint co-trustees or separate trustees of all
or any part of the Trust relating to a Series of Trust Certificates. In the
event of such appointment, all rights, powers, duties and obligations conferred
or imposed upon the Trustee by the Trust Agreement relating to such Series will
be conferred or imposed upon the Trustee and each such separate trustee or co-
trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations
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solely at the direction of the Trustee. The Trustee may also appoint agents to
perform any of the responsibilities of the Trustee, which agents shall have the
rights, powers, duties and obligations of the Trustee conferred on them by such
appointment; provided, however, that the Trustee will continue to be responsible
for its duties and obligations under the Trust Agreement.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency
of the Trust Agreement, the Trust Certificates or any Underlying Asset or
related documents. If no Event of Default (as defined in the related Trust
Agreement) has occurred, the Trustee is required to perform only those duties
specifically required of it under the Trust Agreement.
The Trustee may be held liable for its own negligent action or failure
to act, or for its own willful misconduct or bad faith; provided, however, that
the Trustee will not be liable for any action or any failure to act by it in
reliance upon the advice of or information from legal counsel or accountants or
any other person believed by it in good faith to be competent to give such
advice or information. The Trustee may rely and shall be protected in acting
upon any written notice, request, direction or other document believed by it to
be genuine and to have been signed or presented by the proper party or parties.
RESIGNATION OF THE TRUSTEE
The Trustee may, upon written notice to the Company, resign at any
time, in which event the Company may appoint a successor Trustee. If no
successor Trustee has been appointed and has accepted the appointment within 90
days after the Trustee has given such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for appointment of a
successor Trustee. The Trustee may at any time be removed with respect to one
or more Series by the Company with or without cause, or by Holders of a majority
of the Aggregate Outstanding Principal of the Certificates of any Series with
cause, upon 30 days' written notice of such removal delivered to the Trustee
(and in the case of removal by Holders, to the Company), such removal to take
effect only upon the appointment of a qualified successor Trustee and its
acceptance of such appointment. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee.
AMENDMENT OF TRUST AGREEMENT
The Trust Agreement for each Series of Trust Certificates may be
amended by the Company and the Trustee with respect to such Series, without
notice to or consent of the Trust Certificateholders (i) to cure any defect,
omission, inconsistency or ambiguity in the Trust Agreement or in the
Certificates of any Series, (ii) add to the covenants and agreements of the
Trustee or the Company or to surrender any right or power therein conferred upon
the Company, (iii) effectuate the assignment of the Trustee's rights and duties
to a qualified successor as provided therein, (iv) comply with the Securities
Act, the
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Trust Indenture Act of 1939, the Investment Company Act or the Code, or
(v) modify, alter, amend or supplement the Trust Agreement in any other respect
which is not adverse in any material respect to any Certificateholders of any
Series. Any such amendment pursuant to clause (v) of the preceding sentence
will be deemed not to adversely affect in any material respect the interests of
any Trust Certificateholder if the Trustee receives written confirmation from
each Rating Agency rating such Trust Certificates that such amendment will not
cause such Rating Agency to reduce the then current rating thereof. The Trust
Agreement for each Series also may be amended by the Trustee and the Company
with respect to such Series with the consent of the Holders possessing not less
than a majority of the Aggregate Outstanding Principal of the Trust Certificates
of such Series affected thereby, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Trust
Agreement with respect to such Series or modifying in any manner the rights of
Trust Certificateholders of such Series; provided, however, that no such
amendment may (a) reduce the amount or delay the timing of payments on any Trust
Certificate or (b) reduce the aforesaid percentage of aggregate outstanding
principal amount of Trust Certificates of each Class, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
100% of the aggregate outstanding principal amount of each Class of Trust
Certificates affected thereby.
PASS THROUGH OF VOTING RIGHTS
The Trustee shall seek instructions from Trust Certificateholders of a
Series in connection with any vote, consent or waiver required in respect of any
related Underlying Asset. Except as otherwise provided in the Prospectus
Supplement, the Trustee shall direct any action or cast any vote as a holder of
such Underlying Asset in proportion to the Aggregate Outstanding Principal of
Trust Certificates held by Trust Certificateholders of such Series taking the
corresponding position. If applicable, the Prospectus Supplement will specify
whether and under what circumstances voting in such cases will be by Class.
LIST OF TRUST CERTIFICATEHOLDERS
Three or more Trust Certificateholders of record of a Series may, by
written application to the Trustee, request access to the list maintained by the
Trustee of Trust Certificateholders of such Series for purposes of communicating
with other Trust Certificateholders with respect to their rights under the Trust
Agreement or under the Trust Certificates for such Series, which request shall
be accompanied by a copy of the communication which such Trust
Certificateholders propose to transmit. The Trustee may choose not to give such
Trust Certificateholders access to the list of Trust Certificateholders if it
agrees to mail the communication on behalf of the requesting Trust
Certificateholders, at their expense, to all Trust Certificateholders. If the
Trustee objects to the proposed mailing on the grounds that it would be contrary
to the best interests of the Trust Certificateholders or a violation of
applicable law, it may decline to make the proposed mailing.
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MEETINGS OF TRUST CERTIFICATEHOLDERS
The Trust Agreement will not provide for the holding of any annual or
other meeting of Trust Certificateholders.
TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations created by the Trust Agreement for a Series will terminate upon the
distribution to Trust Certificateholders of all amounts distributable to them
pursuant to such Trust Agreement after the later of (i) the final payment or
other liquidation of the last Underlying Asset remaining in the Trust for such
Series and (ii) the date specified by the Optionholder in its notice to the
Trustee as the date upon which it will exercise the Optional Call Right. In no
event, however, will the trust created by the Trust Agreement continue beyond
the expiration of 21 years from the death of the last survivor of certain
persons identified in the Trust Agreement. For each Series, the Trustee will
give written notice of termination of the Trust Agreement to each Trust
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Trust Certificates at an office or agency specified in
the notice of termination. If so provided in the related Prospectus Supplement
for a Series, the Company or another entity may effect an optional termination
of the Trust or repurchase all or certain Classes of Trust Certificates of a
Series under circumstances described in such Prospectus Supplement. See "The
Securities - Optional Termination of Trust", "- Optional Repurchases of Trust
Certificates", "- Optional Call Right" and "- Other Repurchases of Trust
Certificates".
THE ISSUER
GENERAL
The Issuer of a Series of Securities will be either the Company or a
Trust.
THE COMPANY
The Company is a special-purpose Delaware corporation organized for
the purpose of (i) acting as originator, settlor or depositor with respect to
Trusts formed to issue Securities, (ii) issuing securities (including the
Securities and other securities backed by underlying obligations of various
types) and (iii) acting as settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not expected that the Company
will have any significant assets other than the Underlying Assets and other
assets backing the issuance of other securities. The Company is an affiliate of
CSFB. Neither CSFB nor any of their affiliates (other than, to the extent
specified in the related Prospectus Supplement with respect to any Series, the
Company) has guaranteed, will guarantee or is or will be otherwise obligated
with respect to any Series of
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Securities. The principal office of the Company is located in 55 East 52nd
Street, New York, New York 10055. Its telephone number is (212) 909-2000.
The Certificate of Incorporation of the Company provides that the
Company may conduct any lawful activities necessary or incidental to the
issuance and sale of one or more Series of Bonds and to serve as depositor of
one or more trusts that may issue and sell Bonds or Trust Certificates.
If so specified in the related Prospectus Supplement for a Series of
Bonds, the related Underlying Assets may be transferred by the Issuer to a
trust, subject to the obligations of the Bonds of such Series, thereby relieving
the Issuer of its obligations with respect to such Bonds.
TRUSTS
Each Trust will be a Delaware business trust created pursuant to a
Series Supplement to the Trust Agreement. Under the terms of each Series
Supplement, the Company or one of its affiliates will convey to the Trustee
Underlying Assets to secure one or more Series in return for certificates or
other instruments evidencing beneficial ownership of the Trust. The Company or
such affiliate may in turn sell or assign the certificates of beneficial
interest to another entity or entities, including affiliates of the Company.
The Trust will pledge the Underlying Assets to the Trustee under the
related Indenture as security for a Series of Bonds. The Trustee will hold such
Underlying Assets as security only for that Series, and Holders of such Series
will be entitled to the equal and proportionate benefits of such security,
subject to the express subordination of certain Classes thereof, as if the same
had been granted by a corporate issuer.
Each Trust Agreement will provide that the related Trust may not
conduct any activities other than those related to the issuance and sale of the
particular Series and ownership of Underlying Securities.
ADMINISTRATOR
If so specified in the related Prospectus Supplement, the Issuer will
enter into an administration agreement with an Administrator acceptable to the
Rating Agencies rating the applicable Series of Securities pursuant to which
advisory, administrative, accounting and clerical services will be provided to
the Issuer. The Trustee may serve as the Administrator. In addition, under the
Indenture or Trust Agreement, as applicable, the Issuer is responsible for
certain administrative and accounting matters relating to the Securities. It is
intended that the Administrator will perform these services on behalf of the
Issuer, and amounts payable with respect to such services will be subordinated
to the Issuer's obligations to pay principal and interest to the Bondholders or
Trust Certificateholders.
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FISCAL YEAR
The fiscal year of each Issuer will end on December 31, unless
otherwise specified in the applicable Prospectus Supplement.
USE OF PROCEEDS
The Issuer will apply all or substantially all the net proceeds from
the sale of each Series offered hereby and by the related Prospectus Supplement
to purchase from the Company or one of its affiliates the Underlying Assets
underlying such Series simultaneously with the issuance and sale of such
Securities. The proceeds may also be used to repay indebtedness that has been
incurred to acquire Underlying Assets to be pledged by the Issuer as security
for the Securities, to establish the Reserve Funds, if any, for the Series and
to pay costs of structuring, guaranteeing and issuing the Securities or for
other purposes set forth in the related Prospectus Supplement. If so specified
in the related Prospectus Supplement, the purchase of the Underlying Assets for
a Series may be effected by an exchange of Securities with the seller of such
Underlying Assets.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Any bearer Securities will be issued in compliance with United States
federal income tax laws and Treasury Regulations applicable at the time of
issuance. Under current law, bearer Securities may not be offered or sold
during a restricted period specified under the Treasury Regulations (generally,
a 40 day period beginning on the closing date of a Security) in the United
States or its possessions or to United States Persons other than to (a) the
United States office of (i) an international organization (as defined in Section
7701(a)(18) of the Code), (ii) a foreign central bank (as defined in Section 895
of the Code), or (iii) any person offering or selling bearer securities during
the restricted period that is a "Distributor" within the meaning of Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(4) pursuant to a written contract with
the Issuer or with another Distributor, that purchases bearer Securities for
resale or for its own account and agrees to comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Code, or (b) the foreign branch of a
United States financial institution purchasing for its own account or for
resale, which institution agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code. In addition, a sale of a bearer Security
may be made during the restricted period to a United States Person who acquired
and holds the bearer Security on the certification date (as described below)
through a foreign branch of a United States financial institution that agrees to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code.
Any Distributor offering or selling bearer Securities during the restricted
period must agree not to offer or sell bearer Securities in the United States or
its possessions or to United States Persons (except as discussed above) and must
employ procedures reasonably designed to ensure that its employees or agents
directly engaged in selling bearer Securities are aware of these restrictions.
In addition, on the earlier of the date of the first actual payment of interest
or the date of delivery in definitive form (the "certification date"), the owner
of a Security must provide a written certificate
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to the related Issuer to the effect that on the certificate date, such Security
is owned by (i) a person that is not a United States Person, (ii) a United
States Person described in Treasury Regulation Section 1.163-5(c)(2)(i)(D)(6),
or (iii) a financial institution for purposes of resale during the restricted
period. A financial institution described in clause (iii) of the preceding
sentence must certify in addition that it has not acquired the Certificate for
purpose of resale directly or indirectly to a United States Person or to a
person within the United States or its possessions.
Bearer Securities and their interest coupons will bear the following
legend: "Any United States person who holds this obligation will be subject to
limitations under the United States income tax laws, including the limitations
provided in sections 165(j) and 1287(a) of the Internal Revenue Code".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OVERVIEW
The following is a general discussion of certain of the anticipated
material United States federal income tax consequences of the purchase,
ownership and disposition of Securities. Because the income tax consequences of
an investment in any Security will depend on the terms of the Security, the
characterization of the Issuer for federal income tax purposes and the
Underlying Assets relating to such Security, the discussion herein is limited to
a discussion of certain tax consequences of several common types of
transactions. The Prospectus Supplement for each Series of Securities will
describe additional consequences that relate to the specific Securities issued
pursuant thereto. Accordingly, this discussion should only be read in
connection with the discussion under "Certain Federal Income Tax Consequences"
in the Prospectus Supplement to which investors are referred. The discussion
below does not apply to bearer Securities or Securities denominated in (or
representing interests in assets denominated in) a currency other than the
United States dollar. Further, because of the transaction-specific nature of
investing in Securities that represent interests in Notional Principal
Contracts, other hedging instruments or other Swap Agreements this discussion
addresses only certain of the consequences arising from such an investment.
Certain federal income tax consequences of investing in these types of
Securities will be addressed in the related Prospectus Supplement.
The discussion below does not purport to address all federal income
tax consequences that may be applicable to particular categories of investors,
some of which may be subject to special rules (including pension plans or other
tax-exempt investors, banks, thrifts, insurance companies, real estate
investment trusts, regulated investment companies, investors that are not United
States Persons, dealers in securities or currencies and persons so treated for
federal income tax purposes, persons whose functional currency (as defined in
Section 985 of the Code) is other than the United States dollar, and persons who
hold Securities as part of a straddle, hedging or conversion transaction). The
discussion is based on the Code, legislative history, Treasury Regulations,
cases, administrative rulings and other authorities that are currently in
effect, or in the case of certain Treasury Regulations, proposed or temporary,
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all of which, particularly proposed Treasury Regulations, are subject to change
or differing interpretations. Any such change (or differing interpretations)
may apply retroactively. Furthermore, the discussion does not address any of
the state, local and foreign tax consequences of the purchase, ownership and
disposition of the Securities. Investors should consult their own tax advisors
in determining the federal, state and local income and other tax consequences to
them of the purchase, ownership, and disposition of Securities.
The following summary is based upon current provisions of the Code,
the Treasury regulations promulgated thereunder and judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
Each Trust will be provided with an opinion of Sidley & Austin ("Federal Tax
Counsel") regarding certain federal income tax matters. An opinion of Federal
Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any
of the issues discussed below will be sought from the IRS.
In addition to the federal income tax consequences described herein,
potential investors should consider the state, local and foreign income tax
consequences of the acquisition, ownership and disposition of the Securities.
State, local and foreign income tax laws may differ substantially from the
corresponding federal income tax law, and this discussion does not purport to
describe any aspect of the income tax laws of any state, local or foreign
jurisdictions. Therefore, potential investors should consult their own tax
advisers with respect to the various state, local and foreign tax consequences
of an investment in Securities.
References in this section to a "Securityholder" and "Holder" are
references to the beneficial owner of a Security.
TAXATION OF INCOME FROM BONDS
Treatment of the Bonds as Indebtedness.
The Issuer will agree, and the Bondholders will agree by their
purchase of Bonds, to treat the Bonds as debt for federal tax purposes. Counsel
to the Issuer specified in the related Prospectus Supplement will advise the
Issuer that the Bonds will be classified as debt for federal income tax
purposes. If, contrary to the opinion of such counsel the IRS successfully
asserted that one or more of the Bonds did not represent debt for federal income
tax purposes, the Bonds might be treated as equity interests in the Issuer. If
so treated, in the case of Bonds issued by a Trust, the Issuer might be taxable
as a corporation, and the resulting taxable corporation would not be able to
reduce its taxable income by deductions for interest expense on Bonds
recharacterized as equity. Alternatively, in the case of Bonds issued by a
Trust, the Trust might be treated as a publicly traded partnership that would be
taxable as a corporation unless it met certain qualifying income tests.
Treatment of Bonds issued by a Trust as equity interests in a partnership could
have adverse tax consequences to certain holders, even if the Trust were not
treated as a publicly traded partnership taxable as a corporation. For example,
income allocable to certain tax-exempt entities (including pension funds) may be
"unrelated business taxable income", income to foreign holders generally would
be subject to U.S.
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federal income tax and U.S. federal tax return filing and withholding
requirements, and individual holders might be subject to certain limitations on
their ability to deduct their share of Trust expenses. The discussion below
assumes that the Bonds will be characterized as debt for federal income tax
purposes.
Interest Income on the Bonds.
The taxation of interest on a Bond will depend on whether the interest
constitutes "qualified stated interest" (as defined below). Interest on a Bond
that constitutes qualified stated interest is includible in a Bondholder's
income as ordinary interest income when actually or constructively received, if
such Bondholder uses the cash method of accounting for federal income tax
purposes, or when accrued, if such Bondholder uses an accrual method of
accounting for federal income tax purposes. Interest that does not constitute
qualified stated interest is included in a Bondholder's income under the rules
described below under "--Original Issue Discount", regardless of such
Bondholder's method of accounting, or, in certain circumstances, under rules
governing contingent payments under which the interest is recognized as ordinary
gross income only as the interest payments become fixed or are received,
depending on such Bondholder's method of accounting. Notwithstanding the
foregoing, interest that is payable on a Bond with a fixed maturity of one year
or less from its issue date is included in a Bondholder's income under the rules
described below under "--Short Term Bonds".
Definition of Qualified Stated Interest.
Qualified stated interest is stated interest that is unconditionally
payable, or that will be constructively received, in cash or in property (other
than debt instruments of the issuer) at least annually at a single fixed rate.
Qualified stated interest also includes stated interest that is
payable on a Bond at a variable interest rate, provided that the (i) Bond
qualifies as a "variable rate debt instrument" ("VRDI") and (ii) such stated
interest is at a single "qualified floating rate" or "objective rate" (each as
defined below) and is unconditionally payable, or will be constructively
received, in cash or in property (other than debt instruments of the issuer) at
least annually.
Definition of a Variable Rate Debt Instrument. A Bond is a VRDI if
all of the three following conditions are met.
First, the issue price of the Bond must not exceed the total
noncontingent principal payments by more than an amount equal to the lesser of
(i) .015 multiplied by the product of the total noncontingent principal payments
and the number of complete years to maturity from the issue date (or, in the
case of a Bond that is an "installment obligation", its weighted average
maturity) and (ii) 15% of the total noncontingent principal payments. An
installment obligation is a debt instrument that provides for payment of any
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amount other than qualified stated interest before maturity. The issue price
and issue date of a Bond will be the first price and the first settlement date,
respectively, at which a substantial amount of the Bonds in the issuance that
includes such Bond is sold for money (excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers).
Second, the Bond must provide for stated interest (compounded or paid
at least annually) at (a) one or more qualified floating rates, (b) a single
fixed rate and one or more qualified floating rates, (c) a single objective rate
or (d) a single fixed rate and a single objective rate that is a "qualified
inverse floating rate" (as defined below).
Third, the Bond must provide that a qualified floating rate or
objective rate in effect at any time during the term of the instrument is set at
the current value of that rate. A current value is the value of the rate on any
day that is no earlier than three months prior to the first day on which that
value is in effect and no later than one year following that first day.
Definition of a Qualified Floating Rate. Subject to certain
exceptions, a variable rate of interest is a qualified floating rate if
variations in the value of the rate can reasonably be expected to measure
contemporaneous fluctuations in the cost of newly borrowed funds in the currency
in which the Bond is denominated. A variable rate will be considered a
qualified floating rate if the variable rate equals (i) the product of an
otherwise qualified floating rate an a fixed multiple that is greater than zero
but not more than 1.35 or (ii) an otherwise qualified floating rate (or the
product described in clause (i)) plus or minus a fixed rate. If the variable
rate equals the product of an otherwise qualified floating rate and a single
multiplier greater than 1.35, however, such rate will generally constitute an
objective rate, described more fully below. A variable rate will not be
considered a qualified floating rate if the variable rate is subject to a cap,
floor, governor (i.e., a restriction on the amount of increase or decrease in
----
the stated interest rate) or similar restriction that is reasonably expected as
of the issue date to cause the yield on the Bond to be significantly more or
less than the expected yield determined without the restriction (other than a
cap, floor or governor that is fixed throughout the term of the Bond).
Definition of an Objective Rate. Subject to certain exceptions, an
objective rate is a rate (other than a qualified floating rate) that is
determined using a single fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates where each rate would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more items of personal property that are
actively traded (other than the stock or the debt of the issuer or certain
related parties) or (iv) a combination of rates described in the three foregoing
clauses. For purposes of clause (iii) of the preceding sentence, a foreign
currency for which there is an active interbank market is presumed to be
actively traded. Notwithstanding the first sentence of this paragraph, a rate
on a debt instrument is not an objective rate if it is reasonably expected that
the average value of the rate during the first half of the debt instrument's
term will be either
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significantly less than or significantly greater than the average value of the
rate during the final half of the debt instrument's term. The IRS may designate
rates other than those described in the first sentence of this paragraph that
will be treated as objective rates. As of the date hereof, no such other rates
have been designated.
An objective rate described in the preceding paragraph is a "qualified
inverse floating rate" if (a) the rate is equal to a fixed rate minus a
qualified floating rate and (b) the variations in the rate can reasonably be
expected to reflect inversely contemporaneous variations in the cost of newly
borrowed funds (disregarding any caps, floors, governors or similar restrictions
that would not, as described above, cause a rate to fail to be a qualified
floating rate). If interest on a Bond is stated at a fixed rate for an initial
period of less than one year, followed by a variable rate that is either a
qualified floating rate or an objective rate for a subsequent period, and the
value of the variable rate on the issue date is intended to approximate the
fixed rate, the fixed rate and the variable rate together constitute a single
qualified floating rate or objective rate.
On December 16, 1994, proposed Treasury Regulations (the "1994
Proposed Regulations") were issued that would (among other things) expand the
definition of an objective rate. Under the 1994 Proposed Regulations, an
objective rate would be a rate that is determined using a single fixed formula
that is based on objective financial or economic information that is neither
within the control of the issuer (or a related party) nor unique to the
circumstances of the issuer (or a related party). Examples of rates that should
qualify under the 1994 Proposed Regulations include a rate based on the consumer
price index or on the price level of actively traded property. The definition
of objective rate under the current Treasury Regulations (as discussed above) is
generally limited to rates derived by formula from qualified floating rates and
rates based on the yield or change in price (rather than the price itself) of
actively traded property, such as stocks, bonds and commodities, and
combinations of these rates; in contrast, the definition of an objective rate
under the 1994 Proposed Regulations is not so limited. The definition of
objective rate in the 1994 Proposed Regulations is proposed to be effective for
debt instruments issued on or after April 4, 1994.
Taxation of Original Issue Discount -- General Rules for Fixed Rate Bonds
Definition of OID. Original issue discount ("OID") is the excess of a
Bond's "stated redemption price at maturity" over its "issue price". A Bond's
stated redemption price at maturity is the sum of all payments provided by the
Bond other than payments of qualified stated interest. Thus, any payments
provided by a Bond that are not payments of qualified stated interest are
included in the Bond's stated redemption price at maturity, whether such
payments are designated as interest or as principal.
Holders of Bonds with OID that mature more than one year from their
issue date generally will be required to include such OID in income as it
accrues in accordance with the constant yield method described below, before the
receipt of the related
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cash payments. A Holder's tax basis in a Bond is increased by each accrual of
OID and decreased by each payment other than a payment of qualified stated
interest.
If the amount of OID with respect to a Bond is less than a specified
de minimis amount, the amount of OID is treated as zero. The de minimis amount
is an amount equal to one quarter of one percent multiplied by the product of
the stated redemption price at maturity and the number of complete years to
maturity. In the case of a Bond that is an installment obligation, the de
minimis amount is determined by reference to the weighted average maturity of
the Bond rather than the number of complete years to maturity.
Treatment of De Minimis OID. If a Bond has de minimis OID, all
payments of stated interest are treated as payments of qualified stated
interest. As discussed above, in general, qualified stated interest is
includible in a Holder's income according to such Holder's regular method of
accounting (i.e., the cash method or an accrual method). Any de minimis OID
----
that is not included in payments of stated interest is included in income as
capital gain as principal payments are made. The amount includible equals the
product of the total amount of de minimis OID and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Bond.
Inclusion of OID in Income. The general rules for including OID on a
Bond in the income of a Holder are as follows. These general rules apply to
Bonds bearing a fixed rate but do not apply to Bonds on which interest accrues
based on an Index. The special rules that apply to this type of Bonds are
described below under "Taxation of OID on Variable Interest Bonds".
The amount of OID includible in the income of a Holder for any taxable
year is determined under the constant yield method, in four steps.
In the first step, the "yield to maturity" of the Bond is computed.
The yield to maturity is the discount rate that, when used in computing the
present value of all interest and principal payments to be made under the Bond
(including payments of qualified stated interest) produces an amount equal to
the issue price of the Bond. The yield to maturity is constant over the term of
the Bond and, when expressed as a percentage, must be calculated to at least two
decimal places.
In the second step, the term of the Bond is divided into "accrual
periods". Accrual periods may be of any length and may vary in length over the
term of the Bond, provided that each accrual period is no longer than one year
and that each scheduled payment of principal or interest occurs either on the
final day of an accrual period or on the first day of an accrual period.
In the third step, the total amount of OID on the Bond is allocated
among accrual periods. In general, the OID allocable to an accrual period
equals the product of
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the "adjusted issue price" of the Bond at the beginning of the accrual period
and the yield to maturity of the Bond, less the amount of any qualified stated
interest allocable to the accrual period. The adjusted issue price of a Bond at
the beginning of the first accrual period is its issue price. Thereafter, the
adjusted issue price of the Bond is its issue price, increased by the amount of
OID previously includible in the gross income of any Bondholder and decreased by
the amount of any payment previously made on the Bond other than a payment of
qualified stated interest. For purposes of computing the adjusted issue price of
a Bond, the amount of OID previously includible in the gross income of any
Bondholder is determined without regard to "premium" and "acquisition premium",
as those terms are defined below.
In the fourth step, the "daily portions" of OID are determined. The
daily portions of OID are determined by allocating to each day in an accrual
period its ratable portion of the OID allocable to the accrual period.
A Bondholder includes in income in any taxable year the daily portions
of OID for each day during the taxable year that such Holder held Bonds. In
general, under the constant yield method described above, Bondholders generally
will be required to include in income increasingly greater amounts of OID in
successive accrual periods.
Taxation of OID on Variable Interest Bonds
The taxation of OID on a Variable Interest Bond will depend on whether
the Bond is a VRDI, as that term is defined above. The applicable Prospectus
Supplement will state whether such a Bond qualifies as a VRDI.
Bonds that are VRDIs. The tax treatment of a Variable Interest Bond
that is a VRDI will depend on whether the VRDI provides for annual interest at a
single variable rate. A VRDI is considered to provide for annual interest at a
single variable rate if it provides for stated interest at a single qualified
floating rate or objective rate that is unconditionally payable in cash or in
property (other than debt instruments of the issuer), or that will be
constructively received under general principles of federal income tax law, at
least annually.
VRDIs that Provide for Interest at a Single Variable Rate. In the
case of a VRDI that provides for interest at a single variable rate, the amount
of OID includible in income during a taxable year, if any, is determined under
the rules applicable to fixed rate debt instruments by assuming that the
variable rate is a fixed rate. Those rules are set forth above under "Taxation
of Original Issue Discount -- General Rules for Fixed Rate Bonds". In the case
of a qualified floating rate or a qualified inverse floating rate, the assumed
fixed rate is the value, as of the issue date, of the qualified floating rate or
qualified inverse floating rate. In the case of an objective rate (other than a
qualified inverse floating rate), the assumed fixed rate is a fixed rate that
reflects the yield that is reasonably expected for the debt instrument.
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The 1994 Proposed Regulations would extend the rules described in the
preceding paragraph to the accrual of qualified stated interest on a VRDI that
provides for interest at a single variable rate. Under the 1994 Proposed
Regulations, which would be effective for debt instruments issued on or after
April 4, 1994, the amount of qualified stated interest that accrues during an
accrual period on such a VRDI is determined by assuming that the VRDI bears
interest at a fixed rate determined in the manner described in the preceding
paragraph. Qualified stated interest allocable to an accrual period is
increased (or decreased) if the interest actually paid during an accrual period
exceeds (or is less than) the interest assumed to be paid during the accrual
period.
Other VRDIs. If a Variable Interest Bond that is a VRDI does not
provide for interest either at a single variable rate or at a fixed rate, the
amount of interest and OID accruals are determined by constructing an equivalent
fixed rate debt instrument, using the following four steps.
The first step is to determine the fixed rate substitute for each
variable rate provided by the Variable Interest Bond. The fixed rate substitute
for each qualified floating rate provided by the Variable Interest Bond is the
value of that qualified floating rate on the issue date. If the Bond provides
for two or more qualified floating rates with different intervals between
interest adjustment dates (for example, the 30-day Commercial Paper Rate and
quarterly LIBOR), the fixed rate substitutes are based on intervals that are
equal in length (for example, the 90-day Commercial Paper Rate and quarterly
LIBOR, or the 30-day Commercial Paper Rate and monthly LIBOR). The fixed rate
substitute for an objective rate that is a qualified inverse floating rate is
the value of the qualified inverse floating rate on the issue date. The fixed
rate substitute for an objective rate that is not a qualified inverse floating
rate is a fixed rate that reflects the yield that is reasonably expected for the
Variable Interest Bond.
The second step is to construct an equivalent fixed rate debt
instrument that has terms that are identical to those provided under the
Variable Interest Bond, except that the equivalent fixed rate debt instrument
provides for the fixed rate substitutes determined in the first step, in lieu of
the qualified floating rates or objective rates provided by the Variable
Interest Bond.
The third step is to determine the amount of qualified stated interest
and OID for the equivalent fixed rate debt instrument under the rules described
above for fixed rate Bonds. These amounts are taken into account as if the
Bondholder held the equivalent fixed-rate debt instrument.
The fourth step is to make appropriate adjustments for the actual
values of the variable rates. In this step, qualified stated interest or OID
allocable to an accrual period is increased (or decreased) if the interest
actually accrued or paid during the accrual period exceeds (or is less than) the
interest assumed to be accrued or paid during the accrual period under the
equivalent fixed rate debt instrument.
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Bonds that are not VRDIs. The law applicable to Variable Interest
Bonds that are not VRDIs ("contingent debt instruments") is unclear as of the
date hereof. Set forth below are the rules that would apply to contingent debt
instruments under the 1994 Proposed Regulations.
In the case of a contingent debt instrument issued for cash, the 1994
Proposed Regulations require the issuer to construct a projected schedule of
payments under the instrument. The projected payments consist of any
noncontingent payments provided by the debt instrument and the projected amounts
of the contingent payments. Interest income is then accrued on the debt
instrument by the Bondholder under the general rules applicable to OID
obligations, on the assumption that the projected amounts will actually be paid.
Whenever a contingent payment is fixed at the projected amount, no further
adjustments are required. Whenever a contingent payment is fixed at an amount
that is above (or below) the projected amount, a positive (or negative)
adjustment must be made with respect to the interest income that has been
previously accrued by the Bondholder.
The 1994 Proposed Regulations refer to this method as the
"noncontingent bond method", because it is based on the construction of a
hypothetical noncontingent bond, the payments on which equal the expected amount
of the contingent payments provided for by the debt instrument in question. The
projected payment schedule established at the issuance of the instrument remains
in place through its life. Consequently, interest accruals with respect to
contingent payments that have not yet been fixed may be higher or lower at any
point in time than they would be if the projected values were to be revised to
take into account current information.
The 1994 Proposed Regulations introduce a distinction between
"quotable contingent payments" and "nonquotable contingent payments". If the
right to a contingent payment is substantially similar to a right to property
for which quotes of forward prices are readily available, the contingent payment
is a quotable contingent payment. If not, it is a nonquotable contingent
payment. To the extent that the debt instrument provides for quotable
contingent payments, the projected payment schedule must be based on quoted
forward prices.
To the extent that the contingent payments are nonquotable, the issuer
must construct the projected payment schedule by determining the projected yield
of the contingent debt instrument and then selecting a projected amount for each
nonquotable contingent payment so that the projected payment schedule produces
this yield and reasonably reflects the relative expected values of the
nonquotable contingent payments. The 1994 Proposed Regulations indicate that
the projected yield should be a reasonable rate for the debt instrument, taking
into account not only the terms of the instrument, but also market conditions
and the creditworthiness of the issuer. The issuer's determination of the
projected payment schedule will be respected unless it is unreasonable. If the
projected payment schedule set by the issuer is unreasonable (or if the issuer
does not provide a projected payment schedule), the Bondholder must set the
projected payment schedule. A
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Bondholder that uses its own projected payment schedule must explicitly disclose
this fact on its income tax return and the reason why such Holder set its own
schedule.
In general, any gain realized by a Bondholder on the sale, exchange or
retirement of a contingent debt instrument is interest income under the 1994
Proposed Regulations. Any loss on a contingent debt instrument accounted for
under the method described in the preceding paragraph is ordinary loss to the
extent it does not exceed such Holder's prior interest inclusions on the
instrument (net of negative adjustments).
The 1994 Proposed Regulations are proposed to become effective for
debt instruments issued on or after the date that is 60 days after the
publication of final Treasury Regulations. In the absence of effective
regulations dealing with such debt instruments, interest should be taken into
account under general principles of federal income tax law. Under such general
principles, interest on such Bonds would be taken into account by a Bondholder
that uses the cash method of accounting when actually or constructively
received, and would be taken into account by a Bondholder that uses an accrual
method of accounting when the right to receive such interest is fixed and the
amount thereof is determinable with reasonable accuracy.
Market Discount
A Bondholder may be subject to the market discount rules of the Code.
If a Bondholder acquires a Bond having a maturity date of more than one year
from the date of its issuance and has a tax basis in the Bond that is, in the
case of a Bond that does not have OID, less than its stated redemption price at
maturity, or, in the case of a Bond that has OID, less than its adjusted issue
price, the amount of such difference is treated as market discount for federal
income tax purposes, unless such difference is less than a specified de minimis
amount. The de minimis amount is 1/4 of one percent of the stated redemption
price at maturity multiplied by the number of complete years to maturity (from
the date of acquisition).
Under the market discount rules of the Code, a Bondholder is required
to treat any principal payment (or, in the case of a Bond that has OID, any
payment that does not constitute a payment of qualified stated interest) on, or
any gain on the sale, exchange, retirement or other disposition of, a Bond as
ordinary income to the extent of the market discount that has not previously
been included in income and is treated as having accrued on such Bond at the
time of such payment or disposition. Thus, partial principal payments are
treated as ordinary income to the extent of market discount that has not
previously been included in income and is treated as having accrued. If such
Bond is disposed of by the Bondholder in certain otherwise nontaxable
transactions, accrued market discount will be includible as ordinary income by
the Bondholder as if such Holder had sold the Bond at its then fair market
value.
In general, the amount of market discount that has accrued is
determined on a ratable basis. A Bondholder may, however, elect to determine
the amount of accrued
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market discount on a constant yield to maturity basis. This election is made on
a bond-by-bond basis and is irrevocable.
With respect to Bonds with market discount, a Bondholder may not be
allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry such Bonds. A
Bondholder may elect to include market discount in income currently as it
accrues, in which case the interest deferral rule set forth in the preceding
sentence will not apply. Such an election will apply to all debt instruments
acquired by the Bondholder on or after the first day of the first taxable year
to which such election applies and is irrevocable without the consent of IRS. A
Bondholder's tax basis in a Bond will be increased by the amount of market
discount included in such Holder's income under such an election.
Premium and Acquisition Premium
If a Bondholder purchases a Bond at a "premium", the Bondholder does
not include any OID in gross income. A Bond is purchased at a premium (or
"amortizable bond premium") if its adjusted basis, immediately after its
purchase by such Holder, exceeds the sum of all amounts payable on the Bond
after the purchase date other than payments of qualified stated interest.
Bondholders may elect to amortize the premium over the remaining term of the
Bond (where such Bond is not callable prior to its maturity date), as a
reduction in the amount of the interest payments otherwise includible in income.
If a Bondholder makes this election, the premium would be allocated among all
the interest payments on the Bond, on the basis of the Bondholder's yield to
maturity, with compounding at the close of each accrual period. A Bondholder
who elects to amortize premium must reduce the tax basis of the Bond by the
amount of the premium amortized in any year. If this election is made with
respect to any Bond, it will also apply to all debt instruments held by the
Bondholder at the beginning of the first taxable year to which the election
applies and to all debt instruments acquired by the Bondholder, and will be
binding for all subsequent taxable years unless the election is revoked with the
consent of the IRS. If a Bond may be called by the Trust prior to maturity
after the Bondholder has acquired it, the amount of amortizable bond premium is
determined with reference to either the amount payable at maturity, or, if it
results in a smaller premium attributable to the period through the earlier call
date, with reference to the amount payable on the earlier call date.
If a Bondholder does not purchase a Bond at a premium, but instead
purchases such Bond at an "acquisition premium", the amount of OID that the
Bondholder includes in gross income is reduced to reflect the acquisition
premium. A Bond is purchased at an acquisition premium if its adjusted basis,
immediately after its purchase is (a) less than or equal to the sum of all
amounts payable on the Bond after the purchase date other than payments of
qualified stated interest and (b) greater than the Bond's adjusted issue price.
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If a Bond is purchased at an acquisition premium, the Bondholder
reduces the amount of OID otherwise includible in income during an accrual
period by a fraction. The numerator of this fraction is the excess of the
adjusted basis of the Bond immediately after its acquisition by the purchaser
over the adjusted issue price of the Bond. The denominator of the fraction is
the excess of the sum of all amounts payable on the Bond after the purchase
date, other than payments of qualified stated interest, over the Bond's adjusted
issue price.
As an alternative to reducing the amount of OID otherwise includible
in income by this fraction, the Bondholder may elect to compute OID accruals by
treating the purchase as a purchase at original issuance and applying the
constant yield method described under "Taxation of Original Issue Discount--
General Rules for Fixed Rate Bonds--Inclusion of OID in Income" above.
Election to Treat All Interest as OID
Treasury Regulations permit an election to accrue all interest,
discount (including de minimis market discount or OID) (reduced by any premium)
in income as interest, based on a constant yield method. If such an election
were to be made with respect to a Bond, the Bondholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Bondholder acquires
during the year of the election or thereafter. Similarly, a Bondholder that
makes this election for a Bond that is acquired at a premium will be deemed to
have made an election to amortize bond premium with respect to all debt
instruments having amortizable bond premium that such Bondholder owns or
acquires. See "-- Premium and Acquisition Premium", above. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Bond is irrevocable.
Optional Call Rights Held by Person Other Than Issuer
If a Series of Bonds provides for an Optional Call Right to purchase
such Bonds, and the Optionholder is a person other than the Issuer of that
Series of Bonds, Holders of such Series should be treated as having sold a call
option with respect to the Bonds. The Holders should be treated for federal
income tax purposes as though they had received an option premium equal to the
fair market value of the call right (the "deemed option premium") and had paid
this amount (in addition to the amount actually paid) as consideration for the
Bonds. Accordingly, the Holders' tax basis in the Bonds should be increased by,
and reflect the deemed option premium. Thus, the amount of the OID otherwise
includible in income with respect to Bonds should be reduced to reflect the
portion of the deemed option premium allocable to them.
Upon exercise of the Optional Call Right, the portion of the deemed
option premium allocable to the Bonds should be taken into account as additional
amount realized upon the sale of the Bonds and thus should increase the amount
of gain or reduce the amount
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of loss recognized upon such sale. If the Optional Call Right lapses without
being exercised, the deemed option premium should be included in income as
short-term capital gain at the time of such lapse.
If a Holder sells or exchanges a Bond or Bonds prior to the exercise
or lapse of the Optional Call Right, the Holder should be deemed to have made a
payment to the purchaser of the Bond or Bonds equal to the fair market value of
the Optional Call Right, and the amount treated as the amount realized upon the
sale or exchange of the Bond or Bonds should be increased by this same amount.
The Holder should recognize gain (or loss) upon relief of its liability under
the Optional Call Right equal to (i) the deemed option premium over (or under)
(ii) the fair market value of the Optional Call Right. Any such gain or loss
would be capital gain or loss.
The Bonds and the Optional Call Right should constitute positions in a
straddle, and thus the straddle rules of Section 1092 should apply. See
"Taxation of Income From Trust Certificates--Optional Call Right" below.
The foregoing discussion does not apply to an Optional Call Right to
purchase a Series of Bonds if that Optional Call Right is held by the Issuer of
that Series of Bonds. Such Optional Call Rights are not taken into account for
tax purposes separately from the Bonds to which they relate.
Gain or Loss on Disposition.
A Bondholder generally will recognize gain or loss upon the sale or
exchange of a Bond equal to the difference between the amount realized upon such
sale or exchange and the Bondholder's adjusted basis in the Bond. Such adjusted
basis in the Bond generally will equal the cost of the Bond, increased by OID,
acquisition discount or market discount previously included in respect thereof,
and reduced (but not below zero) by any payments on the Bond other than payments
of qualified stated interest and by any premium that the Bondholder has taken
into account. To the extent attributable to accrued but unpaid interest, the
amount realized by the Bondholder will be treated as a payment of interest. Any
gain or loss will be capital gain or loss if the Bond was held as a capital
asset, except as provided under "Market Discount" above and "Short-Term
Bonds"below. The excess of net long-term capital gains over net short-term
capital losses is taxed at a lower rate than ordinary income for certain non-
corporate taxpayers. The distinction between capital gain or loss and ordinary
income or loss is also relevant for purposes of, among other things, limitations
on the deductibility of capital losses.
Short-Term Bonds.
In the case of a Bond with a maturity of one year or less from its
issue date (a "Short-Term Bond"), no interest is treated as qualified stated
interest, and therefore all interest is included in OID. Bondholders that
report income for federal income tax purposes on an accrual method and certain
other Bondholders, including banks
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and dealers in securities, are required to include OID in income on such Short-
Term Bonds on a straight-line basis, unless an election is made to accrue the
OID according to a constant yield method based on daily compounding.
Any other Bondholder of a Short-Term Bond is not required to accrue
OID for United States federal income tax purposes, unless it elects to do so.
In the case of a Bondholder that is not required, and does not elect, to include
OID in income currently, any gain realized on the sale, exchange or retirement
of a Short-Term Bond is ordinary income to the extent of the OID accrued on a
straight-line basis (or, if elected, according to a constant yield method based
on daily compounding) through the date of sale, exchange or retirement. In
addition, Bondholders that are not required, and do not elect, to include OID
on a Short-Term Bond in income currently are required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or carry
such Short-Term Bond in an amount not exceeding the deferred interest income
with respect to such Short-Term Bond (which includes both the accrued OID and
accrued interest that are payable but that have not been included in gross
income), until such deferred interest income is realized. Such a Bondholder may
elect to apply the foregoing rules (except for the rule characterizing gain on
sale, exchange or retirement as ordinary) with respect to "acquisition discount"
rather than OID. Acquisition discount is the excess of the stated redemption
price at maturity of the Short-Term Bond over the Bondholder's basis in the
Short-Term Bond. This election applies to all obligations acquired by the
taxpayer on or after the first day of the first taxable year to which such
election applies, unless revoked with the consent of the IRS. A Bondholder's
tax basis in a Short-Term Bond is increased by the amount included in such
Owner's income on such a Bond.
Taxation of Certain Foreign Bondholders.
As used herein, the term "Non-United States Holder" means a Bondholder
that is, for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a non-resident alien or foreign
fiduciary of an estate or trust or (iv) a foreign partnership.
In general, Non-United States Holders will not be subject to United
States federal withholding tax with respect to payments of principal and
interest on Bonds (including OID), provided that certain conditions are met.
Under United States federal income tax law now in effect, and subject to the
discussion of backup withholding in the following section, payments of principal
and interest (including OID) with respect to a Bond to any Non-United States
Holder will not be subject to United States federal withholding tax, provided,
in the case of interest (including OID), that (i) such Holder does not actually
or constructively own 10% or more of the equity of the Trust, (ii) such Holder
is not for United States federal income tax purposes a controlled foreign
corporation related, directly or indirectly, to the Trust through equity
ownership, (iii) such Holder is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code and (iv) either (A) the Non-United States
Holder certifies, under penalties of perjury, to the Trust or paying
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agent, as the case may be, that such Holder is a Non-United States Holder and
provides such Holder's name and address, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Bond, certifies, under penalties of perjury, to the
Trust or paying agent, as the case may be, that such certificate has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy thereof. A
certificate described in this paragraph is effective only with respect to
payments of interest (including OID) made to the certifying Non-United States
Holder after the issuance of the certificate in the calendar year of its
issuance and the two immediately succeeding calendar years.
On April 15, 1996, the IRS issued proposed regulations that provide
optional documentation procedures designed to simplify compliance by withholding
agents. These regulations would not affect the documentation rules described in
the preceding paragraph, but would add "intermediary certification" options for
certain qualifying withholding agents. Under one such option, a withholding
agent would be allowed to rely on Form W-8 furnished by a financial institution
or other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the IRS and thus, is
a "qualified intermediary". Under another option, an authorized foreign agent
of a U.S. withholding agent would be permitted to act on behalf of the U.S.
withholding agent, provided that certain conditions are met. These regulations
are proposed to be effective for payments made after December 31, 1997.
Notwithstanding the foregoing, interest described in Section 871(h)(4)
of the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any income
or profits of the issuer or a related person, any change in the value of any
property of the issuer or a related person or any dividends, partnership
distributions or similar payments made by the issuer or a related person.
Interest described in Section 871(h)(4) of the Code may include other types of
contingent interest identified by the IRS in future Treasury Regulations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Bond is effectively connected
with the conduct of such trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed in the three preceding
paragraphs, will be subject to United States federal income tax on such interest
(including OID) in the same manner as if it were a United States person (as
defined below). In lieu of the certificate described above, such Holder will be
required to provide a properly executed IRS Form 4224 annually (every three
years under the regulations issued on April 15, 1996) in order to claim an
exemption from withholding tax. In addition, if such Holder is a foreign
corporation, it may be subject to
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a branch profits tax equal to 30% (or such lower rate as may be specified by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to adjustments. For this purpose, interest (including OID)
on a Bond will be included in the earnings and profits of such Holder if such
interest (including OID) is effectively connected with the conduct by such
Holder of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest, market discount or OID in certain circumstances) realized upon the
sale, exchange, retirement or other disposition of a Bond by a Non-United States
Holder will not be subject to United States federal income tax unless (i) such
gain or income is effectively connected with a trade or business in the United
States of the Non-United States Holder or (ii) in the case of a Non-United
States Holder who is a nonresident alien individual, the Non-United States
Holder is present in the United States for 183 days or more in the taxable year
of such sale, exchange, retirement or other disposition and either (a) such
individual has a "tax home" (as defined in Section 911(d)(3) of the Code) in the
United States or (b) the gain is attributable to an office or other fixed place
of business maintained by such individual in the United States.
Backup Withholding and Information Reporting.
Under current United States federal income tax law, information
reporting requirements apply to interest (including OID) and principal payments
made to, and to the proceeds of sales before maturity by, certain Bondholders
that are United States persons. "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is includible in
gross income for United States federal income tax purposes, without regard to
its source.
In addition, a 31% backup withholding tax will apply if such
Bondholder (i) fails to furnish its Taxpayer Identification Number ("TIN")
(which, for an individual, would be his or her Social Security Number) to the
payor in the manner required, (ii) furnishes an incorrect TIN and the payor is
so notified by the IRS, (iii) is notified by the IRS that it has failed properly
to report payments of interest and dividends or (iv) in certain circumstances,
fails to certify, under penalties of perjury, that it has not been notified by
the IRS that it is subject to backup withholding for failure properly to report
interest and dividend payments. Backup withholding will not apply with respect
to payments made to certain exempt recipients, such as corporations (within the
meaning of Section 7701(a) of the Code) and tax-exempt organizations.
In the case of a Non-United States Holder, under Treasury Regulations,
backup withholding and information reporting will not apply to payments of
principal and interest made by the Trust or any paying agent thereof on a Bond
with respect to which such holder has provided the required certification under
penalties of perjury that it is a Non-United States Holder or has otherwise
established an exemption, provided that (i) the Trust
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or paying agent, as the case may be, does not have actual knowledge that the
payee is a United States person and (ii) certain other conditions are satisfied.
Subject to the discussion below, payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies under penalties of perjury as to its
status as a Non-United States Holder and certain other qualifications (and no
agent of the broker who is responsible for receiving or reviewing such statement
has actual knowledge that it is incorrect) and provides his or her name and
address or the holder otherwise establishes an exemption.
In general, if principal or interest payments on a Bond are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a Bondholder, such custodian, nominee or other agent
will not be required to apply backup withholding to such payments made to such
owner and will not be subject to information reporting. However, if such
custodian, nominee or other agent is a United States person for United States
federal income tax purposes, a controlled foreign corporation for United States
tax purposes, or a foreign person 50% or more of whose gross income is
effectively connected with its conduct of a United States trade or business for
a specified three-year period, such custodian, nominee or other agent may be
subject to certain information reporting (but not backup withholding)
requirements with respect to such payment unless such custodian, nominee or
other agent has in its records documentary evidence that the Bondholder is not a
United States person and certain conditions are met or the Bondholder otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
withholding may apply to any payment which such custodian, nominee or other
agent is required to report if such custodian, nominee or other agent has actual
knowledge that the payee is a United States person.
Under Treasury Regulations, payments on the sale, exchange or
retirement of a Bond to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States tax purposes, or a
foreign person 50% or more of whose gross income is effectively connected with
its conduct of a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless such broker has in its records documentary evidence that the Bondholder
is not a United States person and certain other conditions are met or the
Bondholder otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States person.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a Bondholder under the backup withholding rules will
be allowed as a refund or a credit against such owner's United States federal
income tax, provided that the required information is furnished to the IRS.
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Bondholders should consult their tax advisors regarding the
application of information reporting and backup withholding to their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available.
TAXATION OF INCOME FROM TRUST CERTIFICATES
For a discussion of the tax consequences of holding Trust Certificates
treated as interests in a partnership, see "Taxation of Partnership-Taxed Trust
Certificates" below. The remainder of this subsection addresses only the tax
consequences of holding Trust Certificates issued by a Trust treated as a
grantor trust for federal income tax purposes.
Each Certificateholder will be considered to own an undivided interest
in the Underlying Assets of the Trust. A Certificateholder will be deemed to
purchase an interest in each Underlying Asset in the Trust at a price determined
by allocating the purchase price paid for the Trust Certificate among all the
Underlying Assets in proportion to their fair market values at the time of the
purchase of the Trust Certificate. Accordingly, each Certificateholder must
include in its gross income its pro rata share of the interest and other income
attributable to the Underlying Assets (subject to the discussion below of
servicing fees treated as exceeding reasonable compensation for services) and
any other income of the Trust. Payments received on the Underlying Assets may
be reinvested by the Trustee for a short time period prior to their distribution
to Certificateholders. Each Certificateholder will be required to include in
its income its pro rata share of the income earned on such interim reinvestment.
In the case of any payment received in respect of a Financial Guaranty
Insurance, the character of such payment will be the same as the character of
the payments under the Underlying Security to which such Financial Guaranty
Insurance relates. Each Certificateholder may deduct (subject to any limitation
applicable to such Certificateholder) its pro rata share of the fees and other
deductible expenses paid or deemed paid by the Trust.
In general, each Certificateholder should calculate income separately
for its interest in each Underlying Asset of the Trust (first by allocating to
each such Underlying Asset a portion of the Certificateholder's basis in the
Certificate based on each such Underlying Asset's relative fair market value on
the date the Certificate is purchased). It is possible that the IRS may permit
or require that Certificateholders report their income by aggregating their
interests in all of the Underlying Securities. However, interests in the
Underlying Securities will not, in any circumstances, be aggregated if each of
the Underlying Securities either (i) is part of an issue a substantial portion
of which is traded on an established market or (ii) is part of an issue a
substantial portion of which is issued for money to parties who are not related
to the Underlying Issuer or Certificateholder and who do not purchase other debt
instruments of the same Underlying Issuer in connection with the same underlying
transaction or related transactions.
In computing the income arising from the Trust's Underlying Assets,
all income on these Underlying Assets allocable to the Trust Certificates,
including income effectively paid over to the Administrator and the Trustee (or
otherwise used to pay
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expenses), but not including income effectively paid over to the Administrator
that is treated as in excess of reasonable compensation for services, is taken
into account. However, each Certificateholder will be allowed to deduct,
consistent with its method of accounting, any fees paid or deemed paid by the
Trust allocable to that Trust Certificate. Prospective investors should be aware
that under the Code, for non-corporate Certificateholders which itemize
deductions when computing taxable income, expenses of producing income
(including the Certificateholder's allocable share of the servicing fees) are
aggregated with other expenses of producing income and certain other deductions,
and that the aggregate amount of such expenses is deductible only to the extent
such amount exceeds two percent of the non-corporate Certificateholder's
adjusted gross income. In addition, such expenses in excess of the two percent
threshold, when combined with the Certificateholder's deductions for items such
as taxes, certain other investment expenses and charitable deductions, are
subject to a reduction equal to, generally, three percent of the
Certificateholder's adjusted gross income in excess of a statutory threshold
amount. Furthermore, no deduction will be allowed in respect of such fees for
alternative minimum tax purposes. Prospective investors should consult their own
tax advisors regarding the deductibility of expenses before purchasing
Certificates.
The following discussion does not address Trust Certificates backed by
Underlying Securities that constitute "applicable high yield discount
obligations" within the meaning of Section 163(i) of the Code. Where
applicable, the Prospectus Supplement for each Series of such Trust Certificates
will describe certain federal income tax consequences that relate to such Trust
Certificates.
INCOME ALLOCABLE TO UNDERLYING SECURITIES THAT ARE STRIPPED BONDS OR STRIPPED
COUPONS
As noted above, a Certificateholder will be deemed to purchase an
interest in each Underlying Security held by the Trust at a price determined by
allocating the purchase price paid for the Trust Certificate among all the
Underlying Securities in proportion to their fair market values at the time of
the purchase of the Trust Certificate. The consequences to a Certificateholder
of such a deemed purchase will depend on whether the Underlying Security is
either a "Stripped Bond" or "Stripped Coupon" within the meaning of Section 1286
of the Code. As these terms are defined in Section 1286 of the Code, a Stripped
Bond is, in general, a debt instrument issued at any time with interest coupons
where there is a separation in ownership between the debt instrument and any
coupon which has not yet become payable, and a Stripped Coupon is any coupon
relating to a Stripped Bond. Some or all of the Underlying Securities may be
treated as Stripped Bonds or Stripped Coupons under these definitions.
In general, Certificateholders of Interest Only Certificates,
Principal Only Certificates and Zero Coupon Certificates will be subject to the
Stripped Coupon and Stripped Bond rules of Section 1286 of the Code, as
discussed below. In addition, if the fees paid to the Administrator (the
"servicing fee") were considered to exceed reasonable compensation for services,
the Administrator would be considered to own an interest in each Underlying
Security. Accordingly, all of the Underlying Securities would be treated
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as Stripped Bonds or Stripped Coupons. Interest from the Underlying Securities
used to pay that portion of the servicing fee that exceeds reasonable
compensation for services would not be included in the income of
Certificateholders, and no deduction would be allowed for that portion of the
servicing fee.
In the case of Underlying Securities that are Stripped Bonds or
Stripped Coupons, on the date on which a Certificate is purchased, each such
Underlying Security will be treated as newly issued with OID for federal income
tax purposes. Each such Underlying Security will be treated as having an issue
price equal to the price at which it is deemed purchased by Certificateholders.
For a discussion of OID, see "Taxation of Income From Bonds --Taxation of
Original Issue Discount" above.
Market Discount and Premium
Because the purchase by a Certificateholder of a Certificate will be
treated as an original issuance of such Certificateholder's share of generally
each of the Underlying Securities that are Stripped Bonds or Stripped Coupons on
the purchase date, the purchase of a Certificate will not result in market
discount or acquisition premium with respect to any Certificate.
INCOME ALLOCABLE TO UNDERLYING SECURITIES THAT ARE NEITHER STRIPPED BONDS NOR
STRIPPED COUPONS
In the case of Certificates the Underlying Securities for which are
neither Stripped Coupons nor Stripped Bonds, to the extent that the portion of
the purchase price of a Trust Certificate allocated to an Underlying Security is
less than the portion of the principal balance of the Underlying Security that
is allocable to the Trust Certificate, the interest in the Underlying Security
will have been acquired at a discount, that will represent OID or Market
Discount (as defined below). To the extent that the portion of the purchase
price of a Certificate allocated to an Underlying Security is greater than the
portion of the principal balance of the Underlying Security which is allocable
to the Trust Certificate, the interest in the Underlying Security will have been
acquired at a premium (as described below under "-- Premium and Acquisition
Premium").
The treatment of any discount on an Underlying Security will depend on
whether the discount represents OID or Market Discount. To the extent the
Underlying Security will have OID, a Certificateholder will be subject to the
tax rules applicable to OID, which are discussed in detail in "Taxation of
Income From Bonds -- Taxation of Original Issue Discount" above.
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Market Discount
A Certificateholder of a Trust Certificate the Underlying Securities
for which are neither Stripped Coupons nor Stripped Bonds may be subject to the
market discount rules of Sections 1276 through 1278 of the Code. If a
Certificateholder that acquires such Certificate with Underlying Securities
having a maturity date of more than one year from the date of their issuance has
a tax basis in the Underlying Security that is, in the case of an Underlying
Security that does not have OID, less than its stated redemption price at
maturity, or, in the case of an Underlying Security that has OID, less than its
adjusted issue price, the amount of the difference is treated as market discount
for federal income tax purposes, unless such difference is less than a specified
de minimis amount. For a discussion of the market discount rules, see "Taxation
of Income From Bonds -- Market Discount" above.
Premium and Acquisition Premium
If a Certificateholder purchases an interest in Underlying Securities
at a premium, the Certificateholder does not include any OID in gross income.
An Underlying Security is purchased at a premium if its adjusted basis,
immediately after its purchase by the Certificateholder, exceeds the sum of all
amounts payable on the instrument after the purchase date other than payments of
qualified stated interest. For a discussion of the rules applicable to premium,
see "Taxation of Income From Bonds -- Premium and Acquisition Premium" above.
If a Certificateholder does not purchase an Underlying Security at a
premium, but instead purchases such interest at an acquisition premium, the
amount of OID that the Certificateholder includes in gross income is reduced to
reflect the acquisition premium. See "Taxation of Income From Bonds -- Premium
and Acquisition Premium" above.
OPTIONAL CALL RIGHT
If a Series of Trust Certificates provides for an Optional Call Right
to purchase such Certificates or the Underlying Securities, Holders of such
Series should be treated as having sold a call option with respect to the
Underlying Securities. The Holders should be treated for federal income tax
purposes as though they had received an option premium equal to the fair market
value of the call right (the "deemed option premium") and had paid this amount
(in addition to the amount actually paid) as consideration for the Certificates.
Accordingly, the Holders' tax basis in the Underlying Securities should reflect
the deemed option premium. Thus, the amount of the OID otherwise includible in
income with respect to each of the Underlying Securities should be reduced to
reflect the portion of the deemed option premium allocable to each of them.
Holders should not recognize any income or gain as a result of being treated as
receiving the deemed option premium.
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Upon exercise of the Optional Call Right, the portion of the deemed
option premium allocable to the Underlying Securities should be taken into
account as additional amount realized upon the sale of the Underlying Securities
and thus should increase the amount of gain or reduce the amount of loss
recognized upon such sale. If the Optional Call Right lapses without being
exercised, the deemed option premium should be included in income as short-term
capital gain at the time of such lapse.
If a Holder sells or exchanges a Trust Certificate or Certificates
prior to the exercise or lapse of the Optional Call Right, the Holder should be
deemed to have made a payment to the purchaser of the Certificate or
Certificates equal to the fair market value of the Optional Call Right, and the
amount treated as the amount realized upon the sale or exchange of the Trust
Certificate or Certificates should be increased by this same amount. The Holder
should recognize gain (or loss) upon relief of its liability under the Optional
Call Right equal to (i) the deemed option premium over (or under) (ii) the fair
market value of the Optional Call Right. Any such gain or loss would be capital
gain or loss.
The Underlying Securities and the Optional Call Right should
constitute positions in a straddle, and thus the straddle rules of Section 1092
should apply. Holders should consider identifying their interests in the
Underlying Securities and the Optional Call Right as constituting an "identified
straddle" under Section 1092(a)(2)(B). Such an identification must be made on a
Holder's records before the close of the day on which any Trust Certificate is
acquired. Failure to make such an identification may result in deferral of any
loss recognized on disposition of a Holder's interest in the Underlying
Securities or the Optional Call Right that is deemed to occur on disposition of
Certificates. Whether such deferral would occur, and its consequences, would
depend on the specific circumstances of each Holder. Consequently, Holders
should consult their tax advisors as to whether and how to identify their
interests in the Underlying Securities and the Optional Call Right as an
identified straddle. Because a Holder's interest in the Underlying Securities
and the Optional Call Right will constitute positions in a straddle within the
meaning of Section 1092(c), any gain recognized on disposition of a Holder's
interest in the Underlying Securities or the Optional Call Right will be short-
term capital gain. In addition, under Section 263(g), interest expense and
carrying charges allocable to a straddle are deductible only to the extent of
interest (including original issue discount and certain market discount) and
dividend income from the property constituting the straddle, and the
nondeductible portions are added to the taxpayer's adjusted basis for such
property.
Foreign Certificateholders
Certificateholders that are not United States Persons ("non-United
States Certificateholders") will not, in general, be subject to United States
federal withholding tax with respect to payments of principal and interest on
Underlying Securities issued by United States Persons, provided that certain
conditions are met. Under United States federal income tax law now in effect
and subject to the discussion of backup withholding in the following section,
payments of principal and interest (including OID) by the Trust with
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respect to an Underlying Security or any paying agent to any non-United States
Certificateholder will not be subject to United States federal withholding tax,
provided, in the case of interest, that (i) such Certificateholder does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Underlying Issuer entitled to vote, (ii) such
Certificateholder is not for United States federal income tax purposes a
controlled foreign corporation related, directly or indirectly, to the
Underlying Issuer through stock ownership, (iii) such Certificateholder is not a
bank receiving interest described in Section 881(c)(3)(A) of the Code and (iv)
either (A) the beneficial owner of the Certificate certifies, under penalties of
perjury, to the Trust or paying agent, as the case may be, that such
Certificateholder is a non-United States Certificateholder and provides such
Certificateholder's name and address, if any, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Certificate, certifies, under penalties of perjury,
to the Issuer or paying agent, as the case may be, that such certificate has
been received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy thereof.
A certificate described in this paragraph is effective only with respect to
payments of interest (including OID) made to the certifying non-United States
Certificateholder after the issuance of the certificate in the calendar year of
its issuance and the two immediately succeeding calendar years.
On April 15, 1996, the IRS issued proposed regulations that provide
optional documentation procedures designed to simplify compliance by withholding
agents. These regulations would not affect the documentation rules described in
the preceding paragraph, but would add "intermediary certification" options for
certain qualifying withholding agents. Under one such option, a withholding
agent would be allowed to rely on Form W-8 furnished by a financial institution
or other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the IRS and thus, is
a "qualified intermediary". Under another option, an authorized foreign agent
of a U.S. withholding agent would be permitted to act on behalf of the U.S.
withholding agent, provided that certain conditions are met. These regulations
are proposed to be effective for payments made after December 31, 1997.
Notwithstanding the foregoing, interest described in Section 871(h)(4)
of the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the Underlying Issuer or a related person,
any income or profits of the Underlying Issuer or a related person, any change
in the value of any property of the Issuer or a related person or any dividend,
partnership distributions or similar payments made by the Underlying Issuer or a
related person. Interest described in Section 871(h)(4) of the Code may include
other types of contingent interest identified by the IRS in future Treasury
Regulations. If the
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Trust issues Certificates that represent interests in Underlying Assets, the
interest on which is described in Section 871(h)(4) of the Code, the United
States withholding tax consequences of any such Certificates will be described
in the applicable Prospectus Supplement.
If a non-United States Certificateholder is engaged in a trade or
business in the United States and interest (including OID) on the Underlying
Securities deemed owned by such non-United States Certificateholder is
effectively connected with the conduct of such trade or business, the non-United
States Certificateholder, although exempt from the withholding tax discussed in
the two preceding paragraphs, will be subject to United States federal income
tax on such interest (including OID) in the same manner as if it were a United
States Certificateholder. In lieu of the certificate described above, such a
Certificateholder will be required to provide to the Trust a properly executed
IRS Form 4224 in order to claim an exemption from withholding tax. In addition,
if such a Certificateholder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% (or such lower rate as may be specified by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to adjustments. For this purpose, interest (including
OID) on an Underlying Security will be included in the earnings and profits of
such a Certificateholder if such interest (including OID) is effectively
connected with the conduct by the non-United States Certificateholder of a trade
or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or OID) realized upon the sale, exchange, retirement or other
disposition of a Trust Certificate will not be subject to federal income tax
unless (i) such gain or income is effectively connected with a trade or business
in the United States of the non-United States Certificateholder or (ii) in the
case of a non-United States Certificateholder who is an individual, the non-
United States Certificateholder is present in the United States for 183 days or
more in the taxable year of such sale, exchange, retirement or other disposition
and either (a) such individual has a "tax home" (as defined in Section 911(d)(3)
of the Code) in the United States or (b) the gain is attributable to an office
or other fixed place of business maintained by such individual in the United
States.
A non-United States Certificateholder generally will not be subject to
United States withholding tax with respect to payments of principal and interest
on Underlying Securities that are issued by foreign Underlying Issuers.
However, such payments may be subject to United States federal income tax at
graduated rates (subject to credit for foreign income taxes) if such payments
are either derived in the active conduct of banking, financing or similar
business within the United States or received by a corporation the principal
business of which is trading in stocks or securities for its own account. If
subject to United States federal income taxation at graduated rates, such
payments may also give rise to the branch profits tax, as discussed above.
A Trust Certificate held by an individual who is a non-United States
Certificateholder at the time of death will not be subject to United States
federal estate tax
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with respect to an Underlying Security if the Certificateholder does not own,
actually or constructively, 10% or more of the total combined voting power of
all classes of stock of the Underlying Issuer entitled to vote and the interest
payments with respect to the Underlying Security are not effectively connected
with a United States trade or business of such Certificateholder.
Backup Withholding and Information Reporting
Information reporting requirements apply to interest (including OID)
and principal payments made to, and to the proceeds of sales before maturity by,
certain non-corporate United States Certificateholders. In addition, a 31%
backup withholding tax will apply if the non-corporate United States
Certificateholder (i) fails to furnish its TIN (which, for an individual, would
be his or her Social Security Number) to the payor in the manner required, (ii)
furnishes an incorrect TIN and the payor is so notified by the IRS, (iii) is
notified by the IRS that it has failed properly to report payments of interest
and dividends or (iv) in certain circumstances, fails to certify, under
penalties of perjury, that it has not been notified by the IRS that it is
subject to backup withholding for failure properly to report interest and
dividend payments. Backup withholding will not apply with respect to payments
made to certain exempt recipients, such as corporations (within the meaning of
Section 7701(a) of the Code) and tax-exempt organizations. For a discussion of
the rules relating to backup withholding and information reporting, see
"Taxation of Income From Bonds -- Backup Withholding and Information Reporting"
above.
Sale or Exchange of the Certificates
A Certificateholder generally will recognize gain or loss upon the
sale or exchange of a Trust Certificate equal to the difference between the
amount received and the Certificateholder's adjusted basis in its interest in
the Underlying Assets. Such adjusted basis in its interest in the Underlying
Assets generally will equal the cost of the Trust Certificates, increased by
income previously included in respect thereof, and reduced (but not below zero)
by previous distributions, if any. Any gain or loss will be capital gain or
loss if the interests in the Underlying Securities were held as capital assets,
except as provided under "Taxation of Income From Bonds -- Market Discount" and
"--Short-Term Bonds" above.
INCOME ALLOCABLE TO CERTAIN UNDERLYING ASSETS THAT ARE SWAP AGREEMENTS
Notional Principal Contracts
The tax treatment of a Swap Agreement depends on whether that Swap
Agreement is classified as a Notional Principal Contract for federal income tax
purposes. A Notional Principal Contract is defined for federal income tax
purposes as a financial instrument that provides for the payment of amounts by
one party to another at specified intervals calculated by reference to a
specified index applied to a notional principal amount in exchange for either
(a) a promise to pay similar amounts or (b) specified consideration such as, for
example, a cash payment made at the time that the contract is entered into.
Swap Agreements classified as
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Notional Principal Contracts for federal income tax purposes include interest
rate swaps, interest rate caps, interest rate floors and basis swaps.
The net income or net deduction from a Notional Principal Contract for
a taxable year is included in or deducted from gross income for that taxable
year. The net income or expense from a Notional Principal Contract should be
treated as ordinary income or expense. The net income or net deduction from a
Notional Principal Contract for a taxable year equals the total of (a) all of
the Periodic Payments that are recognized from that Contract for the taxable
year and (b) all of the Nonperiodic Payments that are recognized from that
Contract for the taxable year. If, for any taxable year, there is a net expense
from the Notional Principal Contract, noncorporate Certificateholders that
itemize deductions may not be allowed to deduct part or all of the amount of
such net expense. Section 67 of the Code will allow a deduction for such net
expense only to the extent that such net expense, along with certain other
miscellaneous itemized deductions, exceeds two percent of such
Certificateholder's adjusted gross income. In addition, such expenses in excess
of the two percent threshold, when combined with the Certificateholder's
deductions for items such as taxes, certain other investment expenses and
charitable deductions, are subject to a reduction equal to, generally, three
percent of the Certificateholder's adjusted gross income in excess of a
statutory amount. Also, such net expense may not be deductible for purposes of
the alternative minimum tax. A noncorporate Certificateholder that itemizes
deductions should consult its tax advisor regarding the application of Section
67 of the Code and the alternative minimum tax to an investment in the
Certificates.
"Periodic Payments" are payments made or received pursuant to a
Notional Principal Contract that are payable at intervals of one year or less
during the entire term of the Contract, that are based on a Specified Index
(appropriately adjusted for the length of the interval) and that are based on
either a single notional principal amount or a notional principal amount that
varies over the term of the contract in the same proportion as the notional
principal amount that measures the payments made by the other party varies. The
term Specified Index includes a single fixed interest rate or a floating rate
index such as LIBOR or COFI.
All taxpayers, regardless of whether they use an accrual method of
accounting or the cash method of accounting, must recognize the ratable daily
portion of a Periodic Payment that they make or receive for the taxable year to
which that portion relates. A portion of a Periodic Payment may be considered
to relate to a taxable year ending prior to the date that the amount of the
Periodic Payment is fixed because the value of the Specified Index is not fixed
until after the end of the taxable year. In such a case, the ratable daily
portion of the Periodic Payment that relates to that taxable year is generally
based on the amount that would have been the amount of the Periodic Payment
using the value of the Specified Index as of the last day of that taxable year.
Similar rules apply if the amount of a Periodic Payment relating to a taxable
year is not known as of the end of the taxable year because the notional
principal amount to be used in computing the payment is not fixed until after
the end of the taxable year.
A "Nonperiodic Payment" is any payment made or received pursuant to a
Notional Principal Contract that is not a Periodic Payment or a termination
payment.
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Examples of Nonperiodic Payments include the premium that is made to purchase an
interest rate cap, the payment that is received for selling an interest rate
floor and the yield adjustment fee that is made or received when a taxpayer
enters into an "off-market" interest rate swap contract. The rules governing the
time at which Nonperiodic Payments made or received are to be taken into account
are the same regardless of whether the taxpayer uses an accrual method of
accounting or the cash method of accounting. Regardless of the taxpayer's method
of accounting, the taxpayer must recognize in each taxable year of the contract
the portion of the Nonperiodic Payment allocable to that taxable year.
Generally, a Nonperiodic Payment is allocated among the years of the
contract in a way that reflects the economic substance of the contract. For
this purpose, an interest rate swap contract is considered to be, in economic
substance, a series of cash-settled forward contracts. Accordingly, a yield
adjustment fee paid to enter into an off-market interest rate swap contract
would not be deductible by the payor, and would not be includible in the income
of the payee, when made. Instead, the yield adjustment fee would be allocated
among the settlement dates provided by the contract in a way that would reflect
the premiums that would be paid to enter into a series of cash-settled off-
market forward contracts. Only the portion of the yield adjustment fee that is
allocable to the forward contracts that settle during a particular period is
recognized for that period.
Similarly, a premium paid for an interest rate cap contract would not
be deductible by the purchaser or includible in the income of the seller when
such premium is paid. Instead, it would be allocated among the settlement dates
provided by the cap contract in a way that would reflect the premiums that would
be paid to enter into a series of cash-settled option contracts. Only the
portion of the premium that is allocable to the option contract or contracts
that expire during a particular period is recognized for that period.
Treasury Regulations provide that a taxpayer generally may elect to
amortize a yield adjustment fee or a cap or floor premium paid when a contract
is entered into using a simplified method referred to as the "level payment
method". Under this method, the fee or premium is assumed to represent a self-
amortizing installment loan that is repaid through equal payments, each
consisting of a principal component and a time value component, over the term of
the contract. The principal component of each hypothetical payment is treated
as a Periodic Payment that is deemed to be made on each of the dates that the
contract provides for Periodic Payments by the payor of the Nonperiodic Payment
or, if there are no such Periodic Payments, on each of the dates that the
contract provides for Periodic Payments by the recipient of the Nonperiodic
Payment.
Treasury Regulations contain rules which apply to Notional Principal
Contracts entered into as "hedging transactions" within the meaning of Treasury
Regulations. For this purpose, hedging transactions include Swap Agreements
entered into to reduce the risk of price changes or currency fluctuations with
respect to ordinary property held or to be held by a taxpayer. Under these
rules, Nonperiodic Payments made or received with respect to such Notional
Principal Contracts generally would be required to be taken into account under
the rules in the preceding paragraph.
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The purchase price paid for the Trust Certificates by the
Certificateholders would be allocated among the Underlying Securities owned by
the Trust and any Swap Agreements entered into by the Trust. If a
Certificateholder sells or exchanges a Trust Certificate prior to the maturity
of the Swap Agreements, the Certificateholder should be deemed to have either
received an amount equal to the fair market value of rights under the Swap
Agreements (if the Swap Agreements were an asset at the time of the sale or
exchange) or paid an amount to the purchaser equal to the present value of
liability under the Swap Agreements (if the Swap Agreements were a liability at
the time of the sale or exchange). If the Swap Agreements were an asset at the
time of the sale or exchange, the Certificateholder should recognize gain (or
loss) on the Swap Agreements equal to the excess (or the deficit) of (i) the
fair market value of the rights under the Swap Agreements (adjusted to reflect
any portion of such amount already taken into account under the rules for
Nonperiodic Payments) over (or under) (ii) the amount of the original purchase
price allocable to the Swap Agreements (adjusted to reflect any portion of such
amount already taken into account under the rules for Nonperiodic Payments). If
the Swap Agreements were a liability at the time of the sale or exchange, the
Certificateholder should recognize loss on the Swap Agreements equal to the sum
of the present value of the liability and the amount of the original purchase
price allocable to the Swap Agreements.
The foregoing discussion of the treatment of Notional Principal
Contracts considers only the tax consequences of Contracts that are held to
maturity and does not consider the consequences of sale, exchange, assignment or
termination of such contracts or of defaults with respect to such Contracts.
Options, Including Options to Enter Into Notional Principal Contracts
A taxpayer does not recognize any income, expense, gain or loss as a
result of making or receiving a payment to enter into an option contract.
If an option contract expires without being exercised, the payment
that was received or made to enter into the option contract is recognized as
gain or loss, respectively. The character of such gain or loss will depend on
whether the option contract is a hedging transaction within the meaning of
Treasury Regulations. If the option contract is a hedging transaction, and if
certain identification requirements are met, gain or loss on the expiration of
the option contract will be treated as ordinary. If the option contract is not
a hedging transaction within the meaning of Treasury Regulations because, for
example, the property to which the option relates is or would be a capital asset
in the taxpayer's hands, any such gain or loss will be treated as capital.
The time at which such gain or loss is taken into account may also
depend on whether the option contract is a hedging transaction with the meaning
of Treasury Regulations. If the option contract is not a hedging transaction,
it is taken into account when recognized. If it is a hedging transaction,
Treasury Regulations may require deferral of such gain or loss.
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If an option contract entitling or obligating the taxpayer to purchase
or sell property is exercised, the payment that was made or received when the
option contract was entered into is treated as an adjustment to basis, if the
taxpayer purchases property pursuant to the exercise of the option, and is
treated as an adjustment to amount realized, if the taxpayer sells property
pursuant to the exercise of the option. If an option contract entitling or
obligating the taxpayer to enter into a Notional Principal Contract is
exercised, the payment that was made or received when the option contract was
entered into is treated as a Nonperiodic Payment made or received when the
Notional Principal Contract is entered into pursuant to the exercise of the
option. See "Notional Principal Contracts" above for a discussion of the
treatment of Nonperiodic Payments made or received when a Notional Principal
Contract is entered into.
Option contracts that are "listed options" within the meaning of
Section 1256 of the Code are subject to different rules, provided that they do
not constitute hedging transactions. Changes in the market value of listed
options generally are taken into account on a mark-to-market basis prior to
disposition or exercise. Such gain or loss is treated as 40% short-term capital
gain or loss and 60% long-term capital gain or loss. In general, a listed
option is one that is traded on, or subject to the rules of a board or exchange
registered with the SEC or designated by the CFTC.
TAXATION OF INCOME FROM PARTNERSHIP-TAXED TRUST CERTIFICATES
With respect to certain of the Series of Trust Certificates, Trust
Certificates may be issued by a Trust treated as a partnership for federal
income tax purposes ("Partnership-Taxed Certificates"). In such a case, the
Trustee will agree or will be deemed to have agreed, for purposes of federal,
state and local income and franchise tax purposes, to treat the Trust as a
partnership and the Holders of the Partnership-Taxed Certificates as partners.
Any references to "Partnership-Taxed Trusts" in the remainder of the discussion
in this subsection are to Trusts treated as partnerships for federal income tax
purposes.
Partnership Taxation
Pass-through of Income, Gain, Loss and Deductions. The Partnership-
Taxed Trust will not be subject to federal income tax, but each Holder of a
Partnership-Taxed Certificate will be required separately to take into account
such Holder's allocable share of income, gains, losses, deductions and credits
of the Partnership-Taxed Trust on its own federal income tax return. Income,
gains, losses, deductions and credits of the Partnership-Taxed Trust will be
calculated at the Trust level and elections will be made at the Trust level.
Under the Trust Agreement, Holders of Partnership-Taxed Certificates will not be
permitted to participate in the preparation of the Partnership-Taxed Trust's tax
returns, and any particular election made or not made by the Partnership-Taxed
Trust may be adverse to any particular Holder. Alternatively, in certain
circumstances, a Holder of a Partnership-Taxed Certificate may be deemed to earn
guaranteed payments, rather than a share of the Partnership-Tax Trust's income.
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It should be noted that if the servicing fees paid to the
Administrator were considered to exceed reasonable compensation for services,
the Administrator would be considered to own an interest in each of the
Underlying Securities held by the Partnership-Taxed Trust and all such
Underlying Securities therefore would be treated as Stripped Bonds or Stripped
Coupons. Interest from the Underlying Securities used to pay that portion of
the servicing fee that exceeds reasonable compensation would not be included in
the income of the Partnership-Taxed Trust, and no deduction would be allowed to
the Partnership-Taxed Trust for that portion of the servicing fee.
The tax items of a Partnership-Taxed Trust are allocable to the
Holders in accordance with the Code, Treasury Regulations, and the Trust
Agreement. The Trust Agreement will provide that the Partnership-Taxed Trust
will allocate items of income, gain, loss or deduction among the Holders so that
such items so allocated will have "substantial economic effect" or will be in
accordance with the Holder's interest in the Partnership-Taxed Trust. There can
be no assurance that the net amount of income so allocated will equal the
amounts distributed as income on the Partnership-Taxed Certificates. Further,
while such an allocation will be made in manner that the Issuer believes will be
given effect for federal income tax purposes, no assurance can be given that the
IRS will not require a greater amount of income to be allocated to certain
Holders of Partnership-Taxed Certificates.
The Code provides that, for non-corporate Holders who itemize
deductions when computing taxable income, expenses of producing income are
aggregated with other expenses of producing income and certain other deductions,
and that the aggregate amount of such expenses is deductible only to the extent
such amount exceeds two percent of the non-corporate Holder's adjusted gross
income. In addition, such expenses in excess of the two percent threshold, when
combined with the noncorporate Holder's deductions for items such as taxes,
certain other investment expenses and charitable deductions, are subject to a
reduction equal to, generally, three percent of the Holder's adjusted gross
income in excess of a statutory threshold amount. Furthermore, no deduction
will be allowed for such expenses for alternative minimum tax purposes.
Prospective investors should consult their own tax advisors regarding the
deductibility of expenses before purchasing Partnership-Taxed Certificates.
Cash distributions to a Holder of a Partnership-Taxed Certificate by
the Partnership-Taxed Trust will constitute a return of capital to the extent of
such Holder's basis in the Partnership-Taxed Certificates and will reduce the
tax basis of such Holder's Partnership-Taxed Certificates (but not below zero).
If a Holder's tax basis in his Partnership-Taxed Certificate should be reduced
to zero, its share of any subsequent cash distributions for any year in excess
of its share of taxable income will be taxable to such Holder as though such
excess were a gain on the sale or exchange of its interest in the Partnership-
Taxed Trust.
The Partnership-Taxed Trust currently intends to make all tax
calculations relating to income and allocations to Holders on an aggregate basis
(except that items of income, gains, losses and deductions allocable to Swap
Agreements will be determined separately). If the IRS were to require that such
calculations be made separately for each asset held by the Partnership-Taxed
Trust, the Partnership-Taxed Trust might be required to incur additional
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expenses; it is believed, but there can be no assurances, that these additional
expenses would not have a material adverse effect on Holders.
The foregoing discussion applies only to Holders of Partnership-Taxed
Certificates that acquire Partnership-Taxed Certificates in exchange for money
and does not apply to Holders of Partnership-Taxed Certificates that acquire
Partnership-Taxed Certificates in exchange for property.
Disposition of Partnership-Taxed Certificates. Generally, capital gain or
loss will be recognized on a sale or exchange of Partnership-Taxed Certificates
in an amount equal to the difference between the amount realized and the
Holder's tax basis in the Partnership-Taxed Certificates sold. Any gain on the
sale of a Partnership-Taxed Certificate attributable to the Holder's share of
unrealized receivables or unrecognized accrued Market Discount of the
Partnership-Taxed Trust would generally be treated as ordinary income to the
Holder and such ordinary income may not be offset by any capital loss from the
sale. A Holder's tax basis in a Partnership-Taxed Certificate will generally
equal its cost therefor, increased by such Holder's allocable share of the
Partnership-Taxed Trust's income that has been includible in such Holder's
income and decreased by such Holder's allocable share of the Partnership Trust's
loss and any distributions received with respect to such Certificate. In
addition, both tax basis in the Partnership-Taxed Certificates and the amount
realized on a sale of a Partnership-Taxed Certificate will generally include the
Holder's share of any other liabilities of the Partnership-Taxed Trust. A
Holder acquiring Partnership-Taxed Certificates of the same Series at different
prices will be required to maintain a single aggregate adjusted tax basis in
such Partnership-Taxed Certificates and, upon sale or other disposition of some
of the Partnership-Taxed Certificates, allocate a pro rata portion of such
aggregate tax basis to the Partnership-Taxed Certificates sold (rather than
maintaining a separate tax basis in each Partnership-Taxed Certificate for
purposes of computing gain or loss on a sale of that particular Partnership-
Taxed Certificate).
If a Holder of a Partnership-Taxed Certificate is required to
recognize an aggregate amount of income (not including income attributable to
disallowed itemized deductions described above) over the life of the
Partnership-Taxed Certificates that exceeds the aggregate cash distributions
with respect thereto, such excess will generally give rise to a loss upon the
retirement of the Partnership-Taxed Certificates. Any such loss will be a
capital loss.
Allocations of Income or Loss Among Holders. In general, the
Partnership-Taxed Trust's taxable income and losses will be determined monthly
and the tax items for a particular calendar month will be allocated among the
Holders in proportion to the proportionate interest in the Partnership-Taxed
Trust owned by them as of a particular day of each month. As a result, a Holder
purchasing Partnership-Taxed Certificates during any month may be allocated tax
items (which will affect its tax liability and tax basis) attributable to
periods before such Holder actually held the Partnership-Taxed
Certificates.
The use of such a monthly convention may not be permitted by existing
Treasury Regulations. If a monthly convention is not allowed (or only applies
to transfers of less than
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all of the Holder's interest), taxable income or losses of the Partnership-Taxed
Trust might be reallocated among the Holders of Partnership-Taxed Certificates.
The Partnership-Taxed Trust will be authorized to revise the Partnership-Taxed
Trust's method of allocation between transferrers and transferees to conform to
a method permitted by future Treasury Regulations.
Section 754 Election. If a Holder of a Partnership-Taxed Certificate
sells its Partnership-Taxed Certificate at a profit (or loss), the purchaser
will have a higher (or lower) basis in the Partnership-Taxed Certificates than
the Holder had. The tax basis of the assets of the Partnership-Taxed Trust will
not be adjusted to reflect that higher (or lower) basis unless the Partnership-
Taxed Trust were to file an election under Section 754 of the Code. In order to
avoid the administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the Partnership-Taxed Trust likely will not (and will not required
to) make such election. As a result, Holders of Partnership-Taxed Certificates
might be allocated a greater or lesser amount of the Partnership-Taxed Trust's
income than they would had they purchased directly the Partnership's assets. If
the Partnership-Taxed Trust does make an election under Section 754 of the Code,
such an election will apply to all subsequent transferees, which may be adverse
to certain transferees.
Partnership Terminations. In general terms, if 50% or more of the
interests in the Partnership-Taxed Trust are transferred within a 12 month
period, the Partnership-Taxed Trust will be considered to terminate for federal
income tax purposes, and a new Partnership-Taxed Trust will be deemed to be
established. In such a case, the assets will be considered to be distributed to
each of the Holders of the Partnership-Taxed Certificates and then recontributed
by them to the "new" Partnership-Taxed Trust. Each Holder may be subject to tax
to the extent the amount of money and value of marketable securities deemed
distributed to such Holder exceeds its adjusted basis in the Partnership-Taxed
Certificates. Such a termination could have further adverse effect on some or
all of the Holders, including the possibility of "bunching" of income from more
than one taxable year of any Holder with a taxable year other than the calendar
year.
Certain Administrative Matters. The Partnership-Taxed Trust will be
required to keep complete and accurate books and records. Such books will be
maintained for tax purposes on an accrual basis and calendar year. The Company
(or an affiliate of the Company), the Trustee or the Administrator will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Partnership-Taxed Trust and will report each Holder's allocable
share of items of the Partnership's income and expense to Holders and the IRS on
Schedule K-1 based upon the above described allocation methods and conventions.
The Partnership-Taxed Trust will provide the Schedule K-1 information to
nominees that fail to provide the Partnership-Taxed Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the related Partnership-Taxed
Certificates. Generally, a Holder must file tax returns that are consistent
with the information return filed by the Partnership-Taxed Trust or be subject
to penalties unless the Holder notifies the IRS of all such inconsistencies.
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Under Section 6031 of the Code, any person that holds Partnership-
Taxed Certificates as a nominee at any time during a calendar year is required
to furnish the Partnership-Taxed Trust at least annually with a statement
containing certain information on the nominee, the beneficial owners and the
Partnership-Taxed Certificates so held. Such information includes (i) the name,
address and TIN of the nominee and (ii) as to each beneficial owner (x) the
name, address and TIN of such person, (y) whether such person is a United States
Person, a tax-exempt entity or a foreign government, an international
organization or any wholly owned agency or instrumentality of either of the
foregoing, and (z) certain information on Partnership-Taxed Certificates that
were held, bought or sold on behalf of such person throughout the year
(including the method, cost and date of acquisition of the Partnership-Taxed
Certificates). In case of a Partnership-Taxed Trust not making a Section 754
election (as discussed above), Holders may not be required to provide certain of
the information referred to in (z) of the immediately preceding sentence. In
addition, brokers and financial institutions that hold Partnership-Taxed
Certificates through a nominee are required to furnish directly to the
Partnership-Taxed Trust information as to themselves and their ownership of
Partnership-Taxed Certificates. The information referred to above for any
calendar year must be furnished to the Trustee on or before the following
January 31. Nominees, brokers and financial institutions that fail to provide
the Trustee with the information described above may be subject to penalties.
The Partnership-Taxed Trust will designate the Company (or an
affiliate of the Company), the Trustee or the Administrator as the "tax matters
partner". The tax matters partner will be responsible for representing the
Holders in any dispute with the IRS that relates to the Partnership-Taxed Trust.
The Code provides for administrative examination of a Partnership-Taxed Trust as
if the Partnership-Taxed Trust were a separate and distinct taxpayer.
Generally, the statute of limitations for Partnership-Taxed Trust items does not
expire before three years after the date on which the information return is
filed by the Partnership-Taxed Trust. Any adverse determination following an
audit of the return of the Partnership-Taxed Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the Holders and, in
certain circumstances, a Holder may be precluded from separately litigating a
proposed adjustment to the items of the Partnership-Taxed Trust. An adjustment
could result in an audit of a Holder's returns and adjustments of items not
related to the income and losses of the Partnership-Taxed Trust.
Tax Treatment of Certain Swap Agreements. Because each Holder of
Partnership-Taxed Certificates will be required to take into account separately
such Holder's allocable share of the Partnership-Taxed Trust's income, gains,
losses and deductions on such Holder's federal income tax return, the rules set
forth above in "Taxation of Income From Certificates -- Income Allocable to
Certain Underlying Assets That Are Swap Agreements" will generally be applicable
to a Holder of a Partnership-Taxed Certificate if the Partnership-Taxed Trust
holds the Swap Agreements discussed above in "Taxation of Income From
Certificates -- Income Allocable to Certain Underlying Assets That Are Swap
Agreements".
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State and Local Taxes
The laws of the states and localities in which any Partnership-Taxed
Trust will be formed and where it will do business or own property will differ.
Thus, any Partnership-Taxed Trust may be subject to tax in one or more states or
localities. Further, a Holder of a Partnership-Taxed Certificate by virtue of
holding that Trust Certificate may be subject to the tax laws of any state where
the Partnership-Taxed Trust does business or owns property or under whose laws
it was established. Prospective investors are urged to consult their own tax
advisors regarding state and local tax consequences when investing in
Partnership-Taxed Certificates.
Foreign Investors
Partnership-Taxed Certificates may not be suitable instruments for
investors that are not United States Persons. Prospective investors that are
not United States Persons are urged to consult their own tax advisors regarding
the federal income tax consequences of the purchase and ownership of
Partnership-Taxed Certificates.
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Unless otherwise specified in the related Prospectus Supplement, the
Securities will be available only in book-entry form. Investors in the
Securities may hold such Securities through any of DTC, CEDEL or Euroclear. The
Securities will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlement and all secondary trades will settle
in same-day funds.
Secondary market trading between investors holding Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
Eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
participants holding Securities will be effected on a delivery-against-payment
basis through the respective Depositories of CEDEL and Euroclear and as
participants in DTC.
INITIAL SETTLEMENT
All Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Securities will be
represented through financial institutions acting on their behalf as direct or
indirect participants in DTC. As a result, CEDEL
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and Euroclear will hold positions on behalf of their participants through their
respective Depositories, which in turn will hold such positions in accounts as
participants of DTC.
Investors electing to hold their Securities through DTC will follow
the settlement practices applicable to United States corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in the same-day funds on the settlement date.
Investors electing to hold their Securities through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no "lock-
up" or restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
SECONDARY MARKET TRADING
General
Because the purchase determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
account are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants
Secondary market trading between DTC Participants will be settled
using the procedures applicable to United States corporate debt issues in same-
day funds.
Trading between CEDEL and/or Euroclear Participants
Secondary market trading between CEDEL Participants and/or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC Seller and CEDEL or Euroclear Purchaser
When Securities are to be transferred from the account of a DTC
Participant to the account of a CEDEL Participant or a Euroclear Participant,
the purchaser will send instructions to CEDEL or Euroclear through a Participant
at least one business day prior to settlement. CEDEL or Euroclear will instruct
the respective Depository to receive the Securities against payment. Payment
will include interest accrued on the Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of a
calendar year consisting of twelve 30-day calendar months. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by
the respective Depository to the DTC Participant's account against delivery of
the Securities. After settlement has been completed, the Securities will be
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credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The Securities' credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Securities will accrue from, the value date (which would be the preceding
day when settlement occurred in New York). If settlement is not completed on
the intended value date (i.e., the trade fails), the CEDEL or Euroclear cash
debit will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, Participants can elect not to preposition funds and allow the credit
line to be drawn on to finance settlement. Under this procedure, CEDEL
Participants or Euroclear Participants purchasing Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Securities were credited to their accounts. However, interest on the Securities
would accrue from the value date. Therefore, in many cases the investment
income on the Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result will
depend on each Participant's particular cost of funds.
Because the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Securities to the
respective Depository for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle like a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser
Due to time zone differences in their favor, CEDEL and Euroclear
Participants may employ their customary procedures for transactions in which
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a Participant at least one business day prior to
settlement. In this case, CEDEL or Euroclear will instruct the respective
Depository to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Securities from the
including the last coupon payment date to and excluding the settlement date on
the basis of a calendar year consisting of twelve 30-day calendar months. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. The payment will
then be reflected in the account of the CEDEL or Euroclear Participant the
following day, and receipt of the cash proceeds in the CEDEL or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the
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CEDEL or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL or Euroclear Participant's account would instead be valued as of the
actual settlement date.
Day traders that use CEDEL or Euroclear and that purchase Securities
from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(i) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(ii) borrowing the Securities in the United States from a DTC
Participant no later than one day prior to settlement, which would give the
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(iii) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC Participant
is at least one day prior to the value date for the sale to the CEDEL
Participant or Euroclear Participant.
CERTAIN UNITED STATES FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A Certificateholder holding securities through CEDEL, Euroclear or DTC
may be subject to United States withholding tax at a rate of 30%, unless each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity or required to
withhold tax complies with applicable certification requirements, and
(i) the Certificateholder provides a statement signed by the
beneficial owner under penalties of perjury that the owner is not a United
States Person, or in the case of an individual, that he or she is not a
resident or citizen of the United States and that provides the name and
address of the beneficial owner; this statement should be made on a Form W-
8 (Certificate of Foreign Status);
(ii) interest is paid to the Certificateholder at an address inside
the United States and the Certificateholder is a United States Person that
is exempt from withholding and complies with the appropriate certification
requirements. if any;
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(iii) provides a properly executed Form 1001 (Exemption or Reduced
Rate Certificate);
(iv) provides a properly executed Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of
Trade or Business in the United States); or
(v) interest is paid at an address inside the United States and backup
withholding is required.
A Certificateholder holding such securities through DTC, CEDEL or
Euroclear may be subject to backup withholding at a rate of 31% unless the
holder:
(i) provides a properly executed Form W-8 or W-9; or
(ii) is a corporation (within the meaning of Section 7701(a) of the
Code) or otherwise establishes that it is a recipient exempt from United
States backup withholding.
The global security holder or, in the case of a Form 1001 or a Form
4224 Filer, his agent, files by submitting the appropriate form to the person
through which he holds (the clearing agency, in the case of persons holding
directly on the books of the clearing agency) a Certificate. Form W-8 and Form
1001 are effective after the issuance of the certificate in the calendar year of
its issuance and the two immediately succeeding calendar years and Form 4224 is
effective for one calendar year. If the information on the forms change, the
beneficial owner must inform the person through which he holds within 30 days of
such change.
This summary does not deal with all aspects of federal income tax
withholding that may be relevant to Certificateholders that are not United
States Persons. Such investors are advised to consult their own tax advisors
for specific tax advice concerning their holding and disposing of Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
Set forth below are certain consequences under ERISA and the Code that
a fiduciary (a "Plan Fiduciary") of an "employee benefit plan" (as defined in
and subject to ERISA) or of a "plan" (as defined in Section 4975 of the Code)
who has investment discretion should consider before deciding to invest the
plan's assets in Securities. The following summary is intended to be a summary
of certain relevant ERISA issues and does not purport to address all ERISA
considerations that may be applicable to a particular plan.
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In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code (a "Plan") refer to any plan or
account of various types which provide retirement benefits or welfare benefits
to an individual or to an employer's employees and their beneficiaries. Plans
include corporate pension and profit-sharing plans, "simplified employee pension
plans", Keogh plans for self-employed individuals (including partners in a
partnership), individual retirement accounts described in Section 408 of the
Code and health insurance plans. For the purposes of the following discussion,
the term "Plan" also includes any entity whose assets constitute assets of any
"Plan" under the provisions of ERISA discussed in the "Plan Assets" section of
this summary, below, and "Plan Fiduciary" includes any person who is a fiduciary
with respect to any such Plan.
Each Plan Fiduciary must give appropriate consideration to the facts
and circumstances that are relevant to an investment in the Securities,
including the role that an investment in the Securities plays in the Plan's
investment portfolio. Each Plan Fiduciary, before deciding to invest in the
Securities, must be satisfied that investment in the Securities is a prudent
investment for the Plan, that the investments of the Plan, including the
investment in the Securities, are diversified so as to minimize the risks of
large losses and that an investment in the Securities complies with the Plan and
related trust documents.
Each Plan considering acquiring a Security 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.
INELIGIBLE PURCHASERS
Securities may not be purchased with the assets of a Plan that is
sponsored by or maintained by the Company, the Trustee, the Issuer or any of
their respective affiliates. Securities may not be purchased with the assets of
a Plan if the Company, the Trustee, Issuer or any of their respective affiliates
or any employees thereof: (i) exercises any discretionary authority or
discretionary control respecting management of a Plan or exercises any authority
or control respecting the management or disposition of its assets, (ii) renders
investment advice for a fee or other compensation, direct or indirect, with
respect to any moneys or other property of a Plan, or has any authority or
responsibility to do so, or (iii) has any discretionary authority or
discretionary responsibility in the administration of a Plan. A party that is
described in clause (i), (ii) or (iii) of the preceding sentence is a fiduciary
under ERISA and the Code with respect to the Plan, and any such purchase might
result in a "prohibited transaction" under ERISA and the Code.
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PLAN ASSETS
When a Plan purchases a Security not only does the Security become an
asset of the Plan, but it is possible that the purchase of a Security by a Plan
will cause, for purposes of Title I of ERISA and Section 4975 of the Code, the
related Underlying Assets 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 will result in the underlying assets of the entity being plan assets.
The DOL Regulation provides that the assets of an entity will not be "plan
assets" of a Plan that purchases an interest therein if such interest is not an
"equity interest". The DOL Regulation defines an equity interest as an interest
other than an instrument that is treated as indebtedness under applicable local
law and that has no substantial equity features. The DOL Regulation provides,
with respect to the purchase of an equity interest by a Plan, that the assets of
an entity will be plan assets of a Plan that purchases an interest therein
unless the investment by all "benefit plan investors" is not "significant" or
certain other exceptions apply. The Prospectus Supplement will specify whether
any of the exceptions set forth in the regulation under ERISA may apply with
respect to a Series of Securities.
The term "benefit plan investors" includes all plans and accounts of
the types described above under "General" as employee benefit plans and
accounts, whether or not subject to ERISA, as well as entities that hold "plan
assets" due to investments made in such entities by any of such plans or
accounts. Investments by benefit plan investors will be deemed not significant
if benefit plan investors own, in the aggregate, less than a 25% interest in the
entity, determined without regard to the investments of persons with
discretionary authority or control over the assets of such entity, of any person
who provides investment advice for a fee (direct or indirect) with respect to
such assets and of "affiliates" of such persons (within the meaning of the DOL
Regulation) of such persons.
There is no restriction on the percentage of the value of the Trust
Certificates that may be owned by benefit plan investors and, thus, there is no
assurance that investment by benefit plan investors will not be significant.
Accordingly, it is not expected that an exception from the plan asset
regulations will apply and, therefore, it should be assumed that the Underlying
Securities will be treated as assets of Plans that purchase Trust Certificates.
If none of the exceptions set forth in the DOL Regulation (including
those discussed above) apply, the Underlying Assets will be deemed to be the
assets of each benefit plan investor for purposes of ERISA. In such a case, the
discussion set forth in the following sections will apply.
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In addition, it should be noted that ERISA and the Code may place
restrictions on the purchase of Trust Certificates by certain investors that are
not Plans. 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 (decided December 13, 1993), which held that assets held in an
insurance company's general account may be deemed to be "plan assets" under
certain circumstances. Based on the reasoning of the John Hancock case, it
could be argued that if the Company or CSFB or any of their affiliates is a
party in interest or a disqualified person with respect to a Plan that has
assets invested in the general account of an insurance company that acquires,
holds or invests in Trust Certificates using such general account funds, such
acquisition of, or holding of, or investment in, such Trust Certificates might
constitute a prohibited transaction for purposes of Section 4975 of the Code or
Section 406 or ERISA, as discussed below. Insurance company investors should
analyze whether this decision may adversely affect their ability to purchase
Trust Certificates.
Consequences of Characterization as Plan Assets
If the Underlying Assets are plan assets, the Trustee, or, in the case
of Bonds, the Company or its affiliate will be a fiduciary under ERISA with
respect to Plan investors, and its duties and liabilities will be subject to the
provisions of ERISA. Generally, the fiduciary provisions of ERISA require Plan
Fiduciaries to act for the exclusive benefit of participants and beneficiaries
of the Plan, to employ the care, skill, prudence and diligence that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, to diversify
investments so as to minimize the risk of large losses and to comply with the
Plan and trust documents of the Plan.
Prohibited Transactions
If the Underlying Assets are plan assets, Section 406 of ERISA will
prohibit the Trustee, among others, from causing the assets of the Issuer to be
involved, directly or indirectly, in certain types of transactions with "parties
in interest" 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 criminal and civil penalties upon the
Plan Fiduciary and possibly other persons. Section 4975(c) 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 IRA that engages in a prohibited transaction may
instead forfeit its tax-exempt status) and also requires recision of such
transaction.
The types of transactions subject to the prohibited transaction
restrictions of ERISA and Section 4975(c) of the Code include: (i) sales,
exchanges or leases of property (such as the Securities), (ii) loans or other
extensions of credit and (iii) the furnishing of goods and services. As
described in Section 406(b)(1) or Section 4975(c)(1)(E) of the Code, the use of
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plan assets by or for the benefit of parties in interest or disqualified persons
may also constitute a prohibited type of transaction.
The Company, the Trustee, the Issuer 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 Securities by or on behalf of such Plan could give
rise to one or more "prohibited transactions" within the meaning of Section 406
ERISA and Section 4975(c) of the Code unless an exemption described below or
some other exemption is available. In particular, the sale of a Security by the
underwriters thereof or the services provided by the Trustee to such Plan would
appear in certain circumstances to be a prohibited transaction 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.
Certain exemptions are described below:
The prohibited transaction restrictions of Section 406(a) of ERISA and
Sections 4975(c)(1)(A) through (D) of the Code also do not apply to the purchase
or sale of Securities by a Plan from a party in interest that is a registered
broker-dealer if the conditions set forth in Prohibited Transaction Class
Exemption 75-1 ("PTCE 75-1") are satisfied. That exemption, however, does not
extend to violations of Section 406(b) of ERISA or Section 4975(c)(1)(E) of the
Code. The conditions that must be satisfied for PTCE 75-1 to apply as follows:
(i) the broker-dealer is registered under the Exchange Act and
customarily purchases and sells securities for its own account in the
ordinary course of its business as a broker-dealer;
(ii) the transaction is at least as favorable to the Plan as an
arm's-length transaction with an unrelated party and, at the time of the
transaction, was not a prohibited transaction within the meaning of Section
503(b) of the Code;
(iii) the broker dealer is not a fiduciary with respect to the
Plan and is a party in interest with respect to the Plan solely because it
or an affiliate provides services to the Plan; and
(iv) for a period of six years from the date of the transaction,
the Plan maintains or causes to be maintained such records as are necessary
to determine whether the foregoing conditions have been met, and such
records are unconditionally available for examination during normal
business hours by the DOL and certain other persons.
Section 408(b)(2) of ERISA and Section 4975(d)(2) of the Code permit
the payment of fees to parties in interest that perform services for a Plan if
(i) such services are appropriate and helpful for the establishment or operation
of the Plan, (ii) such services are provided under a reasonable arrangement
(including termination upon reasonably short notice without penalty); and (iii)
no more than reasonable compensation is paid therefor.
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Before purchasing any Securities, a Plan Fiduciary should consult with
its counsel and determine whether there exists any prohibition to the
acquisition and holding of such Securities. In particular, a Plan Fiduciary
should determine whether the underwriters of the Securities, the Issuer, the
Trustee, the Company or the Servicer are parties in interest with respect to the
Plan and whether any prohibited transaction exemptions, such as the
Underwriter's Exemption PTCE 75-1, Section 408(b)(2) of ERISA or Section
4975(d)(2) of the Code, apply.
Prohibited Transaction Class Exemptions
Certain prohibited transaction class exemptions ("PTCEs") issued by
DOL, including PTCE 84-14 (qualified professional asset managers), PTCE 90-1
(insurance company pooled separate accounts) and PTCE 91-38 (bank collective
investment fund), may apply to Plans purchasing Securities and to some or all
transactions involving the Securities if the conditions for an applicable
exemption are satisfied.
OTHER REQUIREMENTS
ERISA imposes a bonding requirement on the Trustee, or, in the case of
Bonds, the Company or its affiliate (if a fiduciary). This requirement may be
fulfilled by adding an agent's rider to the bond otherwise covering each Plan's
other assets. ERISA also imposes a requirement that all assets of a Plan be
held in trust. This requirement will be fulfilled by the trustee of any Plan
holding its Security in trust. ERISA does not require that the assets of the
Issuer be held in trust.
Except as otherwise set forth, the foregoing statements regarding the
consequences under ERISA of an investment in Securities are based on the
provisions of the Code and ERISA as currently in effect, and the existing
administrative and judicial interpretations thereunder. No assurance can be
given that administrative, judicial or legislative changes will not occur that
would not make the foregoing statements incorrect or incomplete.
Acceptance of subscriptions on behalf of individual retirement
accounts or other Plans is in no respect a representation by the Company, the
Issuer, the Trustee or any other party that this investment meets all relevant
legal requirements with respect to investments by any particular Plan or that
such investment is appropriate for any particular Plan. 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.
LEGAL INVESTMENT
Institutions whose investment activities are subject to regulation by
federal or state authorities should review policies and guidelines adopted from
time to time by such authorities before purchasing any of the Securities,
because certain Series or Classes may be deemed unsuitable investments, or may
otherwise be restricted, under such policies or guidelines.
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The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest-
bearing" or "income-paying" and, with regard to any Securities issued in book-
entry form, provisions which may restrict or prohibit investments in securities
which are issued in book-entry form.
All investors should consult with their own legal advisors in
determining whether and to what extent the Securities constitute legal
investments for such investors.
PLAN OF DISTRIBUTION
The Issuer will apply all or substantially all the net proceeds from
the sale of each Series offered hereby and by the related Prospectus Supplement
to purchase from the Company or one of its affiliates the Underlying Assets
underlying such Series simultaneously with the issuance and sale of such
Securities. The difference between the aggregate price paid by the Company or
such affiliate for such Underlying Assets and such net proceeds represents
profit (or loss) to the Company or such affiliate. None of such profits or
losses will be disclosed in any Prospectus Supplement.
The Securities of any Series may be offered in any of three ways: (i)
through underwriters or dealers; (ii) directly to one or more purchasers; or
(iii) through agents. The related Prospectus Supplement will set forth the
terms of the offering of any Series of Securities, including the names of any
underwriters, the purchase price of such Securities and the proceeds to the
Issuer or such affiliate from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers, any
securities exchanges on which such Securities may be listed and the place and
time of delivery of the Securities to be offered thereby.
If underwriters are used in the sale, Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
The obligations of the underwriters to purchase such Securities will be subject
to certain conditions precedent, and the underwriters will be obligated to
purchase all such Securities if any of such Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If so indicated in the related Prospectus Supplement, the Underwriting
Agreement relating to a particular Series of Securities will authorize agents,
underwriters or dealers to
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solicit offers by certain specified institutions to purchase Securities at the
public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts. Delayed Delivery Contracts provide for the payment
of the public offering price by certain institutional investors, and delivery of
the related Securities, at a future date to be specified in the Prospectus
Supplement. If Delayed Delivery Contracts are used, the Underwriting Agreement
will establish (i) a contractual limit on the amount of Securities that can be
covered by such contracts and (ii) a minimum principal amount of each Delayed
Delivery Contract. Certain other conditions to the use of Delayed Delivery
Contracts may be set forth in the related Prospectus Supplement and such
Prospectus Supplement will set forth the commissions payable for solicitations
of such contracts.
Securities may also be sold through agents designated by the Issuer
from time to time. Any agent involved in the offer or sale of Securities will
be named, and any commissions payable by the Issuer to such agent will be set
forth, in the related Prospectus Supplement. Any such agent will act on a best
efforts basis for the period of its appointment.
Any underwriters, dealers or agents participating in the distribution
of Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of the Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Issuer to
indemnification by the Issuer against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with or perform services for the Issuer or its affiliates in the ordinary course
of business.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby
will be passed on for the Company by Sidley & Austin, New York, New York. Other
counsel may pass on legal matters involving the application of laws of any
jurisdictions other than the State of New York or the United States of America.
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GLOSSARY
The following are abbreviated definitions of certain capitalized terms
used in this Prospectus and the related Prospectus Supplement. Certain terms
used under "The Securities", "The Indenture" and "The Trust Agreement" are
defined more fully in the relevant Governing Document, to which reference is
made.
"Accrual Bond" means a Bond on which interest accrues and is added to
the principal of such Security periodically but with respect to which no
interest or principal is payable except during the period or periods specified
in the related Prospectus Supplement.
"Accrual Date" means, with respect to any Series, the date on which
interest begins accruing on the Securities of the Series, as specified in the
related Prospectus Supplement.
"Accrual Payment Amount" means, with respect to any Payment Date for a
Series occurring prior to or on the Accrual Termination Date, the aggregate
amount of interest accrued on the Accrual Securities of such Series during the
Interest Accrual Period relating to such Payment Date and which is not then
required to be paid.
"Accrual Securities" means a Class of Securities of a Series on which
interest accrues and is added to the principal of such Securities periodically
but with respect to which no interest or principal is payable except during the
period or periods specified in the related Prospectus Supplement.
"Accrual Termination Date" means, with respect to a Class of Accrual
Securities, the Payment Date on which all Securities of the related Series with
Final Scheduled Payment Dates earlier than that of such Class of Accrual
Securities have been fully paid, or such other date or period as may be
specified in the related Prospectus Supplement.
"Accrual Trust Certificate" means a Trust Certificate that is an
Accrual Security.
"Administration Agreement" means, with respect to a Series, an
agreement pursuant to which the Administrator agrees to perform certain
ministerial, administrative, accounting and clerical duties on behalf of the
Issuer with respect to such Series.
"Administration Fee" means the fee specified as such in the
Administration Agreement.
"Administrator" means the person that will perform certain
ministerial, administrative, accounting and clerical duties on behalf of the
Issuer with respect to certain Series of Securities pursuant to an
Administration Agreement.
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"Aggregate Discounted Amount" means, with respect to any Series, the
aggregate amount obtained by adding the Discounted Amount of each Underlying
Security for such Series, plus the Discounted Amount, as determined in the
related Prospectus Supplement, of any cash remaining in the Collection Account
or any other Pledged Fund or Account subsequent to an initial deposit therein by
the Issuer (together with, if applicable, the aggregate Discounted Amount of
each other Underlying Asset to which a Discounted Amount is assigned).
"Aggregate Outstanding Principal" means, with respect to any Series or
Class thereof, the principal amount of all Securities of such Series or Class
outstanding at the date of determination, including, in respect of any Class of
Accrual Securities of such Series (or other Class of Securities on which
interest accrues and is added to the outstanding principal amount thereof), the
Compound Value (or accreted value) of such Securities through the Payment Date
or Distribution Date immediately preceding the date of determination.
"Applicable Federal Rate" means the interest rate on Treasury
Securities.
"Asset Schedule" means a schedule appearing in the Trust Agreement
that will identify each Underlying Asset and other property to be included in
the Trust for a Series. The Asset Schedule will specify with respect to each
Underlying Security: the original principal amount and unpaid principal
balance, as of the date of such Trust Agreement; the current interest rate; the
scheduled payments of principal and interest; the maturity date of the related
obligation; if the Underlying Security is an adjustable rate Underlying
Security, the lifetime interest rate cap, if any, and the Index; and, if the
related obligation has other than fixed scheduled payments and level
amortization, the terms thereof.
"Assumed Deposit Date" means the date specified therefor in the
related Governing Document, on which distributions on the Underlying Securities
are assumed to be deposited in the Collection Account for purposes of
calculating Reinvestment Income thereon.
"Assumed Reinvestment Rate" means, with respect to a Series, the per
annum rate or rates specified in the related Prospectus Supplement or the
related Guaranteed Investment Contract for a particular period or periods as the
"Assumed Reinvestment Rate" for funds held in Pledged Funds and Accounts for the
Series.
"Authenticating Agent" means an agent appointed by the Trustee for
purposes of authenticating and delivering any Series of Bonds.
"Available Funds" means, unless otherwise provided in the Prospectus
Supplement, with respect to each Payment Date for a Series, the sum of the
following amounts: (i) the aggregate amount received by the Issuer of such
Series on or prior to such Payment Date in respect of the Underlying Securities
with respect to such Series, the related Underlying Enhancement with respect to
such Series, if any, and Reinvestment Income with respect to such Series, if
any, plus or minus the net amount received or paid on any related Swap
Agreements with respect to such Series and the cash proceeds received upon the
exercise of the Optional Call Right, if any, with respect to such Series; less
(ii) any amounts theretofore paid by
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the Issuer to Holders of such Series to the Trustee with respect to such Series,
to the provider of any Underlying Enhancement with respect to such Series or any
other Person with respect to such Series and any amounts payable on such Payment
Date to the Trustee with respect to such Series, or the provider of any
Underlying Enhancement with respect to such Series or otherwise payable on such
Payment Date by the Issuer.
"Beneficial Owners" means holders of beneficial interests in
Securities that are not Holders of record on the Register for such Securities.
"Bondholder" means the Person in whose name a Bond is registered in
the Security Register.
"Bond Interest Rate" or "Bond Rate" means the interest rate on the
outstanding principal amount of a Bond payable on the applicable Payment Date
for such Bond, as specified in the related Prospectus Supplement.
"Bonds" means the Collateralized Bond Obligations sold by an Issuer
pursuant to this Prospectus and the related Prospectus Supplement.
"Book-Entry Bonds" means Bonds of a Series that are issued in whole or
in part in book-entry form.
"Book-Entry Eligible Securities" means Securities of any Series which
are eligible, but are not required to be held by persons acquiring such
Securities through DTC in the United States or though CEDEL or Euroclear in
Europe.
"Book-Entry Only Securities" means a Class of Securities which are
issued on a book-entry basis and are required to be held by the person acquiring
such Securities through DTC in the United States.
"Book-Entry Registration" means the registration of book-entry
securities.
"Book-Entry Securities" means Securities of a Series that are issued
in whole or in part in book-entry form.
"Book-Entry Trust Certificates" means Trust Certificates of a Series
that are issued in whole or in part in book-entry form.
"Business Day" means a day that is not a Saturday, Sunday, legal
holiday or a day on which banking institutions are authorized or obligated by
law, regulation or executive order to be closed in either New York City or in
the city in which the Corporate Trust Office is then located, or with respect to
any Series that includes any Class of Variable Interest Securities, London.
"CEA" means the Commodity Exchange Act, as amended.
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"CEDEL" means Centrale de Livraison de Valeurs Mobilieres S.A., or its
successor in interest.
"CEDEL Participants" means organizations for which CEDEL holds
securities.
"Certificateholder" or "Trust Certificateholder" means the Person in
whose name a Trust Certificate is registered in the Security Register.
"Certificate of Foreign Status" means a statement made on a form W-8
that is signed by the beneficial owner, under penalties of perjury, that the
owner is not a United States Person, or in the case of an individual, that he or
she is not a resident or citizen of the United States and that provides the name
and address of the beneficial owner.
"CFTC" means the Commodities Futures Trading Commission, or its
successor in interest.
"Class" means a class of Securities within a Series.
"Closing Date" means, with respect to a Series, the date on which
Securities of such Series are first issued.
"Code" means the Internal Revenue Code of 1986, as amended.
"COFI" means the Cost of Funds Index.
"Collection Account" means, with respect to a Series, the account
created pursuant to the Governing Document to collect payments on the Underlying
Assets for application as specified in such Governing Document.
"Company" means CS First Boston Structured Products Corporation, or
its successor in interest.
"Compound Value" means, with respect to a Class of Accrual Securities,
as of any determination date, the original principal amount of such Class, plus
all accrued and unpaid interest, if any, previously added to the principal
thereof and reduced by any payments of principal previously made on such Class
of Accrual Securities and by any losses allocated to such Class.
"Cooperative" means Euroclear Clearance System S.C., a Belgian
cooperative corporation, or its successor in interest.
"Corporate Trust Office" means the corporate trust office of the
Trustee, which shall be specified in the related Prospectus Supplement.
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"Covered Series" means a form of Underlying Enhancement that covers
more than one Series of Securities.
"CSFB" means CS First Boston Corporation, or its successor in
interest.
"Definitive Securities" means the Securities of a Series when and if
issued in definitive form to the record owners of such Series or their nominees.
"Delayed Delivery Contracts" means contracts which provide for the
payment of the public offering price by certain institutional investors, and
delivery of the related Securities, at a future date to be specified in the
Prospectus Supplement.
"Delivery Date" means with respect to a Series, the date on which the
Securities of such Series are to be delivered to the original purchasers
thereof.
"Designated Interest Accrual Date" means, as specified in the related
Prospectus Supplement, (a) the date preceding a Redemption Date or Special
Redemption Date as the date through which accrued interest is paid on redemption
or special redemption, or (b) the date through which accrued interest is paid on
the occurrence of an Event of Default.
"Determination Date" means the date on which a determination is made
regarding the Holders to whom a payment is due and payable on any Underlying
Securities, and in certain cases, other Underlying Assets.
"Discounted Amount" means an amount equal to the lesser of (i) the
present value of an assumed stream of payments of principal and interest on
Underlying Securities included in the Underlying Assets securing a Series or
comprising a Trust together with Reinvestment Income thereon, if any, discounted
with the same frequency as payments are made on the Securities of such Series at
the highest interest rate borne by such Securities and (ii) the product of any
collateral value cap set forth in the related Governing Document and the then
outstanding principal amount thereof.
"Distributor" has the meaning specified in "Limitations on Issuance of
Bearer Certificates".
"DOL" means Department of Labor, or its successor in interest.
"DOL Regulation" means a regulation issued under ERISA by the United
States Department of Labor.
"DTC" means The Depository Trust Company, a limited purpose banking
corporation organized under the laws of the State of New York, or its successor
in interest.
"DTC Participants" means organizations for which DTC holds securities.
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"Due Date" means each date on which a payment is due and payable on
any Underlying Securities and, in certain cases, other Underlying Assets.
"Due Period" means, for each Payment Date, the period beginning on the
second day of the month preceding the month in which such Payment Date, as
applicable, occurs and ending on the first day of the month in which such
Payment Date occurs.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., or its
successor in interest.
"Eligible Institution" means a depository institution the long-term
deposits or the long-term unsecured debt obligations of which (or in the case of
the principal bank in a bank holding company system, the long-term unsecured
debt obligations of such bank holding company) have been rated at least
AAA/Aaa/AAA by S&P, Moody's and Fitch, respectively, and AAA by Duff & Phelps,
if such deposits or obligations are rated by Duff & Phelps, or maintained with a
depository institution the commercial paper of which (or, in the case of a
principal bank in a bank holding company system, the commercial paper of such
bank holding company) is rated at least A-1 + /P-1 by S&P and Moody's,
respectively, and D-1 by Duff & Phelps, if such commercial paper is rated by
Duff & Phelps.
"Eligible Investments" means any one or more of the obligations or
securities described herein under "The Underlying Assets--Investment of Funds".
"Enhanced Series" means a Series covered by an Underlying Enhancement.
"Enhancement Agreement" means the agreement or instrument pursuant to
which any Underlying Enhancement is issued or under which the terms of any
Underlying Enhancement are set forth.
"Enhancements" means Structural Enhancements or Underlying
Enhancements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means employee benefit plans subject to Part 4 of Title
1 of ERISA.
"Euroclear" or "Euroclear Operator" means the organization which
operates the Euroclear System under contract with Euroclear Clearance System
S.C.
"Euroclear Participants" means organizations for which Euroclear holds
securities.
"Event of Default" is defined herein under "The Indenture--Events of
Default" and "The Trust Agreement--Events of Default".
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"Excess Cash Flow" shall have the meaning set forth in the related
Prospectus Supplement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Final Scheduled Payment Date" means the Payment Date on which
principal of and interest on a Series of Securities is scheduled to be paid in
full.
"Financial Guaranty Insurance" means a surety bond or insurance policy
included within the Underlying Enhancements with respect to a Series.
"Fitch" means Fitch Investors Service, L.P., or its successor in
interest.
"Fixed Rate" means a nonvariable interest rate that is assigned to a
Security.
"Governing Document" means the Indenture or the Trust Agreement
(including, unless the context otherwise requires, any related Series
Supplement) establishing the terms of a particular Series.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate,
remise, convey, assign, transfer, deposit, set over, confirm, create and grant a
lien on and a security interest in and right of setoff against property.
"Group" means Assets grouped for the purpose of providing structural
Enhancement. See "Structural Enhancements -- Grouping of Underlying Assets."
"Guaranteed Investment Contract" means a guaranteed investment
contract providing for the investment of distributions on the Underlying Assets
guaranteeing a minimum of a fixed rate of return on the investment of moneys
deposited therein.
"Guarantor" means the person from whom the Issuer obtains a Guaranteed
Investment Contract.
"Holder" means each Person identified as a holder of a Security in the
Security Register.
"Indenture" means with respect to any Series of Bonds, the Trust
Indenture, together with any related Series Supplement.
"Index" means, among other things, LIBOR, a prime rate, COFI, a
commercial paper rate, a federal funds rate or an index based on the price of
certain commodities (such as crude oil, natural gas, gold, silver or coffee) or
the value of certain
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intangibles (such as stock indices, bond indices, foreign exchange rates or the
consumer price index).
"Indirect Participant" means a person such as a bank, broker, dealer
or trust company that clears through or maintains a custodial relationship with
a Participant either directly or indirectly.
"Installment Obligation" means a debt instrument that provides for
payment of any amount other than the qualified stated interest before maturity.
"Interest Accrual Period" means the period specified in the related
Prospectus Supplement for a Series, during which interest accrues on Securities
of the related Series with respect to any Payment Date, Redemption Date or
Special Redemption Date.
"Interest-Only Bond" means a Bond that is entitled to receive only
payments of interest based on the Notional Principal Amount of the Security.
"Interest-Only Securities" means a Class of Securities entitled to
receive only payments of interest based on the Notional Principal Amount of the
Security.
"Interest-Only Trust Certificate" means a Trust Certificate that is
entitled to receive only payments of interest based on the Notional Principal
Amount of the Security.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"IRS" means the Internal Revenue Service.
"Issuer" means the Company or a Trust established as issuer of a
Series of Securities.
"Letter of Credit" means a Letter of Credit issued to enhance
securities as described under "Underlying Enhancements".
"Letter of Credit Issuer" means the issuer of a Letter of Credit
(which may be a syndicate of banks, financial institutions and/or other issuers,
including confirming issuers).
"Letter of Credit Percentage" means the maximum liability of a Letter
of Credit Issuer, expressed as a percentage of the initial aggregate outstanding
principal balance of the Underlying Securities or one or more Classes of
Securities of the related Series, as specified in the related Prospectus
Supplement.
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"LIBOR" means the London Interbank Offered Rate, as determined in
accordance with the terms of the applicable Series Supplement.
"Maximum Variable Interest Rate" means the interest rate cap on the
Bond Interest Rate or Trust Certificate Interest Rate for Variable Interest
Securities.
"Minimum Variable Interest Rate" means the interest rate floor on the
Bond Interest Rate or Trust Certificate Interest Rate for Variable Interest
Securities.
"Moody's" means Moody's Investors Service, Inc., or its successor in
interest.
"1992 Act" means the Future Trading Practices Act of 1992, as amended.
"Nonperiodic Payment" means any payment made or received pursuant to a
Notional Principal Contract that is not a Periodic Payment or a termination
payment.
"Nonresidents" means a nonresident alien individual, foreign
partnership, foreign corporation, foreign estate or foreign trust.
"Notional Principal Amount" means the hypothetical principal amount
used in determining the interest payable on an Interest-Only Security.
"Notional Principal Contract" means a financial instrument that
provides for the payment of amounts by one party to another at specified
intervals calculated by reference to a specified index applied to a notional
principal amount in exchange for either (a) a promise to pay similar amounts or
(b) specified consideration such as, for example, a cash payment made at the
time that the contract is entered into.
"OID" means "original issue discount" within the meaning of Section
1273 of the Code.
"Optional Call Right" means the right of any Optionholder as described
under "The Securities--Optional Call Right".
"Optionholder" means the Company and/or one or more of its affiliates
and/or one or more unrelated third persons who have an Optional Call Right as
described in the related Prospectus Supplement.
"OTS" means the Office of the Thrift Supervision.
"Participant" means a person that transfers Book-Entry Securities
through DTC, CEDEL or Euroclear including securities brokers and dealers, banks,
trust companies and
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clearing corporations and may include certain other organizations such as the
underwriters of the Securities.
"Participating Bond" means a Bond that is entitled to receive payments
of principal and interest and an additional return on investment as described in
the related Prospectus Supplement.
"Participating Securities" means a Class of Securities entitled to
receive payments of principal and interest and an additional return on
investment as described in the related Prospectus Supplement.
"Participating Trust Certificate" means a Trust Certificate that is
entitled to receive payments of principal and interest and an additional return
on investment as described in the related Prospectus Supplement.
"Participation Agreement" means the agreement through which
participation interests in a Series will be acquired.
"Parties in Interest" means all persons described in Section 3(14) of
ERISA for purposes of Title I of ERISA and all persons described in Section
4975(e) of the Code for purposes of Section 4975 of the Code.
"Partnership-Taxed Security" means a Trust Certificate issued by a
Partnership-Taxed Trust.
"Partnership-Taxed Trust" means a Trust that is treated as a
partnership for federal income tax purposes.
"Paying Agent" means the Trustee or any other Person specified in a
Governing Document authorized and appointed pursuant to such Governing Document
to pay the principal or interest on any Securities on behalf of the Issuer.
"Payment Date" means the date on which payments of principal, interest
or any other amounts are payable on a Security.
"Periodic Payments" has the meaning specified in "Certain Federal
Income Tax Consequences--Income Allocable to Certain Underlying Assets that are
Swap Agreements".
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint stock company, limited liability company,
trust (including any beneficiary thereof), unincorporated organization,
government or any agency or political subdivision thereof.
-128-
<PAGE>
"Plan Fiduciary" means a fiduciary of an employee benefit plan as
defined in and subject to ERISA or of a plan as defined in Section 4975 of the
Code.
"Plans" means ERISA Plans and plans within the meaning of Section
4975(e)(1) of the Code, and any person all or a portion of whose assets are
treated as if they were assets of such plans.
"Pledged Fund or Account" means any fund or account, including the
Collection Account or any Reserve Fund established with respect to, and granted
as security for, a Series of Securities.
"Principal Determination Date" means the day specified in the related
Prospectus Supplement.
"Principal-Only Bond" means a Bond that pays principal only and no
interest.
"Principal-Only Securities" means a Class of Zero Coupon Securities
that pay principal only and no interest.
"Principal-Only Trust Certificate" means a Trust Certificate entitled
to receive principal only and no interest.
"Principal Payment Dates" means, with respect to a Class, the dates
specified in the related Prospectus Supplement on which principal of the
Securities of such Class is to be paid.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PTCEs" means Prohibited Transaction Class Exemptions that are issued
by the Department of Labor.
"Rating Agency" means a nationally recognized statistical rating
agency that is described as a Rating Agency in the applicable Prospectus
Supplement.
"Redemption Date" means, with respect to any Series, the Payment Date
specified by the Issuer for the redemption of Securities of such Series pursuant
to the Indenture.
"Redemption Price" means, with respect to any Bond of a Series or
Class to be redeemed, an amount equal to the percentage specified in the related
Prospectus Supplement of the principal amount (or of the Compound Value of any
Accrual Security) of such Security so redeemed, together with accrued and unpaid
interest thereon at the applicable Bond Interest Rate to the Designated Interest
Accrual Date for such Series.
"Reinvestment Income" means any interest or other earnings on Pledged
Funds or Accounts that are part of the Underlying Assets for a Series.
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<PAGE>
"Reserve Fund" means, with respect to a Series, any reserve fund
described in the applicable Prospectus Supplement, including a Subordination
Reserve Fund.
"Retail Bond" means each of the Bonds of a Class identified as such in
the related Prospectus Supplement. See "The Securities--Mandatory Redemption of
Retail Bonds".
"Retail Securities" means a Class of Securities identified as such in
the Prospectus Supplement. See "The Securities-Mandatory Redemption of Retail
Bonds".
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill, Inc., or its successor in interest.
"SEC" means the Securities and Exchange Commission, or its successor
in interest.
"Securities" means Bonds or Trust Certificates.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" means a Holder of an issued Security.
"Securities Owners" means the owners of the beneficial interests in a
Series of Securities.
"Security Register" means the register maintained pursuant to the
Governing Document for a Series, providing for the registration of the
Securities of such Series and the transfers and exchanges thereof.
"Senior Bond" means a Bond that has a claim upon the assets of the
Issuer prior to other Bonds.
"Senior Securityholders" means Holders of Senior Securities.
"Senior Trust Certificate" means a Trust Certificate that has a claim
upon the assets of the Issuer prior to other Trust Certificates.
"Series" means a separate series of Securities sold pursuant to this
Prospectus and the related Prospectus Supplement.
"Series Supplement" means a supplement relating to a Governing
Document establishing the terms of a particular Series.
"Servicer" means any entity which services loans contained in the
Underlying Assets relating to a Series.
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<PAGE>
"Special Redemption Date" means, with respect to a Series, the date of
each month (other than any month in which a Payment Date occurs) on which Bonds
of that Series may be redeemed pursuant to the Indenture for such Series; such
date will be the same day of the month as the day on which the Payment Date for
the Bonds of that Series occurs.
"Specified Index" means: (i) a fixed rate, price or amount; (ii) a
fixed rate, price or amount applicable in one or more specified periods followed
by one or more different fixed rates, prices or amounts applicable in other
periods; (iii) an index that is based on objective financial information; and
(iv) an interest rate index that is regularly used in normal lending
transactions between a party to the contract and unrelated persons.
"Stripped Bond" has the meaning specified in "Certain Federal Income
Tax Consequences--Income Allocable to Underlying Securities that are Stripped
Bonds or Stripped Coupons".
"Stripped Coupon" has the meaning specified in "Certain Federal Income
Tax Consequences--Income Allocable to Underlying Securities that are Stripped
Bonds or Stripped Coupons".
"Structural Enhancement" means overcollateralization,
senior/subordinated structures and other structural elements of Securities
intended, for example, to ensure the timely payments or distributions of or on
Securities or Classes thereof and not constituting a part of the Underlying
Assets.
"Subordinated Bond" means a Bond which is subordinate in right of
payment or priority or otherwise to the extent described in the related
Prospectus Supplement to payment of principal and interest to any Senior Classes
of Securities of such Series.
"Subordinated Securities" means a Class of Securities which are
subordinate in right of payment or priority or otherwise to the extent described
in the related Prospectus Supplement to payment of principal and interest to any
Senior Classes of Securities of such Series.
"Subordinated Securityholders" means Holders of Subordinated
Securities.
"Subordinated Trust Certificate" means a Trust Certificate which is
subordinate in right of payment or priority or otherwise to the extent described
in the related Prospectus Supplement to payment of principal and interest or
otherwise to any Senior Classes of Securities of such Series.
"Swap Agreements" means interest rate swap agreements, interest rate
caps and/or interest rate floors relating to interest rates of the Underlying
Securities and the Securities of the related Series.
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<PAGE>
"Terms and Conditions" means securities clearance accounts and cash
accounts with the Euroclear Operator that are governed by the Terms and
Conditions Governing Use of Euroclear and the related Operating Procedures of
the Euroclear System, and applicable Belgian Law.
"TIN" means Taxpayer Identification Number.
"Treasury Regulations" means the regulations promulgated under the
Code.
"Trust" means a trust established pursuant to the Trust Agreement into
which Underlying Assets are deposited for the purpose of issuing a Series of
Trust Certificates.
"Trust Agreement" means the Master Trust Agreement (including, unless
the context otherwise requires, any related Series Supplement) between the
Company and the Trustee pursuant to which a Series of Trust Certificates is
issued.
"Trust Certificateholder" or "Certificateholder" means the Holder of a
Trust Certificate.
"Trust Certificate Interest Rate" means the interest rate or rates on
the outstanding principal amount of a Trust Certificate payable on the
applicable Payment Date for such Trust Certificate, as specified in the related
Prospectus Supplement.
"Trust Certificates" means the Trust Certificates sold by the Issuer
pursuant to this Prospectus and a related Prospectus Supplement.
"Trustee" means the bank or trust company named in the Prospectus
Supplement for a Series as trustee under the related Indenture or Trust
Agreement.
"Trust Estate" means, with respect to any Series of Bonds, all money,
instruments, securities and other property, including all proceeds thereof,
which are subject or intended to be subject to the lien of the Indenture for the
benefit of the Series as of any particular time (including all property and
interests Granted to the Trustee pursuant to the Series Supplement for such
Series).
"Trust Indenture" means the trust indenture between the Company and
the Trustee or a Trust and the Trustee pursuant to which a Series of Bonds are
issued.
"Unavailable Amount" means, unless otherwise provided in the
Prospectus Supplement, with respect to a Series, the amount, if any, remaining
in the related Collection Account on a related Payment Date that represents (i)
scheduled payments of principal of and interest on the Underlying Assets due
subsequent to the Principal Determination Date immediately preceding the related
Payment Date, (ii) the amount of all related redemptions received or deemed
received subsequent to the Principal Determination Date immediately preceding
such Payment Date or (iii) any investment income that has accrued subsequent to
the Principal Determination Date immediately
-132-
<PAGE>
preceding such Payment Date.
"Undelivered Assets" means Underlying Assets that are not pledged and
delivered to the Trustee on the related Closing Date.
"Underlying Assets" means, with respect to any Series, the Underlying
Securities, any related Underlying Enhancement and/or Swap Agreements and any
cash or Guaranteed Investment Contracts and/or other assets underlying such
Series.
"Underlying Enhancement" means Reserve Funds, Financial Guaranty
Insurance, Letters of Credit and other credit enhancement and/or liquidity
facilities and other enhancements (other than Structural Enhancements) intended,
for example, to ensure the servicing or timely payments or distributions of or
on Securities or Classes thereof and constituting part of the Underlying Assets.
"Underlying Issuers" means the Persons that issue, guarantee or
provide credit support or are otherwise issuers with respect to Underlying
Securities.
"Underlying Securities" means the securities identified as such in the
related Prospectus Supplement and that are transferred by the Company or one of
its affiliates to the related Trust on or before the Closing Date (or are used
by the Company to collateralize a Series of Bonds).
"United States Person" means a person or entity that for United States
federal income tax purposes is either (i) a citizen or resident of the United
States, (ii) a corporation, or other entity created or organized in the United
States or under the laws of the United States or of any political subdivision
thereof or (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
"Variable Interest Bond" means a Bond that is a Variable Interest Rate
Security.
"Variable Interest Payment Date" means, with respect to any Class of
Variable Interest Bonds, the interest payment date specified in the related
Prospectus Supplement. Variable Interest Payment Dates may be monthly,
quarterly, semi-annual or annual.
"Variable Interest Period" means, with respect to any Class of
Variable Interest Securities, the period commencing immediately subsequent to
the preceding Variable Interest Period (or, in the case of the Variable Interest
Period applicable to the first Variable Interest Payment Date with respect to
such Class of Variable Interest Securities, commencing on the Accrual Date for
such Class) and ending on the date specified in the related Prospectus
Supplement, during which such Class of Variable Interest Securities will accrue
interest, payable on the immediately succeeding Variable Interest Payment Date,
at the Bond Interest Rate or Trust Certificate Interest Rate determined on the
immediately preceding Determination Date.
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<PAGE>
"Variable Interest Rate" means the interest rate in respect of a
Variable Interest Security.
"Variable Interest Securities" means a Class of Securities on which
interest accrues at a Bond Interest Rate or Trust Certificate Interest Rate that
is adjusted, based on a predetermined index, at periodic intervals, all as set
forth in the related Prospectus Supplement.
"Variable Interest Trust Certificate" means a Trust Certificate that
is a Variable Interest Security.
"Voting Rights" means Holders' rights to vote and give consents and
waivers in respect of any matter specified in the applicable Governing Document
as requiring such vote, consent or waiver, including any vote, consent or waiver
in respect of any related Underlying Asset. Unless otherwise specified in the
Prospectus Supplement, Voting Rights will be allocated to Holders of a Series of
Securities based on the Aggregate Outstanding Principal of the Security held.
"Zero Coupon Bond" means a Bond that is a Zero Coupon Security.
"Zero Coupon Securities" means a Class of Securities entitled to
receive payments or distributions of principal and interest, if any, only on the
maturity date thereof.
"Zero Coupon Trust Certificate" means a Trust Certificate that is a
Zero Coupon Security.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
-------------------------------------------
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions:
Registration Fee.................. $ 345
Printing and Engraving Expenses... *
Trustee's Fees and Expenses....... *
Legal Fees and Expenses........... *
Blue Sky Fees and Expenses........ *
Accountant's Fees and Expenses.... *
Rating Agency Fees................ *
Miscellaneous..................... *
----------
Total............................. $ *
==========
- ---------------------------
* To be completed by amendment.
Item 15. Indemnification of Directors and Officers
-----------------------------------------
The Company's Certificate of Incorporation and By-laws provide for
indemnification of directors and officers of the Company to the fullest extent
permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against expenses incurred in any such
action, suit or proceeding.
CS First Boston, Inc. carries directors' and officers' liability insurance
that covers certain liabilities and expenses of the Company's directors and
officers and covers the Company for reimbursement of payments to directors and
officers in respect of such liabilities and expenses.
Item 16. Exhibits
--------
1.1 Form of proposed Underwriting Agreement.
4.1 Form of Indenture, including form of Bond.
II-1
<PAGE>
4.2.1 Form of Master Trust Agreement, including form of
Trust Certificate.
4.2.2 Form of Trust Agreement Supplement (Certificates).
4.2.3 Form of Trust Agreement Supplement (Certificates/Bonds)
5.1 Opinion of Sidley & Austin.
8.1 Opinion of Sidley & Austin with respect to tax matters.
23.1 Consent of Sidley & Austin (included in the opinions
filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney of directors and officers of
CS First Boston Structured Products Corporation (included in the
signature pages to this Registration Statement).
25.1 Statement of Eligibility of Trustee.*
99.1 Form of Prospectus Supplement for Trust Certificates.
__________________
* To be filed by amendment.
Item 17. Undertakings
------------
(a) As to Rule 415:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to
this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in this registration statement; and
II-2
<PAGE>
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that the undertakings set forth in clauses (i) and
-------- -------
(ii) above do not apply if the information required to be included in
a post-effective amendment by those clauses is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933, and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on this 29th day of May, 1996.
CS First Boston Structured Products Corporation
By: \s\ Gina Hubbell
----------------------------------------
Name: Gina Hubbell
Title: President and Chief Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gina Hubbell, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all further amendments (including post-effective amendments) to the
Registration Statement to which this Amendment relates, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or her substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Gina Hubbell President, Chief Executive May 29, 1996
- ------------------------- Officer (Principal Executive
Gina Hubbell Officer) and Director
/s/ Lewis Wirshba Treasurer (Principal May 29, 1996
- ------------------------ Financial Officer)
Lewis Wirshba
/s/ Carlos Onis May 29, 1996
- -------------------------
II-4
<PAGE>
Carlos Onis Controller (Principal
Accounting Officer)
/s/ Mark Patterson May 29, 1996
- -------------------------- Director
Mark Patterson
/s/ Benjamin Cohen Vice President May 29, 1996
- -------------------------
Benjamin Cohen
II-5
<PAGE>
EXHIBIT INDEX
Page Number
-----------
1.1 Form of proposed Underwriting Agreement.
4.1 Form of Indenture, including form of Bond.
4.2.1 Form of Master Trust Agreement, including form of
Trust Certificate.
4.2.2 Form of Trust Agreement Supplement (Certificates).
4.2.3 Form of Trust Supplement (Certificates/Bonds)
5.1 Opinion of Sidley & Austin.
8.1 Opinion of Sidley & Austin with respect to tax matters.
23.1 Consent of Sidley & Austin (included in the opinions
filed as Exhibits 5.1 and 8.1).
24.1 Powers of Attorney of directors and officers of
CS First Boston Structured Products Corporation (included in the
signature pages to this Registration Statement).
25.1 Statement of Eligibility of Trustee.*
99.1 Form of Prospectus Supplement for Trust Certificates.
__________________
* To be filed by amendment.
<PAGE>
DRAFT 4/30/96
Exhibit 1.1
CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
[Settlor and Depositor]
[Collateralized Bond Obligations]
[Trust Certificates]
_______ ___, ____
CS First Boston Corporation
[As Representative of the
Several Underwriters]
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
CS First Boston Structured Products Corporation, a Delaware corporation
(the "Company"), proposes [to cause [Name of Trust] (the "Trust")] to issue and
sell $________ in aggregate stated amount of [Collateralized Bond Obligations
(the "[Bonds]" "[Securities]") [and] $________ in aggregate stated amount of
Trust Certificates ([collectively,] the "[Certificates] [Securities]")] governed
pursuant to [a Trust Agreement (the "Trust Agreement") dated as of [date]
between the Company and ___________, as trustee (the "Trustee")] [and] an
Indenture dated as of [date] between the [Company] [Trust] and _____________, as
trustee (the "Indenture Trustee").] [The Certificates will represent beneficial
interests in the Trust.] [The Bonds will represent obligations of the [Trust]
[Company].] The assets of the Trust consist primarily of a pool of [(i) bonds,
debentures, notes and other debt securities issued by corporations,
partnerships, trusts, limited liability companies and other types of domestic
entities, (ii) credit or liquidity enhancement consisting of surety bonds or
insurance policies issued by one or more insurance companies, letters of credit,
other credit enhancement and/or liquidity facilities, (iii) interest rate swap
agreements, interest rate cap agreements and interest rate floor agreements and
(iv) cash or guaranteed investment contracts] (the "Underlying Assets"). [The
Bonds and the Certificates are herein collectively referred to as the
"Securities".]
The Company proposes to sell the Securities to you [and to each of the
other several underwriters participating in an underwriting syndicate managed by
you]. Underwritten offerings of Securities may be made by you [or by an
underwriting syndicate managed by you] (as used in
<PAGE>
this Agreement, references to "you" shall mean the firm [or firms] acting as
sole underwriter[(s) or as representative(s) of a group of underwriters] of such
offering).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-83818) for the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including a related form of prospectus and related form of
prospectus supplement. Such registration statement, as amended, was declared
effective on _____________. Such registration statement, as from time to time
amended, including all exhibits thereto, is hereinafter referred to as the
"Registration Statement". The form of prospectus that appears in the
Registration Statement, as such prospectus is amended from time to time, is
hereinafter referred to as the "Basic Prospectus". The Basic Prospectus as
supplemented by the prospectus supplement relating to the Securities, in the
form in which, as so supplemented, it shall be filed with the Commission
pursuant to Rule 424 under the 1933 Act, is hereinafter referred to as the
"Final Prospectus".
The Company, hereby agrees with you [and the several Underwriters named in
Schedule A hereto (collectively,] [(] the "Underwriter[s]") as follows:
SECTION 1. Representations and Warranties. The Company represents and
------------------------------
warrants to you as of the date hereof[, and to each Underwriter named on
Schedule A hereto,] as follows:
(a) The Registration Statement, at the time it became effective, complied
in all material respects with the requirements of the 1933 Act and the rules and
regulations of the Commission thereunder (the "1933 Act Regulations") and does
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been initiated or threatened by the Commission. The Final Prospectus at the
time it is transmitted to the Commission for filing pursuant to Rule 424 under
the 1933 Act and at the Closing Time referred to in Section 2 will not contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. There are no material
contracts or documents of the Company which are required to be filed as exhibits
to the Registration Statement by the 1933 Act or the 1933 Act Regulations which
have not been so filed.
(b) Since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, and other than as herein or
therein contemplated, (i) the Company has not, and at no time through the
Closing Time will it have, entered into any material transaction or incurred any
material liability or obligation, contingent or otherwise, other than as may
relate to additional series of securities similar to the Securities, (ii) there
has not been, and at no time through the Closing Time will there have been, any
material change in the capital stock or debt of the Company, or any material
adverse change in the business of the Company,
2
<PAGE>
and no material legal or governmental proceeding, domestic or foreign, affecting
the Company or the transactions contemplated by this Agreement has been or at
any time through the Closing Time will have been instituted or threatened, and
(iii) no event has or at any time through the Closing Time will have occurred
that constitutes or would constitute a default under the provisions of the Trust
Agreement [or the Indenture].
(c) The Company has been duly incorporated and is validly existing in good
standing under the laws of the State of Delaware with corporate power and
authority to conduct its business as described in the Registration Statement.
The Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which requires such
qualification and where the failure to so qualify would have a material adverse
effect on the Company.
(d) The shares of issued and outstanding capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable.
(e) The Company is not in violation of its Certificate of Incorporation or
Bylaws. The Company is not in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its properties may be bound, which violations or
defaults separately or in the aggregate would have a material adverse effect on
the Company.
(f) The Company owns or possesses or has obtained all material governmental
licenses, permits, consents, orders, approvals and other authorizations
necessary to conduct its business as described in the Registration Statement or,
if later, the applicable Final Prospectus; and the Company has conducted and is
conducting its business so as to comply in all material respects with all
applicable laws, administrative regulations and administrative and court
decrees.
(g) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending against the
Company (except as set forth in the Registration Statement or, if later, the
applicable Final Prospectus) which could reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, earnings,
business affairs or business prospects of the Company or which could reasonably
be expected to interfere with or materially and adversely affect the
consummation of the transactions contemplated herein.
(h) The execution and delivery of this Agreement[,][and] [the Trust
Agreement] [and the Indenture], the incurrence of the obligations herein and
therein set forth and the consummation of the transactions contemplated herein
and therein are within the corporate power and authority of the Company and have
been duly authorized by the Company by all necessary corporate action; this
Agreement [,] [and] [the Trust Agreement] [and the Indenture]
3
<PAGE>
has been duly executed and delivered by the Company, and each such instrument
constitutes and will constitute a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with such instrument's
terms. Neither the execution and delivery of this Agreement [,] [or] [the Trust
Agreement] [or the Indenture], the incurrence of the obligations herein [or
therein] set forth, nor the consummation of the transactions contemplated herein
will conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, mortgage, pledge, charge, security interest
or encumbrance (collectively, "Lien") [, other than as contemplated by such
agreement,] upon any property or assets of the Company, pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which the Company is a party or by which the Company may be bound, or to
which any of the property or assets of the Company is subject, which separately
or in the aggregate are material, nor will any such action result in any
violation of the provisions of the Certificate of Incorporation or Bylaws of the
Company or of any law, administrative regulation, or, to the best of such
entity's knowledge, any administrative or court decree.
[(__) The issuance of the Certificates has been duly authorized by the
Company and, when such Certificates are executed and delivered in accordance
with the Trust Agreement and sold to the Underwriter[s] pursuant to this
Agreement, such Certificates will be legally issued and will duly evidence all
the beneficial ownership interest in the related trust created by the Trust
Agreement.]
[(__) The issuance of the Notes has been duly authorized by the [Trust]
[Company] and, when such Notes are executed and delivered in accordance with the
Indenture and sold to the Underwriter[s] pursuant to this Agreement, such Notes
will be legally issued and will duly evidence all the interest in the related
trust created by the Indenture.]
(__) The Securities[,] [and] [the Trust Agreement] [and] [the Indenture]
will conform in all material respects to the respective descriptions thereof
contained in the applicable Final Prospectus.
[(__) The Trust Agreement will be effective prior to the Closing Time to
establish the Trust under and pursuant to the laws of the jurisdiction specified
in such Trust Agreement, and the acquisition of the Underlying Assets by the
Trustee will be effective to vest with the holders of the Certificates the
entire beneficial ownership in the Underlying Assets intended to be vested
thereby.]
[(__) The [Trust] [Company]'s assignment of the Underlying Assets to the
Indenture Trustee pursuant to the Indenture will vest in the Indenture Trustee a
first priority perfected security interest therein, subject to no prior lien,
mortgage, security interest, pledge, adverse claim, charge or other
encumbrance.]
(__) [Each of the] [The] [Company] [and the Trust] is not, and will not as
a result of the offer and sale of the Securities as contemplated in this
Agreement become, an
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<PAGE>
"investment company" or under the "control" of an "investment company" (as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")), which would be required to register under the
Investment Company Act.
[(__) The representations and warranties made by the Company in the Trust
Agreement and in any Officers' Certificate of the Company delivered pursuant to
such Trust Agreement will be true and correct at the time made and at the
Closing Time.]
(__) Any certificate signed by an officer of the Company and delivered to
you or to counsel for the Underwriter[s] shall be deemed a representation and
warranty by the Company to [the] [each] Underwriter as to the matters covered
thereby.
(__) All approvals, authorizations, consents, orders or other actions of
any person, corporation or other organization, or of any governmental body,
quasi-governmental body or official (except with respect to the state securities
or Blue Sky laws of various jurisdictions), required in connection with [(i) the
valid and proper deposit of the Underlying Assets pursuant to the Trust
Agreement and (ii) the valid and proper authorization, issuance and sale of the
Certificates pursuant to such Trust Agreement] [and of] [the Notes pursuant to
the Indenture] and this Agreement, have been or will be taken or obtained on or
prior to the Closing Time.
(__) [At or prior to the Closing Time, the Certificates shall be rated
__________ by ___________.] [At or prior to the Closing Time, the Notes shall
be rated ___________ by ____________.]
(__) Any taxes, fees and other governmental charges in connection with the
execution and delivery of this Agreement, [,][and] [the Trust Agreement] [and]
[the Indenture] and in connection with the acquisition of the Underlying Assets
and the issuance of the Securities have been paid or will be paid at or prior to
the related Closing Time.
(__) [At the Closing Time, the Trustee under the Trust Agreement will have
acquired all right, title and interest in and to the Underlying Assets.]
[Immediately prior to the Closing Time, the Company (or one of its affiliates)
will own the Underlying Assets free and clear of any Lien; the Company (or such
affiliate) will have the corporate power and authority to assign, deliver and
deposit the Underlying Assets owned by it to and with the [Indenture] Trustee
under the [Trust Agreement] [Indenture], and will have duly authorized the
assignment, delivery and deposit of such Underlying Assets to and with such
[Indenture] Trustee by all necessary corporate action.] [At the Closing Time,
the Company (or one of its affiliates) will have assigned and delivered to and
transferred to the Trustee under the Trust Agreement all its right, title and
interest in and to the Underlying Assets applicable to the Securities as of the
Closing Time.]
SECTION 2. Sale and Delivery to the Underwriter[s]; Closing. The
------------------------------------------------
[commitment of the Underwriter] [several commitments of the Underwriters] to
purchase Securities shall be
5
<PAGE>
deemed to have been made on the basis of the representations and warranties
herein contained. Subject to the terms and conditions herein set forth, the
Company agrees to sell, or to cause one of its affiliates to sell, to [the]
[each] Underwriter, [severally and not jointly,] and [the] [each] Underwriter,
[severally and not jointly,] agrees to purchase from the Company, at a purchase
price equal to [(i)] ___% of the original stated amount of the Certificates
[and] [(ii) ______% of the original stated amount of the Notes] the respective
original stated amount of [the] [each of such] Securities set forth on Schedule
A hereto opposite the name of such Underwriter[, plus any additional original
stated amount of Securities which such Underwriter may be obligated to purchase
pursuant to Section 10 hereof].
Delivery of, and payment of the purchase price for, the Securities shall be
made at the office of Sidley & Austin, 875 Third Avenue, New York, New York
10022, or at such other place as shall be agreed upon by you and the Company, at
10:00 A.M. on _______, or such other time as shall be agreed upon by you and the
Company (such time and date being referred to as the "Closing Time"). Payment
shall be made in immediately available funds, payable to or upon the order of
the Company. Such Securities shall be in such denominations and registered in
such names as you may request in writing at least two business days prior to the
Closing Time. The Securities will be made available for examination and
packaging by you in New York, New York not later than 10:00 A.M. on the business
day next preceding the Closing Time. The Securities to be so delivered will
initially be represented by one or more Certificates registered in the name of
Cede & Co., the nominee of DTC. The interests of beneficial owners of the
Securities will be represented by book entries on the records of DTC and
participating members thereof.
SECTION 3. Covenants of the Company. The Company covenants with you[, and
------------------------
with each Underwriter participating in the offering of the Securities,] as
follows:
(a) Immediately following the execution of this Agreement, the Company will
prepare a Final Prospectus setting forth the stated amount of Securities covered
thereby and the terms not otherwise specified in the [Trust Agreement] [and the
Indenture] [, the names of the Underwriters participating in the offering and
the principal amount of Securities which each severally has agreed to purchase,
the names of any Underwriters acting as co-managers with you in connection with
the offering,] the price at which the Securities are to be purchased by the
Underwriter[s] from the Company, the initial public offering price, the selling
concession and reallowance, if any, and such other information as you and the
Company deem appropriate in connection with the offering of the Securities. The
Company will promptly transmit copies of the Final Prospectus to the Commission
for filing pursuant to Rule 424 of the 1933 Act Regulations and will furnish to
the Underwriters named therein as many copies of the Final Prospectus as you
shall reasonably request.
(b) The Company will notify you immediately, and in writing confirm the
notice, of (i) the receipt of any comments from the Commission concerning the
Registration Statement, (ii) any request by the Commission for any amendment to
the Registration Statement
6
<PAGE>
or any amendment or supplement to the Final Prospectus or for any additional
information, (iii) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose, and (v) the happening of any event which makes
untrue any statement of a material fact made in the Registration Statement or in
any Final Prospectus then required to be distributed or which requires the
making of a change in the Registration Statement or any such Final Prospectus in
order to make any material statement therein, in light of the circumstances
under which it was made, not misleading. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(c) The Company will give you notice of its intention to file any amendment
to the Registration Statement or any amendment or supplement to the Final
Prospectus, and will not file any such amendment or supplement without
furnishing a copy thereof to you and your counsel and obtaining your consent to
such filing, which consent shall not be unreasonably withheld.
(d) The Company will deliver to you, as soon as practicable, as many signed
copies of the Registration Statement as originally filed and of each amendment
thereto, with signed consents and exhibits filed therewith, and will also
deliver to you such number of conformed copies of the Registration Statement as
originally filed and of each amendment thereto (including consents and
exhibits), as you may reasonably request.
(e) The Company will furnish to [each] [the] Underwriter, from time to time
during the period when the Final Prospectus is required to be delivered under
the 1933 Act, such number of copies of the Final Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for the purposes
contemplated by the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act").
(f) If at any time when a prospectus relating to the Securities is required
to be delivered under the 1933 Act any event occurs as a result of which the
applicable Final Prospectus as then amended or supplemented would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to amend
such Final Prospectus to comply with the 1933 Act, the Company, subject to
subsection (c) above, promptly will prepare and file with the Commission an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance.
(g) The Company will endeavor, in cooperation with you and your counsel, to
qualify the Securities for offering and sale under the applicable securities and
Blue Sky laws of such jurisdictions as you may reasonably designate, and will
maintain such qualification
7
<PAGE>
in effect for a period of not less than two years after the date hereof, and
will cooperate with you and your counsel to determine the eligibility of the
Securities for the investment by institutional investors in such jurisdictions.
The Company will, at your request or the request of your counsel, file such
statements and reports as may be required by the laws of each jurisdiction in
which the Securities have been qualified as above provided. Notwithstanding the
foregoing, no such qualification shall be required in any jurisdiction where, as
a result thereof, the Company would be subject to general service of process,
other than by reason of the offer and sale of the Securities, to qualification
as a foreign corporation or to taxation as a foreign corporation doing business
in such jurisdiction.
(h) The Company will make generally available to its security holders and
will deliver to you as soon as practicable an earnings statement, conforming to
the requirements of Section 11(a) of the 1933 Act, covering a period of at least
twelve months beginning after the effective date of the Registration Statement.
Compliance with Rule 158 of the 1933 Act Regulations shall satisfy the
requirements of this paragraph.
(i) So long as any Securities are outstanding, the Company will furnish to
you as soon as practicable copies of any reports and financial statements
furnished to or filed with the Commission or any national securities exchange by
the Company and to the extent that such information has been maintained in the
ordinary course by the Company, such other information as may reasonably be
requested by you which in your judgment is necessary or appropriate to the
maintenance of a secondary market in the Securities.
SECTION 4. Payment of Expenses. The Company will pay or cause to be paid
-------------------
all expenses incident to the performance of the Company's obligations under this
Agreement[,] [and] [the Trust Agreement] [and] [the Indenture] including without
limitation those related to: (i) the filing of the Registration Statement with
respect to the Securities and all amendments thereto, including Commission
filing fees, (ii) the printing or photocopying and delivery to the
Underwriter[s], in such quantities as you may reasonably request, of copies of
this Agreement, (iii) the preparation, registration, issuance and delivery of
the Securities to the Underwriter[s], (iv) the fees and disbursements of the
Company's counsel and accountants, and of any such counsel rendering a closing
opinion with respect to matters of local law, (v) the qualification of the
Securities under securities and Blue Sky laws and the determination of the
eligibility of the Securities for investment in accordance with the provisions
of Section 3(g), including filing fees and the reasonable fees and disbursements
of counsel for the Underwriter[s] in connection therewith and in connection with
the preparation of any Blue Sky Survey and Legal Investment Survey, (vi) the
printing and delivery to the Underwriter[s], in such quantities as you may
reasonably request, of copies of the Registration Statement with respect to the
Securities and all amendments thereto, of any preliminary prospectus and
preliminary prospectus supplement and of the Final Prospectus and all amendments
and supplements thereto, and of any Blue Sky Survey and Legal Investment Survey,
(vii) the printing or photocopying and delivery to the Underwriter[s], in such
quantities as you may reasonably request, of copies of [the Trust Agreement]
[and] [the Indenture], (viii) the fees charged by investment rating agencies for
rating
8
<PAGE>
the Certificates, (ix) the fees and expenses, if any, incurred in connection
with the listing of Certificates on any national securities exchange and (x) the
fees and expenses of the Trustee [and the Indenture Trustee] and [its] [their
respective] counsel.
SECTION 5. Conditions of Underwriter[s'] ['s] Obligations. The
----------------------------------------------
obligation[s] of the Underwriter[s] to purchase and pay for the Certificates
pursuant to this Agreement [are] [is] subject to the accuracy in all material
respects, on and as of the date hereof, and the applicable Closing Time, of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) Subsequent to the execution of this Agreement, there shall not have
occurred or exist any of the following: (i) any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Company which, in your judgment, materially impairs the
investment quality of the Securities; (ii) the imposition of additional material
governmental restrictions, not in force and effect on the date of this
Agreement, upon trading in securities generally, or the establishment generally
of minimum or maximum prices on the New York Stock Exchange or the suspension of
trading in securities generally on such exchange, or the establishment of a
general banking moratorium by federal or New York authorities; (iii) any event
which makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or the Final Prospectus, or
which is not reflected in the Registration Statement or the Final Prospectus but
should be reflected therein in order to make the statements or information
contained therein not misleading in any material respect; or (iv) an outbreak of
major hostilities or other national or international calamity or any substantial
change or acceleration in market, financial or economic conditions as, in your
judgment, affects adversely the marketability of the Securities.
(b) At the applicable Closing Time you shall have received the opinion or
opinions, addressed to the Underwriter[s] and dated the Closing Time, of Sidley
& Austin, special counsel to the Company, or other counsel reasonably
satisfactory to you and counsel for the Underwriter[s], which opinion or
opinions shall be in form and substance reasonably satisfactory to you and
counsel for the Underwriter[s]. In rendering its opinion, Sidley & Austin and
such other counsel may rely, as to matters of fact, on certificates of
responsible officers of the Company, the Trustee [,the Indenture Trustee] and
public officials and upon such opinions of such other counsel as may be
acceptable to you.
(c) At the Closing Time there shall not have been, since the date hereof or
since the respective dates as of which information is given in the Registration
Statement and the Final Prospectus, any material adverse change in the
condition, financial or otherwise, earnings, business affairs, regulatory
situation or business prospects of the Company whether or not arising in the
ordinary course of business, and you shall have received, at the Closing Time, a
certificate of the Chairman of the Board, the President or any Vice President of
the Company to the effect that there has been no such material adverse change
and to the effect that the other
9
<PAGE>
representations and warranties of the Company contained in Section 1 are true
and correct with the same force and effect as though made at and as of the
Closing Time.
(d) At the Closing Time, you and the Company shall have received the
favorable opinion of counsel for the Trustee, addressed to the Underwriter[s]
and the Company and dated the Closing Time, which opinion or opinions shall be
in form and substance reasonably satisfactory to you and counsel for the
Underwriter[s] and the Company.
[(__) At the Closing Time, you and the Company shall have received the
favorable opinion of counsel for the Indenture Trustee, addressed to the
Underwriter[s] and the Company and dated the Closing Time, which opinion or
opinions shall be in form and substance reasonably satisfactory to you and
counsel for the Underwriter[s] and the Company.]
(e) At the Closing Time, (i) counsel for the Underwriter[s] shall have been
furnished with such documents and opinions (which opinions shall be limited to
those specified in Sections 5(b) and 5(d)) as they may reasonably require for
the purpose of enabling them to pass upon the Registration Statement, the Final
Prospectus, the issuance and sale of the Securities and related proceedings, or
in order to evidence the accuracy of any of the representations and warranties,
or the fulfillment of any of the conditions, herein contained[,] [and] (ii)
[each Underwriter that is not an affiliate of the Company shall have received
the opinion or opinions, addressed to such Underwriter and dated the Closing
Time, of special counsel to such Underwriter, which opinion or opinions shall be
in form and substance reasonably satisfactory to such Underwriter, and (iii)]
all proceedings taken by the Company in connection with the issuance and sale of
the Securities as contemplated in [the Trust Agreement] [and] [the Indenture]
shall be reasonably satisfactory in form and substance to you and counsel for
the Underwriter[s].
(f) At the Closing Time you shall have received or be entitled to rely upon
any opinions of counsel to the Company supplied to the rating agency or rating
agencies rating the Securities relating to certain matters with respect to the
Securities. Any such opinions shall specify that the Underwriter[s are] [is]
entitled to rely upon any such opinions as if such opinions were addressed to
them.
(g) You shall have received evidence satisfactory to you that, on or before
the Closing Time, UCC-1 financing statements have been or are being filed in the
appropriate filing offices reflecting the [transfer of the interests of the
Company in the Underlying Assets and the proceeds thereof to the Trust [and the
grant of the security interest therein by the Trust to the Indenture
Trustee]][grant of the security interest in the Underlying Assets by the Company
to the Indenture Trustee].
(h) [The Certificates shall be rated _____ by ________________, and no
rating agency shall have placed the Certificates under surveillance or review
with possible negative implications.] [The Notes shall be rated ________ by
__________, and no rating agency shall have placed the Notes under surveillance
or review with possible negative implications.]
10
<PAGE>
If any condition in this Section shall not have been fulfilled when and as
required to be fulfilled, this Agreement may be terminated by you by notice to
the Company at any time at or prior to the Closing Time, and such termination
shall be without liability of any party to any other party except as provided in
Section 4.
SECTION 6. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless [each] [the] Underwriter and each person, if any, who controls [any]
[the] Underwriter within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus, preliminary prospectus
supplement or the Final Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein in the light of the circumstances under which
they were made not misleading, unless such untrue statement or omission or such
alleged untrue statement or omission was made in reliance upon and in conformity
with the written information described in the last sentence of Section 6(b) and
furnished to the Company by [any Underwriter through] you expressly for use in
the Registration Statement (or any amendment thereto) or in any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or any
amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based, in each case, upon
any untrue statement or omission described in (i) above, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever (including the reasonable fees
and disbursements of counsel chosen by you) reasonably incurred in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened or any
claim whatsoever based upon any untrue statement or omission, or any alleged
untrue statement or omission described in (i) above, to the extent that any such
expense is not paid under (i) or (ii) above.
(b) [Each] [The] Underwriter [severally] agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement or any amendment thereto, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 6, but only with respect
to untrue
11
<PAGE>
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any preliminary prospectus,
preliminary prospectus supplement or the Final Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter expressly for use in the
Registration Statement (or any amendment thereto) or in any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or any
amendment or supplement thereto). The Company acknowledges that the statements
set forth in the last paragraph of the cover page and [in the ____ paragraphs]
under the heading "Plan of Distribution" in any preliminary prospectus,
preliminary prospectus supplement or the Final Prospectus constitute the only
information furnished in writing by the Underwriter[s] expressly for use in the
documents referred to in the foregoing indemnity.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
SECTION 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which an indemnity provided for in subsections
(a) or (b) of Section 6 is for any reason held to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company, on the one hand, and the Underwriter[s], on the other, shall contribute
to the aggregate losses, liabilities, claims, damages and expense of the nature
contemplated by such subsection incurred by the Company and [one or more of] the
Underwriter[s], (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriter[s] on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above and also the relative fault of the Company on the one hand and the
Underwriter[s] on
12
<PAGE>
the other in connection with the statements or omissions that resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter[s] on the other shall be deemed to be in the same
proportion as the total proceeds from the offering of the Securities (before
deducting expenses) received by the Company bear to the total compensation and
profit (before deducting expenses) received or realized by the Underwriter[s]
from the purchase and resale, or underwriting, of the Securities. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriter[s] and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue or alleged untrue
statement or omission or alleged omission. The Company and the Underwriter[s]
agree that it would not be just and equitable if the contributions pursuant to
this Section 7 were to be determined by pro rata allocation [(even if the
Underwriters were treated as one entity for such purpose)] or by any other
method of allocation that does not take account of the equitable considerations
referred to in the first sentence of this Section 7. The amount paid by an
indemnified party as a result of the losses, liabilities, claims, damages, or
expenses referred to in the first sentence of this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this Section 7. Notwithstanding any other provision of
this Section 7, [no] [the] Underwriter shall [not] be obligated to make
contributions hereunder that in the aggregate exceed the total public offering
price of the Securities purchased by such Underwriter, less the aggregate amount
of any damages that such Underwriter has been required to pay in respect of the
same or substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. [The Underwriters' obligations in this Section 7 to
contribute shall be several in proportion to their respective underwriting
obligations and not joint.] For purposes of this Section, each person, if any,
who controls an Underwriter within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement or any amendment thereto, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
SECTION 8. Representations, Warranties, and Agreements to Survive
------------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto or as contemplated hereby, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of [any]
[the] Underwriter or controlling person thereof, and shall survive delivery of
any Securities to the Underwriters.
SECTION 9. Termination of Agreement. (a) You may terminate this Agreement
------------------------
by notice to the Company, at any time at or prior to the Closing Time, (i) if
there has been, since the respective dates as of which information is given in
the Registration Statement or Final
13
<PAGE>
Prospectus, any material adverse change in the condition, financial or
otherwise, earnings, business affairs, regulatory situation or business
prospects of the Company, whether or not arising in the ordinary course of
business, (ii) if there has occurred any outbreak of major hostilities or other
national or international calamity or any substantial change or acceleration in
market, financial or economic conditions, the effect of which is such as to make
it, in your reasonable judgment, impracticable to market the Securities or
enforce contracts for the sale of the Securities or (iii) if trading generally
on either the New York Stock Exchange or the American Stock Exchange has been
suspended, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required, by either of said exchanges
or by order of the Commission or any other governmental authority, or if a
banking moratorium has been declared by either federal or state authorities.
(b) This Agreement may be terminated by you in accordance with Section 5
hereof.
(c) In the event of any such termination, (i) the covenants set forth in
Section 3 with respect to any offering of Securities shall remain in effect so
long as [any] [the] Underwriter owns any Securities and (ii) the covenant set
forth in Section 3(h), the provisions of Section 4, the indemnity agreement set
forth in Section 6, and the provisions of Sections 7 and 13 shall remain in
effect forever.
SECTION 10. [Default by One or More of the Underwriters. If one or more
-------------------------------------------
of the Underwriters shall fail at the Closing Time to purchase the Securities
which it or they are obligated to purchase hereunder (the "Defaulted
Securities"), you shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, you have not completed such arrangements within such 24-
hour period, then:
(a) if the aggregate original stated amount of Defaulted Securities does
not exceed 10% of the aggregate original stated amount of the Securities to be
purchased pursuant to this Agreement, the nondefaulting Underwriters named
herein shall be obligated to purchase the full amount thereof in the proportions
that their respective underwriting obligations thereunder bear to the
underwriting obligations of all nondefaulting Underwriters; and
(b) if the aggregate original stated amount of the Defaulted Securities
exceeds 10% of the aggregate original stated amount of the Securities to be
pursuant to this Agreement, this Agreement shall terminate without any liability
on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 and nothing in this Agreement
shall relieve any defaulting Underwriter from liability in respect of its
default.
14
<PAGE>
In the event of any such default which does not result in a termination of
this Agreement, either you or the Company shall have the right to postpone the
Closing Time for a period of time not exceeding seven days in order to effect
any required changes in the Registration Statement or in any other documents or
arrangements.]
[RESERVED]
SECTION 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Company shall be directed to it at CS First Boston Structured Products
Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York, Attn:
_______, and notices to you shall be directed to CS First Boston Corporation,
Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055, Attn:
____________.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Underwriter[s] named herein and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the parties hereto, and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and thereto and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from [any] [the]
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND EACH TERMS
----------------------
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
15
<PAGE>
If the foregoing is in accordance with your understanding hereof, please execute
this Agreement in the appropriate space below and return to the undersigned,
whereupon this instrument along with any counterpart will become a binding
agreement among the Company and you in accordance with its terms.
Very truly yours,
CS FIRST BOSTON STRUCTURED
PRODUCTS CORPORATION
By:_______________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
CS FIRST BOSTON CORPORATION
[Acting on behalf of themselves
and as Representative of the
several Underwriters]
By:____________________________
Name:
Title:
16
<PAGE>
SCHEDULE A
Principal Amount
Underwriter of Certificates
- ----------- ----------------
CS First Boston Corporation..................... $
_______________
Total........................................... $
Principal Amount
Underwriter of Notes
----------- --------
CS First Boston Corporation ....................
$
_______________
Total........................................... $
A-1
<PAGE>
DRAFT 4/30/96
Exhibit 4.1
[FORM OF INDENTURE]
between
SERIES TRUST 199_-__.
(a trust formed by CS First Boston Structured Products Corporation)
as Issuer
and
_____________________________,
as Indenture Trustee
Dated as of ______________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions...........................................1
SECTION 1.01. (a) Definitions............................2
SECTION 1.02. Incorporation by Reference of
Trust Indenture Act........................9
SECTION 1.03. Rules of Construction.......................9
ARTICLE II
The Notes............................................10
SECTION 2.01. Form.....................................10
SECTION 2.02. Execution, Authentication and Delivery...10
SECTION 2.03. Temporary Notes..........................11
SECTION 2.04. Registration; Registration of Transfer
and Exchange............................11
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen
Notes...................................13
SECTION 2.06. Persons Deemed Owner.....................13
SECTION 2.07. Payment of Principal and Interest;
Defaulted Interest......................14
SECTION 2.08. Cancellation.............................15
SECTION 2.09. Release of Collateral....................15
SECTION 2.10. Book-Entry Notes.........................15
SECTION 2.11. Notices to Clearing Agency...............16
SECTION 2.12. Definitive Notes.........................16
SECTION 2.13. Tax Treatment............................17
ARTICLE III
Covenants............................................17
SECTION 3.01. Payment of Principal and Interest........17
SECTION 3.02. Maintenance of Office or Agency..........17
SECTION 3.03. Money for Payments To Be Held in Trust...18
SECTION 3.04. Existence................................19
SECTION 3.05. Protection of Trust Estate...............19
SECTION 3.06. Opinions as to Trust Estate..............20
SECTION 3.07. Performance of Obligations...............20
SECTION 3.08. Negative Covenants.......................22
SECTION 3.09. Annual Statement as to Compliance........22
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms...........................23
SECTION 3.11. Successor or Transferee..................25
SECTION 3.12. No Other Business........................25
SECTION 3.13. No Borrowing...........................25
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<PAGE>
SECTION 3.14. [Reserved].............................25
SECTION 3.15. Guarantees, Loans, Advances and
Other Liabilities.....................25
SECTION 3.16. Capital Expenditures...................25
SECTION 3.17. Restricted Payments....................25
SECTION 3.18. Notice of Events of Default..............26
SECTION 3.19. Further Instruments and Acts.............26
ARTICLE IV
Satisfaction and Discharge...........................26
SECTION 4.01. Satisfaction and Discharge of Indenture..26
SECTION 4.02. Application of Trust Money...............27
SECTION 4.03. Repayment of Moneys Held by Paying Agent.27
ARTICLE V
Remedies.............................................28
SECTION 5.01. Events of Default........................28
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment...............................29
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee........30
SECTION 5.04. Remedies; Priorities.....................32
SECTION 5.05. Optional Preservation of the Underlying
Securities..............................34
SECTION 5.06. Limitation of Suits......................34
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest..........35
SECTION 5.08. Restoration of Rights and Remedies.......35
SECTION 5.09. Rights and Remedies Cumulative...........35
SECTION 5.10. Delay or Omission Not a Waiver...........36
SECTION 5.11. Control by Noteholders...................36
SECTION 5.12. Waiver of Past Defaults..................37
SECTION 5.13. Undertaking for Costs....................37
SECTION 5.14. Waiver of Stay or Extension Laws.........37
SECTION 5.15. Action on Notes..........................37
SECTION 5.16. Performance and Enforcement of Certain
Obligations.............................38
ARTICLE VI
The Indenture Trustee................................38
SECTION 6.01. Duties of Indenture Trustee..............38
SECTION 6.02. Rights of Indenture Trustee..............40
SECTION 6.03. Individual Rights of Indenture Trustee...40
SECTION 6.04. Indenture Trustee's Disclaimer...........40
SECTION 6.05. Notice of Defaults.......................41
-ii-
<PAGE>
SECTION 6.06. Reports by Indenture Trustee to Holders..41
SECTION 6.07. Compensation and Indemnity...............41
SECTION 6.08. Replacement of Indenture Trustee.........41
SECTION 6.09. Successor Indenture Trustee by Merger....42
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee..............43
SECTION 6.11. Eligibility; Disqualification............44
SECTION 6.12. Preferential Collection of Claims
Against Issuer..........................44
ARTICLE VII
Noteholders' Lists and Reports...........45
SECTION 7.01. Issuer To Furnish Indenture Trustee Names
and Addresses of Noteholders............45
SECTION 7.02. Preservation of Information;
Communications to Noteholders...........45
SECTION 7.03. Reports by Issuer........................45
SECTION 7.04. Reports by Indenture Trustee.............46
ARTICLE VIII
Accounts, Disbursements and Releases.........46
SECTION 8.01. Collection of Money......................46
SECTION 8.02. Trust Accounts...........................47
SECTION 8.03. General Provisions Regarding Accounts....47
SECTION 8.04. Release of Trust Estate..................48
SECTION 8.05. Opinion of Counsel.......................48
ARTICLE IX
Supplemental Indentures..............................49
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders..........................49
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders.............................50
SECTION 9.03. Execution of Supplemental Indentures.....52
SECTION 9.04. Effect of Supplemental Indentures........52
SECTION 9.05. Conformity with Trust Indenture Act......53
SECTION 9.06. Reference in Notes to Supplemental
Indentures..............................53
ARTICLE X
Redemption of Notes..................................53
SECTION 10.01. Redemption..............................53
SECTION 10.02. Form of Redemption Notice...............54
SECTION 10.03. Notes Payable on Redemption Date........54
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<PAGE>
ARTICLE XI
Miscellaneous........................................54
SECTION 11.01. Compliance Certificates and Opinions,
etc....................................54
SECTION 11.02. Form of Documents Delivered to Indenture
Trustee................................57
SECTION 11.03. Acts of Noteholders.....................58
SECTION 11.04. Notices, etc., to Indenture Trustee,
Issuer and Rating Agencies.............58
SECTION 11.05. Notices to Noteholders; Waiver..........59
SECTION 11.06. Alternate Payment and Notice Provisions.59
SECTION 11.07. Conflict with Trust Indenture Act.......60
SECTION 11.08. Effect of Headings and Table of Contents60
SECTION 11.09. Successors and Assigns..................60
SECTION 11.10. Separability............................60
SECTION 11.11. Benefits of Indenture...................60
SECTION 11.12. Legal Holidays..........................60
SECTION 11.13. GOVERNING LAW...........................60
SECTION 11.14. Counterparts............................61
SECTION 11.15. Recording of Indenture..................61
SECTION 11.16. Trust Obligation........................61
SECTION 11.17. No Petition.............................61
SECTION 11.18. Inspection..............................61
-iv-
<PAGE>
INDENTURE dated as of ______________, between SERIES TRUST 199_-__, a
Delaware business trust (the "Issuer"), and _______________________, a
______________ banking corporation, as trustee and not in its individual
capacity (the "Indenture Trust").
RECITALS
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Class A-1 ___%
Collateralized Bond Obligations (the "Class A-1 Notes") and Class A-2 ___%
Collateralized Bond Obligations (the "Class A-2 Notes" and, together with the
Class A-1 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (a) the Underlying Securities and
all moneys due thereon on or after the Cutoff Date; (b) the security interest in
the Underlying Securities granted by the Company pursuant to the Trust Agreement
and the Trust Supplement and any other interest of the Company in such
Underlying Securities; (c) all funds on deposit from time to time in the Owner
Trust Accounts and in all investments and proceeds thereof (including all income
thereon); (d) all present and future claims, demands, causes of action and
choses in action in respect of any or all of the foregoing and all payments on
or under; and (e) all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion thereof,
voluntary or involuntary, into cash or other liquid property, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders
of the Notes, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
<PAGE>
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. (a) Definitions. Except as otherwise specified
-----------
herein or as the context may otherwise require, the following terms have the
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
---
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
------------------
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented form time to time thereafter).
"Basic Documents" means the Trust Agreement, the Trust Supplement, the
---------------
Note Depository Agreement and other documents and certificates delivered in
connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1 Notes
----------------
and the Class A-2 Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in The City of New York are
authorized or obligated by law, regulation or executive order to remain closed.
"Class" means any one of the classes of Notes.
-----
"Class A-1 Final Scheduled Payment Date" means the _______ Payment
--------------------------------------
Date.
"Class A-1 Interest Rate" means _____% per annum (computed on the
-----------------------
basis of a 360-day year consisting of twelve 30-day months).
"Class A-1 Noteholder" means the Person in whose name a Class A-1
--------------------
Note is registered in the Note Register.
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<PAGE>
"Class A-1 Notes" means the Class A-1 _____% Collateralized Bond
---------------
Obligations, substantially in the form of Exhibit A-1.
"Class A-2 Final Scheduled Payment Date" means the _______ Payment
--------------------------------------
Date.
"Class A-2 Interest Rate" means _____% per annum (computed on the
-----------------------
basis of a 360-day year consisting of twelve 30-day months).
"Class A-2 Noteholder" means the Person in whose name a Class A-2
--------------------
Note is registered in the Note Register.
"Class A-2 Notes" means the Class A-2 _____% Collateralized Bond
---------------
Obligations, substantially in the form of Exhibit A-2.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means .
------------ -----------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
----------
Indenture.
"Company" means CS First Boston Structured Products Corporation, a
-------
Delaware corporation and any successor in interest.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at ____________________________; Attention: ___________________, or at such
other address as the Indenture Trustee may designate from time to time by notice
to the Noteholders and the Issuer, or the principal corporate trust office of
any successor Trustee at the address designated by such successor Indenture
Trustee by notice to the Noteholders and the Issuer.
"Cutoff Date" means .
----------- ------------
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
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<PAGE>
"Definitive Notes" has the meaning specified in Section 2.10.
----------------
"Event of Default" has the meaning specified in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and a right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Note Register.
"Indenture Trustee" means ______________________, a _____________
-----------------
banking corporation, as Indenture Trustee under this Indenture, or any successor
Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor on
the Notes, the Company and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Company or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Company or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
-----------------------
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the
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<PAGE>
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
"Insolvency Event" means, with respect to a specified Person, (a) the
----------------
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Interest Rate" means the Class A-1 Interest Rate or the Class A-2
-------------
Interest Rate.
"Issuer" means Series Trust 199_-__ until a successor replaces it and,
------
thereafter, means such successor and, for the purposes of any provision
contained herein and required by the TIA, each other obligor on the Notes.
"Issuer Order" or "Issuer Request" means a written order or request
------------ --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Investment Company Act" means the Investment Company Act of 1940,
----------------------
as amended.
"Note" means a Class A-1 Note or a Class A-2 Note.
----
"Note Depository Agreement" means the agreement dated
-------------------------
_________________, among the Issuer, the Indenture Trustee and the Depository
Trust Company, as the initial Clearing Agency, relating to the Notes,
substantially in the form of Exhibit B.
"Note Distribution Account" means the account designated as such,
-------------------------
established and maintained pursuant to Section 3.01(a).
"Note Owner" means, with respect to a Book-Entry Note, the Person who
----------
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a
-5-
<PAGE>
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.05.
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee or
any Paying Agent in trust for the Holders of such Notes (provided, however, that
if such Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision for such notice has been made,
satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are held
by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Company or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that the Indenture Trustee knows to be so
owned shall be so disregarded. Notes so owned that have been pledged in good
faith may be regarded as
-6-
<PAGE>
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes, the Company or any
Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means ________________, not in its individual capacity
-------------
but solely as Trustee under the Trust Agreement, or any successor Trustee under
the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Collection Account and the Note Distribution Account, including payments of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" shall have the meaning set forth in the Trust Supplement.
------------
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Company and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date,
-----------
the close of business on [the day immediately preceding such Payment Date or
Redemption Date] [the ___ day of the month preceding the month in which such
Payment Date or Redemption Date occurs].
-7-
<PAGE>
"Redemption Date" means in the case of a redemption of the Notes
---------------
pursuant to Section 6.06 of the Trust Agreement or a sale of the Trust Assets
pursuant to Section 5.01 or 5.02 of the Trust Supplement, the Payment Date
specified by the Company or the Issuer pursuant to Section 6.06 of the Trust
Agreement or Section 5.01 or 5.02 of the Trust Supplement, as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
----------------
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the weighted
average of the Interest Rates for each Class of Notes being so redeemed to but
excluding the Redemption Date, or (b) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer,
Secretary, Assistant Secretary or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Schedule of Underlying Securities" means the listing of the Underlying
---------------------------------
Securities set forth in Schedule I (which Schedule may be in the form of
microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"State" means any one of the 50 States of the United States of America
-----
or the District of Columbia.
"Trust Agreement" means the Trust Agreement, dated __________, between
---------------
the Company and the Owner Trustee.
"Trust Supplement" means the Trust Supplement to the Trust Agreement,
----------------
dated ___________, between the Company and the Owner Trustee, relating to the
Issuer.
"Trust Estate" means all money, instruments, rights and other property
------------
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, all property and interests Granted to the Indenture Trustee),
including all proceeds thereof.
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"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Trust Agreement or Trust Supplement for all
purposes of this Indenture.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Indenture
Trustee; and
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
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(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The Class A-1 Notes and the Class A-2 Notes, in
----
each case together with the Indenture Trustee's certificate of authentication,
shall be in substantially the form set forth in Exhibit A-1 and Exhibit A-2,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A-1 and Exhibit A-2 are part of the terms of this
Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes
--------------------------------------
shall be executed on behalf of the Issuer by any of its Authorized Officers.
The signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of
$_____________ and
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Class A-2 Notes for original issue in an aggregate principal amount of
$____________. The aggregate principal amount of Class A-1 Notes and Class A-2
Notes outstanding at any time may not exceed such respective amounts except as
provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples of $1 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of
---------------
definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange.
---------------------------------------------------
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all
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reasonable times and to obtain copies thereof, and the Indenture Trustee shall
have the right to rely upon a certificate executed on behalf of the Note
Registrar by an Executive Officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes of the same Class in any authorized
denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
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SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i)
------------------------------------------
any mutilated Note is surrendered to the Indenture Trustee or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note and (ii) there is delivered to the Indenture Trustee such security
or indemnity as may be required by it to hold the Issuer and the Indenture
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, the Issuer shall execute, and upon its request the Indenture Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class;
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within seven days shall be due and payable,
or shall have been called for redemption, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 2.05, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 2.05 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all Notes duly issued hereunder.
The provisions of this Section 2.05 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever,
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whether or not such Note be overdue, and none of the Issuer, the Indenture
Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by
notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) The Class A-1 Notes and the Class A-2 Notes shall accrue interest at
the Class A-1 Interest Rate and the Class A-2 Interest Rate, respectively, as
set forth in Exhibit A-1 and Exhibit A-2, respectively, and such interest shall
be payable on each Payment Date as specified therein, subject to Section 3.01.
Any installment of interest or principal payable on a Note that is punctually
paid or duly provided for by the Issuer on the applicable Payment Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date by check mailed first-class postage prepaid to
such Person's address as it appears on the Note Register on such Record Date,
except that (i) unless Definitive Notes have been issued pursuant to Section
2.12, with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payment will be made by wire transfer in immediately available funds to the
account designated by such nominee and (ii) the final installment of principal
payable with respect to such Note on a Payment Date or on the applicable class
final scheduled Payment Date (and except for the Redemption Price for any Note
called for redemption pursuant to Section 10.01(a)) will be payable as provided
below. The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the forms of the Notes set forth in Exhibit A-1 and
Exhibit A-2. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.02. All principal payments
on each Class of Notes shall be made pro rata to the Noteholders of such Class
entitled thereto. The Indenture Trustee shall notify the Person in whose name a
Note is registered at the close of business on the Record Date preceding the
Payment Date on which the Issuer expects that the final installment of principal
of and interest on such Note will be paid. Such notice shall be mailed or
transmitted by facsimile prior to such final Payment Date and shall specify that
such final installment will be payable only upon presentation and surrender of
such Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in connection with
redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed
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any such special record date and payment date and, at least 15 days before any
such special record date, shall mail to each Noteholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder that the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section except as expressly permitted
by this Indenture. All canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time, unless the Issuer shall direct by an Issuer Order that
they be destroyed or (provided that such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee) returned to it.
SECTION 2.09. Release of Collateral. Subject to Section 11.01 and
---------------------
the terms of the Basic Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in form of typewritten Notes representing the Book-Entry Notes,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered
initially on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section 2.10 shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes
and the giving of instructions or directions hereunder) as the
sole holder of the Notes, and shall have no obligation to the
Note Owners;
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(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by
law and agreements between such Note Owners and the Clearing
Agency and/or the Clearing Agency Participants pursuant to the
Note Depository Agreement. Unless and until Definitive Notes
are issued pursuant to Section 2.12, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of
and interest on the Notes to such Clearing Agency Participants;
and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of
the Notes, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing
Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and
has delivered such instructions to the Indenture Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or
--------------------------
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12. Definitive Notes. If (i) the Company advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Company is unable to locate a qualified successor, (ii) the
Company at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default, Owners of the Book-Entry Notes representing
beneficial interests aggregating at least a majority of the Outstanding Amount
of such Notes advise the Clearing Agency in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of such Note Owners, then the Clearing Agency shall notify all Note Owners and
the Indenture Trustee of the occurrence of such event and of the availability of
Definitive Notes to Note Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by
the Clearing Agency, accompanied by registration instructions, the Issuer shall
execute and the Indenture
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Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
SECTION 2.13. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer secured by the Trust Estate. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of a Note (and each Note Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of the
Issuer.
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal and Interest. (a) The Indenture
---------------------------------
Trustee, for the benefit of the Noteholders, shall establish and maintain in the
name of the Trust an Eligible Deposit Account (the "Note Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders.
(b) The Issuer will duly and punctually pay the principal of and
interest, if any, on the Notes in accordance with the terms of the Notes and
this Indenture. Without limiting the foregoing, subject to Section 8.02(b), the
Indenture Trustee will cause to be distributed all amounts on deposit in the
Note Distribution Account on a Payment Date deposited therein pursuant to the
Trust Agreement (i) for the benefit of the Class A-1 Notes, to the Class A-1
Noteholders and (ii) for the benefit of the Class A-2 Notes, to the Class A-2
Noteholders. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate
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Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided
--------------------------------------
in Section 8.02(a) and (b), all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.02(b) shall be
made on behalf of the Issuer by the Indenture Trustee or by another Paying
Agent, and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the Business Day preceding each Payment Date and Redemption
Date, the Issuer shall deposit or cause to be deposited in the Note Distribution
Account an aggregate sum sufficient to pay the amounts then becoming due under
the Notes, such sum to be held in trust for the benefit of the Persons entitled
thereto and (unless the Paying Agent is the Indenture Trustee) shall promptly
notify the Indenture Trustee of its action or failure to so act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and pay such sums to
such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required
to be met by a Paying Agent at the time of its appointment; and
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(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent, and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense and direction of
the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying Agent,
at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time
--------------------------
to time execute and deliver all such supplements and amendments hereto and all
such financing
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statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing
---------------------------
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before _____________, in each calendar year, beginning in
199_, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and with respect to the execution and filing of any financing statements and
continuation statements as is necessary to maintain the lien and security
interest created by this Indenture and reciting the details of such action, or
stating that in the opinion of such counsel no such action is necessary to
maintain such lien and security interest. Such Opinion of Counsel shall also
describe the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien and
security interest of this Indenture until ________________ in the following
calendar year.
SECTION 3.07. Performance of Obligations.
--------------------------
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(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture or such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including but
not limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture, the
Trust Agreement and the Trust Supplement in accordance with and within the time
periods provided for herein and therein. Except as otherwise expressly provided
therein, the Issuer shall not waive, amend, modify, supplement or terminate any
Basic Document or any provision thereof without the consent of the Indenture
Trustee or the Holders of at least a majority of the Outstanding Amount of the
Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Default,
the Issuer shall promptly notify the Indenture Trustee and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the Issuer is
taking with respect to such default.
(e) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee or the Holders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, or waive timely performance or observance by the Company under the
Basic Documents; and (ii) that any such amendment shall not (A) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
distributions that are required to be made for the benefit of the Noteholders or
(B) reduce the aforesaid percentage of the Notes that is required to consent to
any such amendment, without the consent of the Holders of all the Outstanding
Notes. If any such amendment, modification, supplement or waiver shall be so
consented to by the Indenture Trustee or such Holders, the Issuer agrees,
promptly following a request by the Indenture Trustee to do so, to execute and
deliver, in its own name and at its own expense, such agreements, instruments,
consents and other documents as the Indenture Trustee may deem necessary or
appropriate in the circumstances.
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SECTION 3.08. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the Trust
Agreement or the Trust Supplement, sell, transfer, exchange or
otherwise dispose of any of the properties or assets of the
Issuer, including those included in the Trust Estate, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by
reason of the payment of the taxes levied or assessed upon any
part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be
created on or extend to or otherwise arise upon or burden the
Trust Estate or any part thereof or any interest therein or the
proceeds thereof or (C) permit the lien of this Indenture not
to constitute a valid first priority security interest in the
Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 199_), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been
a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and
the nature and status thereof.
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SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any
State and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in
form satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes
and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have
been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is
hereby restricted (A) shall be a United States citizen or a
Person
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organized and existing under the laws of the United States of
America or any State, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture
Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all
Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly
agrees by means of such supplemental indenture that all right,
title and interest so conveyed or transferred shall be subject
and subordinate to the rights of Holders of the Notes, (D) unless
otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against
and from any loss, liability or expense arising under or related
to this Indenture and the Notes and (E) expressly agrees by means
of such supplemental indenture that such Person (or if a group of
Persons, then one specified Person) shall make all filings with
the Commission (and any other appropriate Person) required by the
Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture
comply with this Article III and that all conditions precedent
herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange
Act).
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SECTION 3.11. Successor or Transferee. (a) Upon any consolidation
-----------------------
or merger of the Issuer in accordance with Section 3.10(a), the Person formed by
or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Series Trust 199_-__ will be released
from every covenant and agreement of this Indenture to be observed or performed
on the part of the Issuer with respect to the Notes immediately upon the
delivery of written notice to the Indenture Trustee stating that Series Trust
199_-__ is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Underlying Securities in the manner contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur,
------------
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. [Reserved].
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by the Basic Documents or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not, directly
-------------------
or indirectly, pay any dividend or make any distribution (by reduction of
capital or otherwise) whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or security or set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer
may make, or cause to be made, distributions to the Owner Trustee and the
Certificateholders as contemplated by, and
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to the extent funds are available for such purpose under, the Trust Agreement
and the Trust Supplement. The Issuer will not directly or indirectly, make
payments to or distributions from the Collection Account except in accordance
with this Indenture and the Basic Documents.
SECTION 3.18. Notice of Events of Default. The Issuer shall give
---------------------------
the Indenture Trustee and the Rating Agencies prompt written notice of each
Event of Default hereunder and each default on the part of the Company of its
obligations under the Basic Documents.
SECTION 3.19. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This
---------------------------------------
Indenture shall cease to be of further effect with respect to the Notes except
as to rights of registration of transfer and exchange, substitution of
mutilated, destroyed, lost or stolen Notes, rights of Noteholders to receive
payments of principal thereof and interest thereon, Sections 3.03, 3.04, 3.05,
3.08, 3.10, 3.12 and 3.13, the rights, obligations and immunities of the
Indenture Trustee hereunder (including the rights of the Indenture Trustee under
Section 6.07 and the obligations of the Indenture Trustee under Section 4.02)
and the rights of Noteholders as beneficiaries hereof with respect to the
property so deposited with the Indenture Trustee payable to all or any of them,
and the Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.05 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable.
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b. will become due and payable at the Class A-2 Final Scheduled
Payment Date within one year, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the expense, of the
Issuer.
and the Issuer, in the case of a., b. or c. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable final scheduled Payment Date or Redemption Date (if
Notes shall have been called for redemption pursuant to Section 10.01(a)), as
the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.01(a) and, subject to
Section 11.02, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.02. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein, in the Trust Agreement, the Trust Supplement or by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In
----------------------------------------
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
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ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue
for a period of five days;
(ii) default in the payment of the principal of any Note when the
same becomes due and payable;
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically
dealt with), or any representation or warranty of the Issuer
made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to
have been incorrect in any material respect as of the time when
the same shall have been made, and such default shall continue
or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall
not have been eliminated or otherwise cured, for a period of 30
days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the Holders of at least
25% of the Outstanding Amount of the Notes, a written notice
specifying such default or incorrect representation or warranty
and requiring it to be remedied and stating that such notice is
a notice of Default hereunder;
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case
under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any
substantial part of the Trust
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Estate, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the
Issuer to the entry of an order for relief in an involuntary
case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Trust Estate,
or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to
pay its debts as such debts become due, or the taking of any
action by the Issuer in furtherance of any of the foregoing;
(vi) failure by the Company duly to observe or to perform in any
material respect any other covenants or agreements of the
Company set forth in the Basic Documents, which failure shall
(i) materially and adversely affect the rights of
Certificateholders or Noteholders and (ii) continue unremedied
for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given (A) to the Company by the Owner Trustee or the
Indenture Trustee or (B) to the Company, and to the Owner
Trustee and the Indenture Trustee by the Holders of Notes or
Certificates, as applicable, evidencing not less than 25% of
the Outstanding Amount of the Notes or 25% of the outstanding
Certificate Balance; or
(vii) the occurrence of an Insolvency Event with respect to the
Company.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
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At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Indenture Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
----------------------------------------------------
by Indenture Trustee.
- --------------------
(a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will upon demand of the Indenture Trustee,
pay to it, for the benefit of the Holders of the Notes, the whole amount then
due and payable on such Notes for principal and interest, with interest on the
overdue principal, and, to the extent payment at such rate of interest shall be
legally enforceable, on overdue installments of interest, at the rate borne by
the Notes and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property
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of the Issuer or other obligor upon such Notes, wherever situated, the moneys
adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such right, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization, or
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section 5.03, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes
and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Indenture
Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and
their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor
Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any
such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts
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received with respect to the claims of the Noteholders and of
the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any
Proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee, such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, an all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities.
--------------------
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(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may do one or more of the following (subject to Section
5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, by
declaration or otherwise, enforce any judgment obtained and
collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee and the Holders of the
Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called
and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for principal and
interest or (C) the Indenture Trustee (1) determines that the Trust Estate will
not continue to provide sufficient funds for the payment of principal and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable and (2) obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out such money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest (including any premium), ratably, without preference or priority of any
kind,
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according to the amounts due and payable on the Notes for interest (including
any premium);
THIRD: to Holders of the Class A-1 Notes for amounts due and unpaid on
the Class A-1 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-1 Notes for
principal, until the Outstanding Amount of the Class A-1 Notes is reduced to
zero;
FOURTH: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-2 Notes for
principal, until the Outstanding Amount of the Class A-2 Notes is reduced to
zero; and
FIFTH: to the Issuer for amounts required to be distributed to the
Certificateholders pursuant to the Trust Supplement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 5.04. At least 15 days before such record
date, the Issuer shall mail to each Noteholder and the Indenture Trustee a
notice that states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Underlying Securities.
--------------------------------------------------
If the Notes have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to maintain possession
of the Trust Estate. In determining whether to maintain possession of the Trust
Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in
its own name as Indenture Trustee hereunder;
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(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provision of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive
----------------------------------------------
Principal and Interest. Notwithstanding any other provisions in this Indenture,
- ----------------------
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective due dates thereof expressed in such Note or
in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the Noteholders
is intended to
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be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission
------------------------------
of the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Holders of a majority of
----------------------
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Indenture Trustee to sell or liquidate the Trust Estate
shall be by Holders of Notes representing not less than 100% of
the Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section 5.05, then any direction to the
Indenture Trustee by Holders of Notes representing less than
100% of the Outstanding Amount of the Notes to sell or
liquidate the Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section
5.11, subject to Section 6.01, the Indenture Trustee need not take any action
that it determines might involve it in liability or might materially adversely
affect the rights of any Noteholders not consenting to such action.
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SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of
-----------------------
the acceleration of the maturity of the Notes as provided in Section 5.02 the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Company, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder and under the
Trust Agreement and the Trust Supplement, but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of a Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
--------------------------------
covenants (to the extent that it may lawfully do so) that will not at any time
insist upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to
---------------
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking,
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obtaining or application of any other relief under or with respect to this
Indenture. Neither the lien of this Indenture nor any rights or remedies of the
Indenture Trustee or the Noteholders shall be impaired by the recovery of any
judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so,
the Issuer shall take all such lawful action as the Indenture Trustee may
request to compel or secure the performance and observance by the Company of its
obligations to the Issuer under or in connection with the Basic Documents, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Basic Documents to the
extent and in the manner directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Company thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Company of its obligations under the Basic Documents.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Company under or in
connection with the Basic Documents, including the right or power to take any
action to compel or secure performance or observance by the Company of its
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Basic Documents and any right
of the Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee.
---------------------------
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture 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.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no
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implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and conforming to
the requirements of this Indenture; however, the Indenture
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture, the Trust Agreement or the Trust Supplement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
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(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.02. Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, that such conduct by the Indenture Trustee does not
constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes, and may otherwise deal with the Issuer or its Affiliates with the same
rights that it would have if it were not Indenture Trustee. Any Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any
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document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of such Default
within 90 days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold such notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders. The
---------------------------------------
Indenture Trustee shall deliver to each Noteholder such information as may be
required to enable such holder to prepare its federal and state income tax
returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to
--------------------------
the Indenture Trustee from time to time reasonable compensation for its
services. The Indenture Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuer shall reimburse
the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay the fees
and expenses of such counsel. The Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv), (v) or (vii) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer. The Holders of a
majority in Outstanding Amount of the Notes may remove the
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Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the
-------------------------------------
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.
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If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and if at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
-----------------------------------------------
Indenture Trustee.
- -----------------
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Noteholders, such title
to the Trust Estate, or any part hereof, and subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to
act separately without the Indenture Trustee joining in such
act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding
of title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of
the Indenture Trustee;
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(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA (S) 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of Baa3 or better by [ ]
or shall otherwise be acceptable to [ ]. The Indenture Trustee
shall comply with TIA (S) 310(b), including the optional provision permitted by
the second sentence of TIA (S) 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA (S) 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VII
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Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
---------------------------------------------
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
- ------------------------
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders of Notes as of such Record Date and (b) at such other times as
the Indenture Trustee may request in writing, within 30 days after receipt by
the Issuer of any such request, a list of similar form and content as of a date
not more than 10 days prior to the time such list is furnished; provided,
however, that so long as the Indenture Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders.
- -----------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in Section 7.01 upon receipt of a
new list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA (S) 312(c).
SECTION 7.03. Reports by Issuer.
-----------------
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Issuer may be required to file
with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to
time by the Commission such additional information, documents
and reports
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with respect to compliance by the Issuer with the conditions
and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA (S)
313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses
(i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee. If required by TIA (S)
----------------------------
313(a), within 30 days after each ___________ beginning with ________, ___, the
Indenture Trustee shall mail to each Noteholder as required by TIA (S) 313(c) a
brief report dated as of such date that complies with TIA (S) 313(a). The
Indenture Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Trust Estate, the Indenture Trustee may take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
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SECTION 8.02. Trust Accounts.
--------------
(a) On or before each Payment Date, the Total Distribution Amount with
respect to the preceding Collection Period will be deposited in the Collection
Account as provided in Section 3.02 of the Trust Agreement. On or before each
Payment Date, all amounts required to be deposited in the Note Distribution
Account with respect to the preceding Collection Period pursuant to Section 4.02
of the Trust Supplement will be transferred from the Collection Account to the
Note Distribution Account.
(b) On each Payment Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes for principal and interest (including any premium) in the following
amounts and in the following order of priority (except as otherwise provided in
Section 5.04(b)):
(i) accrued and unpaid interest on the Notes; provided, that if
there are not sufficient funds in the Note Distribution Account
to pay the entire amount of accrued and unpaid interest then
due on the Notes, the amount in the Note Distribution Account
shall be applied to the payment of such interest on the Notes
pro rata on the basis of the total such interest due on the
Notes;
(ii) to the Holders of the Class A-1 Notes on account of principal
until the Outstanding Amount of the Class A-1 Notes is reduced
to zero; and
(iii) to the Holders of the Class A-2 Notes on account of principal
until the Outstanding Amount of the Class A-2 Notes is reduced
to zero.
SECTION 8.03. General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Note Distribution Account shall
be invested in Eligible Investments and reinvested by the Indenture Trustee upon
Issuer Order, subject to the provisions of Section 3.02 of the Trust Agreement.
All income or other gain from investments of moneys deposited in the Note
Distribution Account shall be deposited by the Indenture Trustee in the
Collection Account, and any loss resulting from such investments shall be
charged to such account. The Issuer will not direct the Indenture Trustee to
make any investment of any funds or to sell any investment held in the Note
Distribution Account unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the proceeds of such
sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
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investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in the Note Distribution
Account resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Note Distribution Account to the Indenture
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Issuer and Indenture Trustee) on any Business Day, (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable pursuant to Section 5.02 or
(iii) if such Notes shall have been declared due and payable following an Event
of Default, amounts collected or receivable from the Trust Estate are being
applied in accordance with Section 5.05 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Note Distribution Account in one
or more Eligible Investments.
SECTION 8.04. Release of Trust Estate.
-----------------------
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Note Distribution
Account. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA (S)(S)
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall
------------------
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section
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8.04(a), accompanied by copies of any instruments involved, and the Indenture
Trustee shall also require, as a condition to such action, an Opinion of
Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the holders in contravention
of the provisions of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of the
Trust Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of
------------------------------------------
Noteholders.
- -----------
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to
assure, convey and confirm unto the Indenture Trustee any
property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture
additional Property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer
herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
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(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any
supplemental indenture or to make any other provisions with
respect to matters or questions arising under this Indenture or
in any supplemental indenture; provided, that such action shall
not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the
requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the
qualification of this Indenture under the Securities Act, the
TIA, the Investment Company Act or the Code or under any
similar federal statutes hereafter enacted and to add to this
Indenture such other provisions as may be expressly required by
the Securities Act, the TIA, the Investment Company Act or the
Code.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner, the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior notice to the Rating Agencies and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
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(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or the Redemption Price with
respect thereto, change the provisions of this Indenture
relating to the application of collections on, or the proceeds
of the sale of, the Trust Estate to payment of principal of or
interest on the Notes, or change any place of payment where, or
the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article
V, to the payment of any such amount due on the Notes on or
after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with certain
provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to increase
any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents
cannot be modified or waived without the consent of the Holder
of each Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date
(including the calculation of any of the individual components
of such calculation) or to affect the rights of the Holders of
Notes to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
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(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of
the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing,
------------------------------------
or permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
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SECTION 9.05. Conformity with Trust Indenture Act. Every amendment
-----------------------------------
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption.
----------
(a) The Class A-2 Notes are subject to redemption in whole, but not in
part, at the direction of the Company pursuant to Section 6.06 of the Trust
Agreement, on any Payment Date on which the Company exercises its option to
purchase the Trust Estate pursuant to said Section 6.06 for a purchase price
equal to the Redemption Price; provided, that the Issuer has available funds
sufficient to pay the Redemption Price. The Company or the Issuer shall furnish
the Rating Agencies notice of such redemption. If the Class A-2 Notes are to be
redeemed pursuant to this Section 10.01(a), the Company or the Issuer shall
furnish notice of such election to the Indenture Trustee not later than 20 days
prior to the Redemption Date and the Issuer shall deposit by 10:00 A.M. New York
City time on the Redemption Date with the Indenture Trustee in the Note
Distribution Account the Redemption Price of the Class A-2 Notes to be redeemed,
whereupon all such Class A-2 Notes shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 10.02 to each Holder
of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 5.01 or 5.02 of the Trust Supplement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.01(b), the Company or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 20 days prior to the Redemption Date, whereupon
all such amounts shall be payable on the Redemption Date.
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SECTION 10.02. Form of Redemption Notice.
-------------------------
(a) Notice of redemption under Section 10.01(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed
or transmitted not later than 10 days prior to the applicable Redemption Date to
each Holder of Notes, as of the close of business on the Record Date preceding
the applicable Redemption Date at such Holder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to
be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or
--------------------------------
portions thereof to be redeemed shall, following notice of redemption as
required by Section 10.02 (in the case of redemption pursuant to Section
10.01(a)), on the Redemption Date become due and payable at the Redemption Price
and (unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on the Redemption Price for any period after the date to
which accrued interest is calculated for purposes of calculating the Redemption
Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc.
-----------------------------------------
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of
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Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA) an
Independent Certificate from a firm of certified public accountants meeting the
applicable requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each signatory, such signatory
has made such examination or investigation as is necessary to enable such
signatory to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other
property or securities with the Indenture
Trustee that is to be made the basis for the
release of any property or securities subject to
the lien of this Indenture, the Issuer shall, in
addition to any obligation imposed in Section
11.01(a) or elsewhere in this Indenture, furnish
to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of
each person signing such certificate as to the
fair value (within 90 days of such deposit) to
the Issuer of the Collateral or other property
or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of any signer
thereof as to the matters described in clause
(i) above, the Issuer shall also deliver to the
Indenture Trustee an Independent Certificate as
to the same matters, if the fair value to the
Issuer of the securities to be so deposited and
of all other such securities made the basis of
any such withdrawal or
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release since the commencement of the then-
current fiscal year of the Issuer, as set forth
in the certificates delivered pursuant to clause
(i) above and this clause (ii), is 10% or more
of the Outstanding Amount of the Notes, but such
a certificate need not be furnished with respect
to any securities so deposited, if the fair
value thereof to the Issuer as set forth in the
related Officer's Certificate is less than
$25,000 or less than one percent of the
Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be
released from the lien of this Indenture, the
Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or
stating the opinion of each person signing such
certificate as to the fair value (within 90 days
of such release) of the property or securities
proposed to be released and stating that in the
opinion of such person the proposed release will
not impair the security under this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of any signer
thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to
the Indenture Trustee an Independent Certificate
as to the same matters if the fair value of the
property or securities and of all other
property, other than property as contemplated by
clause (v) below or securities released from the
lien of this Indenture since the commencement of
the then-current calendar year, as set forth in
the certificates required by clause (iii) above
and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such
certificate need not be furnished in the case of
any release of property or securities if the
fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or
less than one percent of the then Outstanding
Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other
provision of this Section 11.01, the Issuer may,
without compliance with the requirements of the
other provisions of this Section, (A) collect,
liquidate, sell or otherwise dispose of
Underlying Securities as and to the extent
permitted or required by the Basic Documents and
(B) make cash
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<PAGE>
payments out of the Owner Trust Accounts as and
to the extent permitted or required by the Basic
Documents, so long as the Issuer shall deliver
to the Indenture Trustee every six months,
commencing __________________, ____, an
Officer's Certificate of the Issuer stating that
all the dispositions of Collateral described in
clauses (A) or (B) above that occurred during
the preceding six calendar months were in the
ordinary course of the Issuer's business and
that the proceeds thereof were applied in
accordance with the Basic Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
the opinion of only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Company or the Issuer, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
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<PAGE>
SECTION 11.03. Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section 11.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and
-----------------------------------------------
Rating Agencies. Any request, demand, authorization, direction, notice,
- ---------------
consent, waiver or Act of Noteholders or other documents provided or permitted
by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee
at its Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall
be sufficient for every purpose hereunder if in writing and
mailed first-class, postage prepaid to the Issuer addressed to:
Series Trust 199___-___, in care of _____________________,
Attention: __________________, or at any other address
previously furnished in writing to the Indenture Trustee by the
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<PAGE>
Issuer. The Issuer shall promptly transmit any notice received
by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of the
Rating Agencies to:________________________________________; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer will furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee will
cause payments to be made and notices to be given in accordance with such
agreements.
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<PAGE>
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The
----------------------------------------
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. In case any provision in this
------------
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which
--------------
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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<PAGE>
SECTION 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly
----------------
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under this Indenture or any certificate
or other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Company or the
Issuer, or join in any institution against the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable
----------
prior notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall, and shall cause its representatives to, hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential
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<PAGE>
treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its obligations
hereunder.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
SERIES TRUST 199___-___.
By:____________________________________, not in its individual
capacity but solely as Owner Trustee
By:____________________________________
Name:
Title:
_____________________________________, not in its individual
capacity but solely as Indenture Trustee,
By:___________________________________
Name:
Title:
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said SERIES
TRUST 199___-___, a Delaware business trust, and that he/she executed the same
as the act of said business trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
_____________________________
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
__________________________, a ____________ banking corporation, and that he/she
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
____________________________
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<PAGE>
SCHEDULE I
[To be provided on the Closing Date]
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<PAGE>
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $__________
No. R- CUSIP NO. ___________
SERIES TRUST 199____-____
CLASS A-1 _____% COLLATERALIZED BOND OBLIGATIONS
Series Trust 199___-___, a business trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of [ ] DOLLARS payable on each Payment Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which
is $__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-1 Notes pursuant to
Section 3.01 of the Indenture dated as of ____________(the "Indenture"), between
the Issuer and ______________, a ____________ banking corporation, as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
______________ Payment Date (the "Class A-1 Final Scheduled Payment Date") and
the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture.
Capitalized terms used but not defined herein are defined in Article I of the
Indenture, which also contains rules as to construction that shall be applicable
herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment, on the principal amount of this Note outstanding on the preceding
Payment Date (after giving effect
A-1-1
<PAGE>
to all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on
this Note will accrue for each Payment Date from [the preceding Payment Date]
[the __ day of the month in which the preceding Payment Date occurred] (or in
the case of the first Payment Date, the Closing Date) to [the day preceding such
Payment Date] [the __ day of the month preceding the month in which such Payment
Date occurs]. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
A-1-2
<PAGE>
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
SERIES TRUST 199___-____.
By:____________________________________, not in its individual
capacity but solely as Owner Trustee under the Trust Supplement
By:____________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
____________________________, not in its individual capacity
but solely as Indenture Trustee
By:_____________________________
Authorized Signatory
A-1-3
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 ______% Collateralized Bond Obligations (herein
called the "Class A-1 Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Class A-1 Notes are subject
to all terms of the Indenture.
The Class A-1 Notes and Class A-2 Notes (collectively, the "Notes") are and
will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the ______ day of
each month or, if any such date is not a Business Day, the next succeeding
Business Day, commencing ___________________________.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-1 Final Scheduled Payment Date
and the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which an Event of Default shall have
occurred and be continuing and the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments on the Class A-1 Notes
shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Payment Date by notice
A-1-4
<PAGE>
mailed or transmitted by facsimile prior to such Payment Date, and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Company or the Issuer, or join in any institution
against the Company or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
A-1-5
<PAGE>
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
A-1-6
<PAGE>
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of ________________ in its individual
capacity, _______________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or failure to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-1-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
_______________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, hereby irrevocably constitutes and
appoints:
_______________________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:_________________________ _______________________/1/
Signature Guaranteed:
________________________
- ----------
/1/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within
Note in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
A-1-8
<PAGE>
EXHIBIT A-2
[FORM OF CLASS A-2 NOTE]
Unless this Note is presented by an authorized representative of the Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_______________
No. R- CUSIP NO._______________
SERIES TRUST 199__-__
CLASS A-2 ______% COLLATERALIZED BOND OBLIGATIONS
Series Trust 199__-__, a business trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of[ ] DOLLARS payable on each Payment Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of
which is $________________ by (ii) the aggregate amount, if any, payable from
the Note Distribution Account in respect of principal on the Class A-2 Notes
pursuant to Section 3.01 of the Indenture dated as of _______________ (the
"Indenture"); between the Issuer and ______, a _________ banking corporation, as
Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
the _______ Payment Date (the "Class A-2 Final Scheduled Payment Date") and the
Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture. No
payments of principal of the Class A-2 Notes shall be made until the Class A-1
Notes have been paid in full. Capitalized terms used but not defined herein are
defined in
A-2-1
<PAGE>
Article I of the Indenture, which also contains rules as to construction that
shall be applicable herein.
The Issuer will pay interest on this Note at the per annum rate shown
above on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date), subject to certain limitations contained in Section
3.01 of the Indenture. Interest on this Note will accrue for each Payment Date
from [the preceding Payment Date] [the __ day of the month in which the
preceding Payment Date occurred] (or in the case of the first Payment Date, the
Closing Date) to [the day preceding such Payment Date] [the __ day of the month
preceding the month in which such Payment Date occurs]. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
SERIES TRUST 199__-__.
By:___________________, not in its individual capacity but solely as
Owner Trustee under the Trust Supplement
By:________________________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
_______________________, not in its individual capacity
but solely as Indenture Trustee
By:_________________________________________
Authorized Signatory
A-2-3
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 ______% Collateralized Bond Obligations (herein
called the "Class A-2 Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Class A-2 Notes are subject
to all terms of the indenture.
This Class A-1 Notes and the Class A-2 Notes (collectively, the "Notes")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date in
an amount described on the face hereof. "Payment Date" means the _____ day of
each month or, if any such date is not a Business Day, the next succeeding
Business Day, commencing _______________.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled Payment
Date and the Redemption Date, if any, pursuant to Section 10.01(a) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee or the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Payment Date by notice mailed or transmitted by facsimile prior to such Payment
Date, and
A-2-4
<PAGE>
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be redeemed in
whole but not in part, at the option of the Company.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
A-2-5
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Company or the Issuer, or join in any
institution against the Company or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
A-2-6
<PAGE>
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________ in its individual
capacity, ________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-2-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________________________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ______________________ ______________________________________/*/
Signature Guaranteed:
_______________________________
- ----------
/*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, in accordance with the Securities Exchange Act of
1934, as amended.
A-2-8
<PAGE>
EXHIBIT B
[Form of Note Depository Agreement]
[Intentionally Omitted]
B-1
<PAGE>
DRAFT 4/30/96
Exhibit 4.2.1
================================================================================
TRUST AGREEMENT
dated as of ______ __, ____
between
CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
and
___________________________________,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions............................... 1
Accrual Certificates.................................. 1
Accrual Termination Date.............................. 1
Affiliate or affiliate................................ 2
Assumed Reinvestment Rate............................. 2
Available Funds....................................... 2
Book-Entry Certificates............................... 2
Call Purchase Price................................... 2
Certificate........................................... 2
Certificate Interest Rate or Rates.................... 2
Class................................................. 2
Closing Date.......................................... 2
Code.................................................. 2
Collection Account.................................... 2
Company............................................... 2
Compound Value........................................ 2
CSFB.................................................. 3
Definitive Certificates............................... 3
Delaware Trustee...................................... 3
Designated Office..................................... 3
Distributor........................................... 3
DTC................................................... 3
Due Date ............................................. 3
Duff & Phelps......................................... 3
Eligible Account...................................... 3
Eligible Institution.................................. 3
Eligible Investments.................................. 4
event of default...................................... 5
Excess Cash Flow...................................... 5
Exchange Act.......................................... 5
Final Scheduled Payment Date.......................... 5
Fitch................................................. 5
Fixed Rate............................................ 5
Government............................................ 5
Guaranteed Investment Contract........................ 5
Holder................................................ 5
Indenture............................................. 5
Interest Accrual Period............................... 5
Interest Only Certificate............................. 5
Investment Company Act................................ 5
Moody's............................................... 5
New York Presenting Agent............................. 6
Notes................................................. 6
Notional Principal Amount............................. 6
-i-
<PAGE>
Optional Call Right................................... 6
Optionholder.......................................... 6
Participating Certificates............................ 6
Payment Date.......................................... 6
Person or person...................................... 6
Pledged Fund or Account............................... 6
Principal Only Certificates........................... 6
Prospectus............................................ 6
Prospectus Supplement................................. 6
Rating Agencies....................................... 6
Record Date........................................... 6
Register.............................................. 7
Reserve Fund.......................................... 7
Securities Act........................................ 7
Senior Certificates .................................. 7
Series................................................ 7
Standard & Poor's..................................... 7
Stated Amount......................................... 7
Structural Enhancement................................ 7
Subordinated Certificates............................. 7
Swap Agreements....................................... 7
Transfer.............................................. 7
Transferor............................................ 8
Trust................................................. 8
Trust Supplement...................................... 8
Underlying Assets..................................... 8
Underlying Derivatives................................ 8
Underlying Enhancement................................ 8
Underlying Issuers.................................... 8
Underlying Securities................................. 9
Variable Interest Certificates........................ 9
Variable Interest Rate................................ 9
Zero Coupon Certificates.............................. 9
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
TERMS OF SERIES;
APPLICABLE DOCUMENTATION
Section 2.01. Amount Unlimited; Issuable in Series...... 9
Section 2.02. Trust Supplement.......................... 12
ARTICLE III
TRANSFER OF UNDERLYING ASSETS; FORM OF
CERTIFICATES; TRANSFER AND EXCHANGE OF CERTIFICATES
Section 3.01. Transfer of Underlying Assets and
Initial Issuance of Certificates.......... 13
Section 3.02. Collection Account........................ 14
-ii-
<PAGE>
Section 3.03. Form, Denomination and Delivery of
Certificates.............................. 15
Section 3.04. Certificates in Registered Form; Holder
As Owner; Pass-Through of Voting Rights... 17
Section 3.05. Transfer and Exchange of Certificates..... 17
Section 3.06. Restrictions on Transfer.................. 18
Section 3.07. Reporting Obligation...................... 18
Section 3.08. DTC Eligibility........................... 18
Section 3.09. Lost Certificates, Etc.................... 19
Section 3.10. Cancellation and Destruction of
Surrendered Certificates.................. 19
Section 3.11. Holders Bound by Agreement................ 20
Section 3.12. List of Holders........................... 20
ARTICLE IV
PROVISION OF INFORMATION, ETC.; TAXES
Section 4.01. Conditions to Deliveries, Transfers and
Exchanges................................. 20
Section 4.02. Payment of Taxes or Other Governmental
Charges................................... 21
ARTICLE V
DISTRIBUTIONS IN RESPECT OF THE UNDERLYING ASSETS; DEFAULTS
Section 5.01. Cash Distributions........................ 21
Section 5.02. Method of Payment......................... 21
Section 5.03. Document Distributions.................... 22
Section 5.04. Events of Default......................... 24
Section 5.05. No Liability of the Company, the
Transferor or the Trustee on Underlying
Assets.................................... 25
ARTICLE VI
THE TRUSTEE AND THE COMPANY
Section 6.01. Maintenance of Office by the Trustee;
Provision of Agreement.................... 25
Section 6.02. Use of Agents; Appointment of Additional
Trustees.................................. 25
Section 6.03. Limited Authority of Trustee.............. 26
Section 6.04. Waiver of Claims.......................... 26
Section 6.05. Prevention or Delay in Performance by
the Trustee............................... 27
Section 6.06. Ownership of and Transactions in
Underlying Assets and Certificates;
Optional Call Right....................... 27
Section 6.07. Exculpation of the Company and the
Transferor................................ 28
-iii-
<PAGE>
Section 6.08. Exculpation of the Trustee................ 28
Section 6.09. Fidelity Bond; Indemnity.................. 29
Section 6.10. Resignation and Removal of the Trustee;
Appointment of Successor Trustee.......... 29
Section 6.11. Fees and Expenses of the Trustee.......... 30
Section 6.12. Indemnification........................... 31
Section 6.13. Swap Agreements; Underlying Enhancement,
Indentures, etc........................... 31
Section 6.14. Delaware Trustee.......................... 32
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.01. Amendment................................. 32
Section 7.02. Termination; Unclaimed Moneys............. 33
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Counterparts.............................. 33
Section 8.02. Exclusive Benefit of Parties.............. 34
Section 8.03. Invalidity of Provisions.................. 34
Section 8.04. Notices................................... 34
Section 8.05. GOVERNING LAW............................. 35
Section 8.06. Headings.................................. 35
TESTIMONIUM....................................................36
SIGNATURES.................................................... 36
-iv-
<PAGE>
TRUST AGREEMENT
TRUST AGREEMENT dated as of _________, ____ between CS FIRST BOSTON
STRUCTURED PRODUCTS CORPORATION, a Delaware corporation (the "Company"), and
_____________, a _____________ banking corporation (the "Trustee"), with respect
to the formation from time to time of separate Trusts and the issuance from time
to time of separate Series of Certificates representing fractional undivided
interests in the respective Trusts.
WHEREAS from time to time the Company and the Trustee may enter into a
Trust Supplement (this and certain other defined terms used herein are defined
in Section 1.01) pursuant to which (i) the Trustee shall declare the creation of
a separate Trust for the benefit of the Holders of the Series of Certificates to
be issued in respect of such Trust and (ii) the Transferor shall Transfer
certain Underlying Assets to the Trustee acting in the capacity of trustee with
respect to such Underlying Assets;
WHEREAS all Certificates to be issued in respect of each separate
Trust will be issued as a separate Series pursuant to this Agreement and the
related Trust Supplement, will evidence fractional undivided interests in such
Trust and will have no rights, benefits or interests in respect of any other
separate Trust or the property held therein; and
WHEREAS the parties wish to establish the terms and conditions on
which the Trustee will provide such trustee and other related services;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt, adequacy and sufficiency of which is
hereby acknowledged by the parties hereto, it is agreed by and among the parties
hereto as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.01. Definitions. In this Agreement, the following terms
-----------
shall have the respective meanings specified in this Section 1.01.
"Accrual Certificates" shall mean a Class of Certificates of a Series
--------------------
on which interest accrues and is added to the principal of such Certificates
periodically but with respect to which no interest or principal is payable
except during the period or periods specified in the related Trust Supplement.
"Accrual Termination Date" shall mean, with respect to a Class of
------------------------
Accrual Certificates, the Payment Date on which all
<PAGE>
Certificates of the related Series with Final Scheduled Payment Dates earlier
than that of such Class of Accrual Certificates have been fully paid, or such
other date or period as may be specified in the related Trust Supplement.
"Affiliate" or "affiliate" shall have the meaning specified in
--------- ---------
Rule 405 under the Securities Act.
"Assumed Reinvestment Rate" shall mean, with respect to a Series, the
-------------------------
per annum rate or rates, if any, specified in the related Trust Supplement or
the related Guaranteed Investment Contract, if any, for a particular period or
periods as the "Assumed Reinvestment Rate" for funds held in the Collection
Account for such Series.
"Available Funds" shall have the meaning set forth in the related
---------------
Trust Supplement.
"Book-Entry Certificates" shall mean Certificates of a Series that are
-----------------------
issued in whole or in part in book-entry form.
"Call Purchase Price" shall have the meaning specified in
-------------------
Section 6.06(b).
"Certificate" shall mean any one of the trust certificates,
-----------
substantially in the form of Exhibit A to a Trust Supplement, evidencing a
fractional undivided interest in the Underlying Assets of a Trust.
"Certificate Interest Rate or Rates" shall mean the interest rate on
----------------------------------
the outstanding Stated Amount of a Certificate payable on the applicable Payment
Date for such Certificate, as specified in the related Trust Supplement.
"Class" shall mean a class of Certificates within a Series.
-----
"Closing Date" shall mean the date specified as such in the related
------------
Trust Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collection Account" shall have the meaning specified in Section
------------------
3.01(a).
"Company" shall mean CS First Boston Structured Products Corporation,
-------
a Delaware corporation.
"Compound Value" shall mean, with respect to a Class of Accrual
--------------
Certificates, as of any Determination Date, the original Stated Amount of such
Class, plus all accrued and unpaid interest, if any, previously added to the
principal thereof and
-2-
<PAGE>
reduced by any payments of principal previously made on such Class and by any
losses allocated to such Class.
"CSFB" shall mean CS First Boston Corporation, a Massachusetts
----
corporation.
"Definitive Certificates" shall mean the Certificates of a Series when
-----------------------
and if issued in definitive form to the beneficial owners of such Series or
their nominees.
"Delaware Trustee" shall mean ________________________, a Delaware
----------------
banking corporation, not in its individual capacity but solely as Co-Trustee.
"Designated Office" shall mean the office of the Trustee at
-----------------
___________________, ______, _____________ _____ or the office of the New York
Presenting Agent or, in the event of a change of the Trustee or New York
Presenting Agent, or of the Trustee's or the New York Presenting Agent's office,
such other office of which notice is provided to the Holders of Certificates at
the time of such change of Trustee, New York Presenting Agent or office.
"Distributor" shall mean CSFB unless otherwise specified in the
-----------
related Trust Supplement.
"DTC" shall mean The Depository Trust Company or its successors.
---
"Due Date" shall mean each date on which a payment is due and payable
--------
on the Underlying Securities of any Series and, in certain cases, other
Underlying Assets of such Series.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co., or its
-------------
successor in interest.
"Eligible Account" shall mean a segregated trust account maintained
----------------
with the Trustee or an Eligible Institution selected by the Trustee, in each
case in which funds are either uninvested or invested solely in Eligible
Investments.
"Eligible Institution" shall mean a depository institution the long-
--------------------
term deposit rating or the long-term unsecured debt obligations of which (or in
the case of the principal bank in a bank holding company system, the long-term
unsecured debt obligations of such bank holding company) have been rated at
least AAA/Aaa/AAA by Standard & Poor's, Moody's and Fitch, respectively, and AAA
by Duff & Phelps, if such deposit or obligations are rated by Duff & Phelps, or
maintained with a depository institution the commercial paper of which (or, in
the case of a principal bank in a bank holding company system, the commercial
paper of such bank holding company) is rated at least A-1+/P-1 by Standard &
Poor's and Moody's, respectively, and D-1
-3-
<PAGE>
by Duff & Phelps, if such commercial paper is rated by Duff & Phelps.
"Eligible Investments" shall mean one or more of the following:
--------------------
(i) obligations of, or guaranteed as to both full and timely
payment of principal and interest by, the United States or any agency
or instrumentality thereof when such obligations are backed by the
full faith and credit of the United States and repurchase agreements
with respect to any such obligations entered into with an Eligible
Institution;
(ii) federal funds, certificates of deposit, time deposits and
bankers' acceptances, each of which shall not have an original
maturity of more than 90 days, of any depository institution or trust
company incorporated under the laws of the United States or any state;
provided that the short-term obligations of such depository
--------
institution or trust company shall be (a) rated at least A-1+/P-1 by
Standard & Poor's and Moody's, respectively, (b) if Fitch is a Rating
Agency hereunder, rated at least F-1 (for investments having an
original maturity of 30 days or less) or F-1+ (for investments having
an original maturity of more than 30 days) by Fitch and (c) if Duff &
Phelps is a Rating Agency hereunder, and if Duff & Phelps rates such
obligations, rated at least D-1 by Duff & Phelps; and
(iii) commercial paper (having original maturities of not more
than 180 days) of any corporation incorporated under the laws of the
United States or any state thereof; provided that such commercial
--------
paper shall be (a) rated at least A-1+/P-1 by Standard & Poor's and
Moody's, respectively, (b) if Fitch is a Rating Agency hereunder,
rated at least F-1 (for investments having an original maturity of 30
days or less) or F-1+ (for investments having an original maturity of
more than 30 days) by Fitch and (c) if Duff & Phelps is a Rating
Agency hereunder, and if Duff & Phelps rates such commercial paper,
rated at least D-1 by Duff & Phelps;
provided, however, that (x) no instrument shall be an Eligible Investment if
- -------- -------
such instrument evidences a right to receive only interest payments with respect
to the obligations underlying such instrument or if such instrument has a
maturity date after the next scheduled Payment Date and (y) no overnight
instrument shall be an Eligible Investment unless it is an investment in
overnight federal funds or in an overnight repurchase agreement described in
clause (i) of this definition.
-4-
<PAGE>
"event of default" shall have the meaning specified in Section 5.04.
----------------
"Excess Cash Flow" shall have the meaning, if any, set forth in the
----------------
related Trust Supplement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Final Scheduled Payment Date" with respect to any Series of
----------------------------
Certificates shall mean the Payment Date on which the Stated Amount of and
interest on such Series of Certificates is scheduled to be paid in full as
specified in the related Trust Supplement.
"Fitch" shall mean Fitch Investors Service, L.P. or its successor in
-----
interest.
"Fixed Rate" shall mean a nonvariable interest rate that is assigned
----------
to a Certificate.
"Government" shall mean the United States of America.
----------
"Guaranteed Investment Contract" shall mean a guaranteed investment
------------------------------
contract providing for the investment of distributions on the Underlying Assets
of a Series, guaranteeing a minimum fixed rate of return on such investment.
"Holder" shall mean each Person identified as a holder of a
------
Certificate in the Register.
"Indenture" shall mean any indenture or other evidence of indebtedness
---------
entered into by the Trustee on behalf of the Holders of the Certificates of a
Series, as specified in the related Trust Supplement.
"Interest Accrual Period" shall mean the period specified in the
-----------------------
related Trust Supplement during which interest accrues on Certificates of the
related Series with respect to any Payment Date, redemption date or special
redemption date, as the case may be.
"Interest Only Certificate" shall mean a Certificate that is entitled
-------------------------
to receive only payments of interest based on the Notional Principal Amount of
the Certificate.
"Investment Company Act" shall mean the Investment Company Act of
----------------------
1940, as amended.
"Moody's" shall mean Moody's Investors Service, Inc., or its successor
-------
in interest.
-5-
<PAGE>
"New York Presenting Agent" shall mean the New York presenting office
-------------------------
referred to in Section 6.01, initially ___________________________ at
___________, ________, ______________.
"Notes" shall mean the notes issued by a Trust pursuant to an
-----
Indenture, if any.
"Notional Principal Amount" shall mean the hypothetical principal
-------------------------
amount used in determining the interest payable on an Interest Only Certificate.
"Optional Call Right" shall have the meaning specified in Section
-------------------
6.06(b).
"Optionholder" shall have the meaning specified in Section 6.06(b).
------------
"Participating Certificates" shall mean Certificates that are entitled
--------------------------
to receive payments of principal and interest and an additional return on
investment as described in the related Trust Supplement.
"Payment Date" shall mean the date on which payments of the Stated
------------
Amount of, interest on or any other amounts with respect to a Certificate are
payable as specified in the related Trust Supplement.
"Person" or "person" shall mean any individual, corporation,
------ ------
partnership, joint venture, association, joint stock company, limited liability
company, trust (including any beneficiary thereof), unincorporated organization,
government or any agency or political subdivision thereof.
"Pledged Fund or Account" shall mean any fund or account, including
-----------------------
the Collection Account or any Reserve Fund established with respect to, or
granted as security for, a Series of Certificates.
"Principal Only Certificates" shall mean Certificates that pay
---------------------------
principal only and no interest.
"Prospectus" shall mean the prospectus dated ___________ prepared by
----------
CSFB in connection with the sale of Certificates and Notes, if any.
"Prospectus Supplement" shall have the meaning set forth in the
---------------------
related Trust Supplement.
"Rating Agencies" shall mean any of Standard & Poor's, Moody's, Fitch
---------------
and Duff & Phelps that are designated as Rating Agencies in the related Trust
Supplement.
-6-
<PAGE>
"Record Date" shall mean the date or dates specified as such in the
-----------
related Trust Supplement.
"Register" shall mean the register maintained by the Trustee pursuant
--------
to Section 3.04(a).
"Reserve Fund" shall mean, with respect to a Series, any reserve fund
------------
described in the related Trust Supplement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Senior Certificates" shall mean any Class of a Series of Certificates
-------------------
that are entitled to the subordination provisions described in the definition of
Subordinated Certificates.
"Series" shall mean a Series of Certificates.
------
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
-----------------
division of The McGraw-Hill Companies, Inc., or its successor in interest.
"Stated Amount" shall mean the amount specified on each Certificate as
-------------
the Stated Amount thereof, which amount shall be $100,000 or an integral
multiple of $1,000 in excess thereof unless otherwise specified in the related
Trust Supplement.
"Structural Enhancement" shall mean, with respect to any Series,
----------------------
overcollateralization, a senior/subordinated structure or other structural
elements of such Series intended to ensure timely payments or distributions of
or on Certificates of such Series (or Classes thereof) and not constituting a
part of the related Underlying Assets.
"Subordinated Certificates" shall mean any Class of a Series of
-------------------------
Certificates that are subordinate in right of payment and priority or otherwise
to the extent described in the related Trust Supplement to any other Class of
such Series. A Trust Supplement may also provide for subordination of one or
more Classes of Subordinated Certificates to another Class of Subordinated
Certificates, in which case such latter Class shall be considered Senior
Certificates with respect to such one or more former Classes.
"Swap Agreements" shall mean interest rate swap agreements, interest
---------------
rate cap agreements, interest rate floor agreements, or other instruments, as
may be specified in the related Trust Supplement, entered into by the Trustee on
behalf of the Holders.
"Transfer" (including, with a correlative meaning, the term
--------
"Transferred") shall mean (i) the sale, transfer, conveyance and assignment of
Underlying Assets to a Trust by a Transferor in consideration of either
Certificates of the related Trust or cash
-7-
<PAGE>
or both or (ii) the deposit of Underlying Assets into a Trust by the Company in
its capacity as depositor hereunder and under the related Trust Supplement.
"Transferor" shall have the meaning specified in Section 3.01(a).
----------
"Trust" shall mean a trust established pursuant to this Trust
-----
Agreement and related Trust Supplement to which Underlying Assets are
Transferred.
"Trust Supplement" shall mean a supplement relating to this Trust
----------------
Agreement, executed by the Company and the Trustee, establishing the terms of a
particular Series.
"Underlying Assets" shall mean the Underlying Securities and any
-----------------
related Underlying Enhancement, Guaranteed Investment Contracts and/or Swap
Agreements, in each case as specified in the related Trust Supplement.
"Underlying Derivatives" shall mean interest rate swap agreements,
----------------------
basis swap agreements, forward rate agreements, interest rate options, forward
foreign exchange agreements, interest rate cap agreements, interest rate floor
agreements, interest rate collar agreements, currency swap agreements, cross-
currency interest rate swap agreements, options, warrants or other instruments,
as may be specified in the related Trust Supplement, entered into by an
Underlying Issuer.
"Underlying Enhancement" shall mean, with respect to any Series,
----------------------
financial guaranty insurance, letters of credit and other credit enhancement
and/or liquidity facilities and other enhancements (other than Structural
Enhancements) intended to ensure the servicing or timely payments or
distributions of or on the Notes, if any, and Certificates of such Series or
Classes thereof and constituting part of the related Underlying Assets.
"Underlying Issuers" shall mean corporations, partnerships, joint
------------------
stock companies, trusts (including a Trust), limited liability companies,
associations, financial institutions, the Government and agencies and
instrumentalities of the Government, states of the United States and agencies
and instrumentalities thereof, foreign governments and agencies and
instrumentalities thereof, foreign subnationals (such as provinces and
municipalities) and agencies and instrumentalities thereof (including state-
owned banks), multilateral and supranational agencies and entities and agencies
and instrumentalities thereof and other types of domestic and foreign non-
governmental and governmental entities that issue, guarantee or provide credit
support or are otherwise issuers with respect to Underlying Securities as may be
specified in a Trust Supplement.
-8-
<PAGE>
"Underlying Securities" shall mean, with respect to any Series, the
---------------------
securities identified as such in the related Trust Supplement for such Series
and which are Transferred by the Transferor to the related Trust.
"Variable Interest Certificates" shall mean a Series or Class of
------------------------------
Certificates on which interest accrues at a Certificate Interest Rate that is
adjusted, based on a predetermined index, at periodic intervals, all as set
forth in the related Trust Supplement.
"Variable Interest Rate" shall mean the interest rate in respect of a
----------------------
Variable Interest Certificate.
"Zero Coupon Certificates" shall mean a Series or Class of
------------------------
Certificates entitled to receive payments or distributions of principal only.
ARTICLE II
----------
ORIGINAL ISSUANCE OF CERTIFICATES;
----------------------------------
TERMS OF SERIES;
----------------
APPLICABLE DOCUMENTATION
------------------------
Section 2.01. Amount Unlimited; Issuable in Series. (a) The
------------------------------------
aggregate principal amount of Certificates which may be authenticated and
delivered under this Agreement is unlimited. The Certificates of any Trust
established pursuant to a Trust Supplement will be issued as a single Series
which may consist of one or more Classes thereof and shall be designated
generally as "Trust Certificates", with such further designations added or
incorporated in such title for the Certificates of each Series, as such
modifications to such general designation may be specified in the related Trust
Supplement. Each Certificate shall bear upon its face the designations so
selected for the Series to which it belongs. All Certificates of the same
Series (or, if such Series is divided into two or more Classes, of the same
Class) shall be substantially identical except as to denomination and as may
otherwise be provided in the Trust Supplement establishing the Certificates of
such Series. Each Series of Certificates issued pursuant to this Agreement and
the related Trust Supplement will evidence fractional undivided interests in the
related Trust and will have no rights, benefits or interests in respect of any
other Trust or the Underlying Assets held therein. All Certificates of the same
Series (or, if such Series is divided into two or more Classes, of the same
Class) shall be in all respects equally and ratably entitled to the benefits of
this Agreement and the related Trust Supplement without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with, and subject to, the terms and provisions of
this Agreement and the related Trust Supplement.
-9-
<PAGE>
(b) The following matters shall be established with respect to the
Certificates of each Series and the Underlying Assets of the related Trust by a
Trust Supplement executed and delivered by and between the Company and the
Trustee (it being understood that such matters need not be established in the
same location of such Trust Supplement):
With respect to the Certificates of each Series:
(i) the formation of the Trust as to which the Certificates of
such Series represent fractional undivided interests and its designation
(which designation shall distinguish such Trust from each other Trust
created under this Agreement and any Trust Supplement);
(ii) the specific title of the Certificates of such Series (which
title shall distinguish the Certificates of such Series from each other
Series of Certificates created under this Agreement and any Trust
Supplement);
(iii) the initial aggregate Stated Amount and Certificate
Interest Rate (or method for determining such rate) and authorized
denominations of each Class of such Series;
(iv) the circumstances, if any, in which the Certificates of such
Series are subject to redemption or to an Optional Call Right or other
retirement prior to maturity or repurchase;
(v) the Final Scheduled Payment Date of each Class of
Certificates;
(vi) the method used to calculate the aggregate amount of
principal, if any, available and required to be applied to the Certificates
of such Series on each Payment Date, the timing of the application of
principal, if any, and the order of priority of the application of such
principal to the various Classes, if any, and the allocation of the
principal to be so applied;
(vii) whether such Certificates are to be issued in Classes,
describing the relationship between or among such Classes, including the
extent and terms of subordination of any Subordinated Certificates, and the
specific terms of each;
(viii) the identity of each Class of Accrual Certificates,
Variable Interest Certificates, Subordinated Certificates, Retail
Certificates, Zero Coupon Certificates, Principal Only Certificates,
Interest Only Certificates and Participating Certificates included in such
Series, if any, or other type of Class of Certificates;
-10-
<PAGE>
(ix) the Payment Dates for the various Classes of Certificates;
(x) the Assumed Reinvestment Rate, if any, and (if applicable)
the percentage of Excess Cash Flow to be applied to payments of principal
of the Series;
(xi) whether the Certificates are to be issuable in registered
form or bearer form or both and, if Certificates in bearer form are issued,
whether bearer Certificates may be exchanged for registered Certificates
and the circumstances and places for such exchange, if permitted;
(xii) with respect to the federal income tax consequences of
such Series, certain elections or intended treatment thereof, if any;
(xiii) each currency or currency unit in which the Certificates
are denominated, if other than U.S. dollars;
(xiv) if applicable, the terms on which the Trust may enter into
an Indenture, issue Notes or issue any other indebtedness;
(xv) whether all or any portion of the Underlying Assets may be
loaned or pledged to the Company, any affiliate of the Company or any other
person (and, if so, the terms and conditions of any such loan or pledge);
(xvi) any matters contemplated by Section 2.01 or 3.06; and
(xvii) any other terms of such Series.
With respect to the Underlying Assets relating to each Series:
(i) with respect to the Underlying Securities included therein,
(A) the aggregate principal amount of such Underlying Securities, (B) the
identity of each Underlying Issuer (including any guarantor and any
provider of credit support) and (C) the title of each such Underlying
Security;
(ii) the terms of any Underlying Enhancement included therein,
including certain contractual terms of the Underlying Enhancement and the
identity and rating of each counterparty thereto and any guarantor thereof;
(iii) the terms of any Swap Agreements included therein,
including certain contractual terms of the Swap Agreements and the identity
and rating of each counterparty thereto and any guarantor thereof;
-11-
<PAGE>
(iv) the terms of any Underlying Derivatives included therein, including
certain contractual terms of the Underlying Derivatives and the identity
and rating of each counterparty thereto and any guarantor thereof;
(v) the characteristics of any other Underlying Assets; and
(vi) the terms, if any, on which the Trustee or its agent may
exchange or sell any Underlying Security.
(c) At any time and from time to time after the execution and delivery
of this Agreement and a Trust Supplement forming a Trust and establishing the
terms of Certificates of a Series, Certificates of such Series shall be
executed, authenticated and delivered by the Trustee to the Person or Persons
specified by the Transferor or Distributor, as applicable, upon request of such
Transferor or Distributor, and upon satisfaction of any conditions precedent set
forth in such Trust Supplement or in any other document to which the Trustee is
a party relating to the issuance of the Certificates of such Series. The
Trustee may condition its execution of a Trust Supplement upon its receipt of
such opinions, certificates and other documents as may be customary.
Section 2.02. Trust Supplement. A Trust Supplement establishing a
----------------
Trust and creating a Series of Certificates shall be in form and substance
acceptable to the Company and the Trustee. The Trustee is hereby authorized to
execute any Trust Supplement executed by the Company and presented by the
Company to the Trustee for its execution; provided that the Trustee shall have
no obligation to execute any Trust Supplement that violates any applicable law
or that exposes the Trustee to any liability. A Trust Supplement may provide
for the designation by the Company of another Person as the Transferor with
respect to the related Series, all on terms to be set forth in such Trust
Supplement. If specified in the related Trust Supplement, a Trust may be formed
as a statutory business trust, in which case the Trustee shall cooperate in the
filing of such certificates of trust and related instruments as may be necessary
or appropriate to effectuate the formation of such Trust under the applicable
business trust statute. With respect to each Trust established by a Trust
Supplement and the related Series of Certificates, the collective terms of this
Agreement and such Trust Supplement shall govern the issuance and administration
of all Certificates of such Series related to such Trust, and all matters
related thereto, and shall have no applicability to any other Trust or Series of
Certificates. As applied to each Trust established by a Trust Supplement and
the related Series of Certificates, the collective terms of such instruments
shall constitute an agreement relating exclusively to such Trust and Series of
Certificates, to like effect as if the collective terms of all such instruments
were set forth in a separate instrument, duly
-12-
<PAGE>
executed and delivered by the Company and the Trustee; provided, however, that
-------- -------
the terms and provisions of this Trust Agreement shall be subject to any
contrary terms and provisions expressly set forth in a Trust Supplement, which
contrary terms and provisions of the Trust Supplement shall control and shall
supersede the contrary terms and provisions of this Trust Agreement.
ARTICLE III
-----------
TRANSFER OF UNDERLYING ASSETS; FORM OF
--------------------------------------
CERTIFICATES; TRANSFER AND EXCHANGE OF CERTIFICATES
---------------------------------------------------
Section 3.01. Transfer of Underlying Assets and Initial Issuance of
-----------------------------------------------------
Certificates. (a) In connection with the establishment of a new Trust and
- ------------
related Series of Certificates, the Company or one of its affiliates or
designees (in such capacity, the "Transferor") may Transfer any amount and
number of Underlying Assets to the Trust which Underlying Assets shall be held
by and in the name of the Trust in an Eligible Account (the "Collection
Account") at the Trustee or at an Eligible Institution selected by the Trustee.
Before such Transfer, the Company or another Person at the direction of the
Company may establish a Trust by means of an initial, nominal transfer of
property, as specified in the related Trust Supplement.
(b) The Trustee hereby declares and agrees that it will and does hold
the Underlying Assets upon the trusts set forth herein and in the related Trust
Supplement for the benefit of the Holders of the related Series of Certificates
as herein set forth.
(c) The Transferor or the Distributor, as applicable, shall, in
connection with each Transfer and as a condition to the execution and delivery
by the Trustee of Certificates of a Series in connection therewith, deliver a
written instruction to the Trustee setting forth: (i) the number and Stated
Amount of Certificates of such Series to be issued by the Trust in respect
thereof and (ii) the name, address, number of an account in the United States
for wire transfer of funds and (unless not required to be obtained under
applicable law and regulations) the taxpayer identification number of each
Person in whose name such Certificates are to be issued.
(d) The Transferor shall, in connection with each Transfer, be deemed
to have represented to the Trustee that the Underlying Assets Transferred by the
Transferor in connection therewith are Transferred free and clear of any right,
charge, security interest, lien, pledge, encumbrance or claim of the Transferor
(other than the right to have such Underlying Assets held in trust by the
Trustee hereunder and to have one or more Certificates issued to evidence
ownership of such Underlying
-13-
<PAGE>
Assets and the other rights and claims with respect to such Underlying Assets
and the proceeds thereof and such Certificates provided for in this Agreement
and the related Trust Supplement).
(e) The Trustee shall, in connection with each Transfer, on the date
of such Transfer and subject to receipt by the Trustee of the written
instructions contemplated to be provided by the Transferor or Distributor, as
applicable, pursuant to paragraph (c) above in connection with such Transfer,
(i) execute and deliver to or upon the order of the Transferor or Distributor,
as applicable, at such Transferor's or Distributor's offices specified in
Section 8.04 or the related Trust Supplement or, at such Transferor's or
Distributor's option, through the facilities of DTC or another depositary, one
or more Certificates (which Certificates may be in definitive or temporary form)
conforming in all respects to, and in the name of the Persons specified in, the
written instructions provided by such Transferor or Distributor in connection
with such Transfer and (ii) register, in the Register, the Person in whose name
each such Certificate is issued as the Holder thereof.
Section 3.02. Collection Account. (a) The Collection Account with
------------------
respect to each Series of Certificates shall be maintained by the Trustee in an
Eligible Account in its name or as otherwise specified in the related Trust
Supplement. The sole assets of any such account shall be assets held by the
Trustee in a trust capacity and any such account shall be considered the
"Collection Account" for purposes of this Agreement and the related Trust
Supplement. The Collection Account may be divided into various sub-accounts
specified in the related Trust Supplement.
(b) The Trustee shall use reasonable best efforts to invest moneys in
the Collection Account on behalf of the related Trust in Eligible Investments
selected by the Trustee, which shall mature not later than the Business Day
immediately preceding the Payment Date next following the date of such
investment at which time such moneys shall be distributed to Holders in
accordance with Section 5.01 and the related Trust Supplement (except that if
such Eligible Investment is an obligation of the institution that maintains the
Collection Account, then such Eligible Investment shall mature not later than
such Payment Date). All such Eligible Investments shall be made in the name of
the related Trust. The Trustee shall select obligations for the investment of
the Collection Account from among Eligible Investments. If an instrument ceases
to meet the requirements of an Eligible Investment as specified in the
definition thereof, the Trustee shall cause all moneys in such investment to be
withdrawn and invested in an Eligible Investment within five Business Days of
the Trustee's actual knowledge or receipt of written notice of the occurrence of
such investment ceasing to meet such requirements. All net income and gain
realized from any such investments shall be added to the
-14-
<PAGE>
Collection Account and the Trustee shall have no liability therefor.
(c) The Trustee shall cause to be deposited in the Collection
Account, directly or upon receipt, all distributions received by it with respect
to the related Underlying Assets.
(d) The Trustee hereby acknowledges and agrees that:
(i) the Collection Account, the Underlying Assets Transferred
thereto and the proceeds of such Underlying Assets shall be held separate
from the general assets of the Trustee;
(ii) the Trustee's interest in the Underlying Assets of a Trust
shall be solely that of Trustee of such Trust and such Underlying Assets
shall be beneficially owned by the Holders of the related Series of
Certificates evidencing such interests;
(iii) except as provided in this Agreement, the related
Indenture, if any, and the related Trust Supplement, the Trustee shall not
subject the Underlying Assets or the proceeds thereof to any right, charge,
security interest, lien or claim of any kind in favor of the Trustee or any
Person claiming by or through the Trustee or assign, transfer, pledge or
otherwise dispose of or extend credit or advance funds against such
Underlying Assets or the proceeds thereof; and
(iv) the Trustee shall use its best efforts to ensure that the
Underlying Assets of a Trust will not be reasonably considered, by any
third parties or any Holder, assets of either the Company, the Transferor
or the Trustee (other than to the extent that the Company, the Transferor
or the Trustee is a Holder of Certificates relating thereto).
Section 3.03. Form, Denomination and Delivery of Certificates. (a)
-----------------------------------------------
Certificates shall be issued substantially in the form of Exhibit A to the
related Trust Supplement, in each case with appropriate insertions,
modifications and omissions. The Certificates of a Series may be endorsed with
or have incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Agreement and the related Trust
Supplement as may be required to comply with any applicable law or regulation or
any applicable rules or procedures of DTC or any other depositary.
(b) Each Certificate of a Series shall evidence the Holder of such
Certificate's ownership interest in the Underlying Assets of the related Trust.
Each Certificate shall be issued and maintained in a Stated Amount of $100,000
or an integral
-15-
<PAGE>
multiple of $1,000 in excess thereof unless otherwise specified in the related
Trust Supplement.
(c) Certificates of a Series shall be, at the election of the
Transferor or Distributor, as applicable, typewritten, engraved, printed or
otherwise produced; provided, however, to the extent required in order for
-------- -------
Certificates to trade under DTC's same-day funds settlement service (but not a
book-entry only basis) or a similar service of another depositary, the
Certificates shall be typewritten or engraved, printed or lithographed on steel-
engraved borders or otherwise produced in accordance with the requirements of
DTC or any such depositary.
(d) In the event that Certificates of a Series are, pursuant to the
provisions hereof, engraved, printed or lithographed, pending the preparation of
Definitive Certificates, the Trustee, with the consent of the Transferor or
Distributor, as applicable, may initially deliver temporary Certificates, which
may, at the election of such Transferor or Distributor, be printed,
lithographed, typewritten, mimeographed or otherwise produced.
(e) If Certificates of a Series are initially delivered in temporary
form, the Holder of any temporary Certificate may, without charge and as soon as
practicable thereafter, surrender such temporary Certificate at a Designated
Office in exchange for a Definitive Certificate, and the Trustee shall execute
and deliver, in exchange for such temporary Certificate, a Definitive
Certificate evidencing ownership of the same interest in the Underlying Assets
evidenced by the surrendered temporary Certificate. If the Transferor or
Distributor, as applicable, shall so request reasonably in advance, the Trustee
shall make the Definitive Certificates available to such Transferor or
Distributor for checking and packaging on a business day preceding the date of
delivery hereunder.
(f) Each Certificate of a Series shall be executed on behalf of the
Trust by the Trustee by the manual or facsimile signature of one of its duly
authorized officers. If an officer of the Trustee whose signature is on a
Certificate ceases to hold office with the Trustee while the Certificate is
still outstanding, the Certificate shall nonetheless remain valid for all
purposes described herein.
(g) The Trustee shall duly authenticate by manual signature and
deliver Certificates of each Series in authorized denominations equalling the
aggregate Stated Amount of each such Series and evidencing the entire ownership
of the related Trust. No Certificate of a Series shall be entitled to any
benefits under this Agreement or the related Trust Supplement or be valid or
obligatory for any purpose unless such Certificate shall have
-16-
<PAGE>
been authenticated as above provided by a duly authorized officer of the
Trustee.
Section 3.04. Certificates in Registered Form; Holder As Owner; Pass-
------------------------------------------------------
Through of Voting Rights. (a) Unless otherwise provided in the Trust
- ------------------------
Supplement, all Certificates of a Series will be in registered form only, and
the Trustee shall maintain a register (the "Register") at a Designated Office on
which it shall record the initial issuance, transfer, exchange or surrender of
Certificates and the identity and address of and account information with
respect to each Holder in whose name a Certificate is issued.
(b) The Holder of a Certificate of a Series shall be treated as the
owner of such Certificate for all purposes (including for purposes of making
payments with respect to such Certificate and effecting the transfer, exchange
or surrender of such Certificate whether or not payment of the Underlying Assets
underlying such Certificate is overdue), and neither the Trustee nor the Company
shall be affected by any notice to the contrary.
(c) The Trustee shall seek instructions from Certificateholders of a
Series in connection with any vote, consent or waiver required in respect of any
related Underlying Asset. Unless otherwise provided in the related Trust
Supplement, the Trustee shall direct any action or cast any vote as a holder of
such Underlying Asset in proportion to the aggregate Stated Amount of
Certificates held by Certificateholders of such Series taking the corresponding
position. If applicable, the Trust Supplement will specify whether and under
what circumstances voting will be by Class.
Section 3.05. Transfer and Exchange of Certificates. Subject to the
-------------------------------------
terms and conditions of this Agreement and the related Trust Supplement, a
Holder of a Certificate may transfer to another or exchange such Certificate for
one or more Certificates in similar form of equal aggregate amount of any
authorized denomination or denominations. The transfer or exchange of a
Certificate shall be effected by the submission by the Holder to a Designated
Office of such Certificate, duly endorsed by such Holder or its attorney-in-fact
duly authorized in writing and accompanied by a written instruction of transfer
or exchange in form satisfactory to the Trustee, duly executed by such Holder or
its attorney-in-fact duly authorized in writing and accompanied by any other
documentation required hereunder or under the related Trust Supplement. The
Trustee shall, pursuant to such instruction, and upon compliance with any
applicable restrictions on transfer, issue one or more Certificates to the
Holder or its transferee, as applicable, and in the event that more than one
such Certificate is issued, such Certificates shall in the aggregate evidence an
ownership interest in the Trust equal to that evidenced by the Certificate so
transferred or exchanged. The transfer or exchange of the Certificates shall be
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<PAGE>
effected upon the payment by the applicable Holder of a reasonable service
charge to the Trustee, together with any tax or governmental charge payable in
connection with such transfer or exchange.
Section 3.06. Restrictions on Transfer. Restrictions on transfer
------------------------
applicable to any Series of Certificates shall be set forth in the related Trust
Supplement.
Section 3.07. Reporting Obligation. If a Trust is not or ceases to
--------------------
be subject to Section 13 or 15(d) of the Exchange Act and is not subject to the
reporting requirements of Rule 12g3-2(b) under such Act, the Company shall
prepare and furnish to the Trustee for further delivery to the Holders of the
related Series of Certificates upon their written request the information
described under paragraph (d)(4)(i) of Rule 144A as contemplated thereby. The
Trustee shall have no responsibility for reviewing or for the accuracy or
sufficiency of such information for any purpose.
Section 3.08. DTC Eligibility. (a) Subject to the terms and
---------------
conditions of this Agreement and the related Trust Supplement, (i) if so
provided in the related Trust Supplement, a Holder of a Certificate of a Series
may elect to have such Certificate traded under the book-entry system maintained
by DTC with respect to the trading of Certificates by transferring such
Certificate to DTC (or its nominee) and making DTC (or its nominee) the Holder
of such Certificate in accordance with the provisions of Section 3.05 and the
applicable procedures of DTC and (ii) the Transferor or Distributor, as
applicable, may elect that any or all Certificates of a Series issued pursuant
to Section 3.01 are issued to DTC (or its nominee) as the Holder of such
Certificates. In the event one or more Holders of Certificates (or the
Transferor or Distributor, as applicable, pursuant to Section 3.01) request that
such Certificates be issued to DTC, as Holder, the Trustee may issue to DTC and
register DTC as the Holder of one or more Book-Entry Certificates requested by
such Holders (or the Transferor or Distributor, as applicable, pursuant to
Section 3.01) to be issued to DTC. The Trustee shall treat DTC as the Holder of
all Book-Entry Certificates registered in its name (or in the name of its
nominee) pursuant to Section 3.04(a) for all purposes of this Agreement
(including, without limitation, Section 5.01) and the related Trust Supplement.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Trustee
shall issue Definitive Certificates in exchange for each Book-Entry Certificate
registered in the name of DTC (or in the name of its nominee). In any such
instance, an owner of a beneficial interest in a Book-Entry Certificate
registered in the name of DTC (or in the name of its nominee) will be entitled
to physical delivery of Definitive Certificates equal to such beneficial
interest and to have such Definitive Certificates registered in
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its name. The Trustee and the Company, shall have no obligation to maintain the
DTC system, and neither the Company nor the Trustee shall have any
responsibility to monitor or restrict the transfer of beneficial ownership of
the Certificates transferred through the facilities of DTC.
(b) With the prior written consent of the Company, DTC may surrender
any Book-Entry Certificate registered in its name (or in the name of its
nominee) in exchange in whole or in part for Definitive Certificates of such
Series of like tenor and terms on such terms as are acceptable to the Company
and DTC. Thereupon (after the delivery to the Company and the Trustee of all
opinions and certificates that may be required for a transfer of a Certificate
to such Person) the Trustee shall execute and deliver, without service charge,
(i) to each Person specified by DTC (pursuant to instructions from its direct or
indirect participants or otherwise) a new Definitive Certificate or Definitive
Certificates of the same Series, of like tenor and terms and of any authorized
denomination as requested by such Person in aggregate Stated Amount equal to and
in exchange for such Person's beneficial interest in the Book-Entry Certificate
or Book-Entry Certificates surrendered by DTC; and (ii) in the event the Stated
Amount of the surrendered Book-Entry Certificate or Book-Entry Certificates
exceeds the aggregate Stated Amount of Definitive Certificates delivered to
Holders pursuant to the preceding clause (i) to DTC a new Book-Entry Certificate
or Book-Entry Certificates of like tenor and terms and in an aggregate Stated
Amount equal to such excess.
(c) The Trust Supplement relating to a Series of Certificates may
specify procedures with respect to other depositaries similar to those specified
in Sections 3.08(a) and (b) with respect to DTC.
Section 3.09. Lost Certificates, Etc. In case any Certificate shall
-----------------------
be mutilated, destroyed, lost or stolen, the Trustee will execute and deliver a
Certificate of like form and tenor in exchange and substitution for such
mutilated Certificate, or in lieu of and in substitution for such destroyed,
lost or stolen Certificate, upon the provision by the Holder thereof to the
Trustee of evidence satisfactory to the Trustee of such destruction or loss or
theft of such Certificate, of the authenticity thereof and of such Holder's
entitlement thereto. The Trustee may, as a condition to recognizing the Person
claiming to be the Holder of a destroyed, lost or stolen Certificate as the
Holder of such Certificate, request such Person to provide to the Trustee
indemnification and documentation reasonably satisfactory to the Trustee.
Section 3.10. Cancellation and Destruction of Surrendered
-------------------------------------------
Certificates. All Certificates surrendered to the Trustee shall be canceled by
- ------------
it. Except as prohibited by
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<PAGE>
applicable law or regulation, the Trustee is authorized to destroy all
Certificates so canceled.
Section 3.11. Holders Bound by Agreement. By and upon acceptance of
--------------------------
a Certificate issued in accordance with the terms hereof and the related Trust
Supplement (whether such Certificate is issued in connection with a Transfer
hereunder or upon transfer, exchange or surrender of any such initially issued
Certificate), the Holder thereof shall have and shall be deemed to have
acknowledged and agreed that such Holder is familiar with and bound by all the
terms of this Agreement and the related Trust Supplement.
Section 3.12. List of Holders. Three or more Certificateholders of
---------------
record of a Series may, by written application to the Trustee, request access to
the list maintained by the Trustee of Certificateholders of such Series for
purposes of communicating with other Holders with respect to their rights under
this Trust Agreement, the related Trust Supplement or under the Certificates for
such Series, which request shall be accompanied by a copy of the communication
which such Holders propose to transmit. The Trustee may choose not to give such
Certificateholders access to the list of Holders if it agrees to mail the
communication on behalf of the requesting Holders, at their expense, to all
Holders. If the Trustee objects to the proposed mailing on the grounds that it
would be contrary to the best interest of the Certificateholders or a violation
of applicable law, it may decline to make the proposed mailing.
ARTICLE IV
----------
PROVISION OF INFORMATION, ETC.; TAXES
-------------------------------------
Section 4.01. Conditions to Deliveries, Transfers and Exchanges. As
-------------------------------------------------
a condition precedent to the execution and delivery, issuance, transfer,
exchange or surrender of any Certificate, the Trustee may require: (i) payment
by the applicable Holder or its transferee to the Trustee of a sum sufficient
for the payment (or, in the event that the Trustee shall have made such payment,
the reimbursement to it) of any tax or other governmental charge with respect
thereto (including any such tax or charge with respect to Underlying Assets
being Transferred); (ii) payment by the applicable Holder or its transferee to
the Trustee of such service charges expressly required to be paid hereunder or
under the related Trust Supplement in connection with any such action; (iii)
provision by the applicable Holder or its transferee to the Trustee of such
proof of identity or residence, or other information (including the number of an
account for wire transfer of funds and the taxpayer identification number of any
transferee), or such representations and warranties or such assurances
(including a signature guaranty), or execution by the applicable Holder or its
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<PAGE>
transferee of such certificates, as the Trustee may reasonably deem necessary or
proper including but not limited to the delivery of all opinions and
certificates prescribed in any provisions restricting the transfer of
Certificates; and (iv) compliance by the applicable Holder and its transferee
with such regulations, if any, as the Trustee may reasonably establish that are
not inconsistent with the provisions of this Agreement and the related Trust
Supplement.
Section 4.02. Payment of Taxes or Other Governmental Charges. If any
----------------------------------------------
tax or other governmental charge shall become payable by or on behalf of the
Trustee (including any tax or charge required to be withheld from any payment to
or by the Trustee under the provisions of any applicable law or regulation),
with respect to any Certificate of a Series or Underlying Assets evidenced
thereby or with respect to any amount payable in respect of any such Underlying
Assets or with respect to any amount payable upon exercise of the Optional Call
Right, such tax or governmental charge shall be payable by the Holder of such
Certificate and may be withheld by the Trustee from distributions under Section
5.01.
ARTICLE V
---------
DISTRIBUTIONS IN RESPECT OF THE UNDERLYING ASSETS; DEFAULTS
-----------------------------------------------------------
Section 5.01. Cash Distributions. (a) Subject to the provisions of
------------------
Article IV and Section 5.01(c), the Trustee shall distribute any Available Funds
with respect to any Underlying Assets of a Trust to the holders of Notes and the
Holders of Certificates of the related Series (as of the applicable Record Date)
in the manner set forth in the related Indenture, if any, and the related Trust
Supplement.
(b) Subject to the provisions of Article IV and Section 5.01(c), upon
the exercise of the Optional Call Right, if any, the Trustee shall forthwith
distribute Available Funds with respect to all cash proceeds received from the
Optionholder to the holders of Notes and the Holders of Certificates of the
related Series in the manner set forth in the related Indenture, if any, and the
related Trust Supplement.
(c) If the Trustee shall be required to withhold from any amount
otherwise distributable pursuant to Section 5.01(a) or (b) an amount on account
of taxes, the Trustee shall withhold the amount so required to be withheld and
the amount distributed in respect of such amount shall be reduced accordingly.
Section 5.02. Method of Payment. Unless otherwise specified in the
-----------------
related Indenture, if any, or the related Trust Supplement, Available Funds
shall be paid (net of any withholdings pursuant to Section 5.01) by the Trustee
to the
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<PAGE>
Holders of Certificates of the related Series (as of the applicable Record
Date), in lawful money of the Government, by wire transfer of immediately
available funds to the respective accounts in the United States of such Holders;
provided that if any such Holder is other than DTC and such Holder has not
- --------
provided to the Trustee, at least 15 days prior to the date of such payment,
information as to an account in the United States to which such payment may be
wire transferred, the Trustee shall mail, by first class mail, a check for the
amount of such payment to the most recent address of such Holder set forth in
the Register; and provided further, that any payment due on Certificates of a
-------- -------
Series on the Final Scheduled Payment Date for such Series shall only be made
upon presentment and surrender, on or prior to such Final Scheduled Payment
Date, of the Certificates.
Section 5.03. Document Distributions. (a) The Trustee will prepare
----------------------
and forward to the Rating Agency and each Holder on each Payment Date (whether
or not such Holder receives a payment on such date) or as soon thereafter as is
practicable, a statement setting forth, to the extent applicable to any Series,
among other things:
(i) the amount of such distribution allocable to principal on the
related Underlying Assets, separately identifying the aggregate amount of
any redemptions or prepayments included therein;
(ii) the amount of such distribution allocable to interest on the
related Underlying Assets;
(iii) the aggregate outstanding principal balance of the related
Underlying Securities as of the opening of business on the immediately
following Due Date, after giving effect to distributions allocated to
principal reported under (i) above and the payment made on the Due Date
immediately preceding such Payment Date;
(iv) the aggregate outstanding principal amount of the
Certificates of such Series as of the immediately following Due Date, after
giving effect to distributions allocated to principal reported under (i)
above and the payment made on the Due Date immediately preceding such
Payment Date;
(v) in the case of Variable Interest Certificates, the Variable
Interest Rate applicable to the distribution being made;
(vi) with respect to Accrual Certificates prior to the Accrual
Termination Date, in addition to the information specified in (i) above,
the amount of interest accrued on
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<PAGE>
such Certificates during the related Interest Accrual Period and added to
the Compound Value thereof;
(vii) if applicable, the amount of any shortfall (i.e., the
difference between the aggregate amounts of principal and interest which
Holders would have received if there were sufficient Available Funds to
distribute and the amounts actually distributed);
(viii) if applicable, the number and aggregate principal
balances of related Underlying Assets delinquent for (a) two consecutive
payments and (b) three or more consecutive payments, as of the close of the
business on the Record Date to which such distribution relates;
(ix) in the case of any related Underlying Enhancement described
in the related Trust Supplement, the amount of coverage of such credit
support as of the close of business on the applicable Payment Date;
(x) in the case of any Series which includes Subordinated
Certificates, the subordinated amount, if any, determined as of the related
Payment Date and, if the distribution to the Holders of Senior Certificates
is less than their required distribution, the amount of the shortfall;
(xi) the amount of any withdrawal from any related Reserve Fund
included in amounts actually distributed to Holders and the remaining
balance of each such Reserve Fund on such Payment Date, after giving effect
to distributions made on such date; and
(xii) such other information as may be specified in the related
Trust Supplement.
In addition, within a reasonable period of time after the end of each calendar
year, the Trustee will furnish to each Holder of record at any time during such
calendar year and the Rating Agency: (A) the aggregate of amounts reported
pursuant to (i) through (iii), (vi), (vii) and (xi) above for such calendar year
and (B) such other information specified in this Agreement and the related Trust
Supplement as may be required to enable Holders to prepare their tax returns.
(b) Subject to the provisions of Article IV and the related Indenture,
if any, and the related Trust Supplement, the Trustee shall distribute to the
Company copies of any documents (or such other material as may be specified in
the related Trust Supplement) distributed to the Trustee, as a holder of the
Underlying Assets, by an Underlying Issuer, provider of Underlying Enhancement
or a Swap Agreement counterparty. Each Holder of a Certificate of the related
Series (and, if such
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<PAGE>
Holder is DTC or a similar depositary, the beneficiaries thereof acting pursuant
to the related depositary arrangements) shall have the right to inspect all such
documents and other material at any reasonable time upon prior written notice to
the Trustee.
Section 5.04. Events of Default. If an Underlying Issuer, provider
-----------------
of Underlying Enhancement or a Swap Agreement counterparty with respect to a
Series of Certificates defaults on a payment required to be made by it with
respect to any Underlying Asset (an "event of default"), the Trustee shall
promptly give notice thereof to the Company, each Holder of Certificates of such
Series and the Rating Agency. Such notice shall set forth (a) the Underlying
Assets affected, (b) the date and nature of such event of default, (c) the
amount of the interest, principal, net Swap Agreement payment or other amount to
which such event of default relates, and (d) any other information which the
Trustee may deem appropriate.
If an event of default occurs with respect to any Series of
Certificates, the Trustee may proceed to enforce its rights as holder of the
related Underlying Assets unless otherwise directed by Holders of a majority in
Stated Amount of the Certificates of such Series (subject to any applicable
terms of subordination among Classes thereof). The Trustee may, in its
discretion, and will, if so directed by Holders of a majority in Stated Amount
of the Certificates of such Series, exercise or enforce any other rights which
it may have as holder of the related Underlying Assets (subject as aforesaid).
In addition, Holders of a majority in Stated Amount of the Certificates of such
Series may together direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee as holder of such Underlying
Assets. Notwithstanding the foregoing, the Trustee shall be under no obligation
to exercise or enforce any of its rights with respect to the Underlying Assets
of a Trust, whether or not at the request or direction of any Holders of a
Series, unless such Holders have offered to the Trustee security or indemnity
satisfactory to it against loss, liability or expense incurred in compliance
with such request or direction or if such request or direction is in conflict
with any law, this Agreement or the related Trust Supplement. No Holder will
have the right to institute any proceeding with respect to this Agreement or the
related Trust Supplement unless (a) Holders of not less than 25% in Stated
Amount of the Certificates of the related Series (subject as aforesaid) have
made written request to the Trustee to institute such proceeding in its own name
as Trustee and have offered the Trustee reasonable indemnity, (b) the Trustee
has for 60 days neglected or refused to institute any such proceeding and (c) no
direction inconsistent with such written request has been given to Holders of a
majority in Stated Amount of the Certificates (subject as aforesaid) of such
Series.
Neither the Trustee (except as provided above) nor the Company will be
under any obligation whatsoever to appear in,
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<PAGE>
prosecute or defend any action, suit or other proceeding in respect of the
Underlying Assets or Certificates of any Trust.
Section 5.05. No Liability of the Company, the Transferor or the
--------------------------------------------------
Trustee on Underlying Assets. The obligor with respect to any Underlying Asset
- ----------------------------
is the applicable Underlying Issuer, provider of Underlying Enhancement or
Guaranteed Investment Contract or Swap Agreement counterparty, as the case may
be. Neither the Company, the Transferor nor the Trustee shall have any
obligation on or with respect to the payment of any amount payable with respect
to any Underlying Asset, except for the obligation of the Trustee to make
distributions of Available Funds in respect thereof in accordance with the
provisions of Article V and the related Trust Supplement and except if it is
---------
such Underlying Issuer, provider or counterparty.
ARTICLE VI
----------
THE TRUSTEE AND THE COMPANY
---------------------------
Section 6.01. Maintenance of Office by the Trustee; Provision of
--------------------------------------------------
Agreement. (a) Until termination of this Agreement in accordance with its
- ---------
terms, there shall be maintained in the Borough of Manhattan, The City of New
York, State of New York, facilities (the "New York Presenting Agent") to which
Holders may deliver Certificates for the transfer, exchange and surrender of
Certificates, all in accordance with the provisions of this Agreement and the
Trust Supplements.
(b) The Trustee shall furnish to each Holder of a Certificate who so
requests in writing a copy of this Agreement and the related Trust Supplement,
and any amendments or supplements thereto, without charge.
Section 6.02. Use of Agents; Appointment of Additional Trustees. (a)
-------------------------------------------------
The Trustee may perform its obligations hereunder and under each Trust
Supplement through one or more agents, which shall be chosen with due care by
the Trustee, taking into account, among other factors, the services to be
performed by such agent and such agent's qualifications and financial status.
The use of such agents shall not alter or diminish the Trustee's
responsibilities as Trustee hereunder and under each Trust Supplement and the
Trustee shall be responsible for the actions of such agents.
(b) For the purpose of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint co-trustees or
separate trustees of all or any part of a Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by this Agreement and the related Trust Supplement will be
conferred or imposed upon the Trustee and each such separate trustee or co-
-25-
<PAGE>
trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of the Trustee but which shall be
independently responsible to the Trustee for compliance with the requirements of
such local jurisdiction.
Section 6.03. Limited Authority of Trustee. (a) The Trustee is to
----------------------------
act solely in a trustee capacity hereunder and under each Trust Supplement.
Although the Trustee will act as a limited agent of the Holders of each Series
in safekeeping and bookkeeping for the related Underlying Assets, the Trustee
will have no authority to act for or assert any right on behalf of any Holder
except as otherwise provided in this Agreement and the related Trust Supplement.
(b) The Trustee shall take no action in respect of any Holder or any
Collection Account or any Underlying Assets not explicitly provided for herein
or in the related Trust Supplement; in particular, and not by way of limitation,
the Trustee shall, subject to the provisions of Article V, be prohibited from
taking, and agrees not to take, any of the following actions with respect to any
Holder or any Collection Account:
(i) fail to distribute all Available Funds and all documents
received in respect of any Underlying Asset (except as otherwise provided
herein or in the related Trust Supplement);
(ii) take any action with respect to an event of default other than
as contemplated in Section 5.04;
(iii) provide any investment advice, investment counselling or
portfolio management to any Holder, in a Holder's capacity as such;
(iv) guarantee or otherwise enhance the creditworthiness of any
Underlying Asset;
(v) fail to notify any Holder in accordance with the terms of this
Agreement or the related Trust Supplement of any event of default; or
(vi) fail to forward to any Holder all communications received by
the Trustee in respect of the related Underlying Assets as required hereby
(except as otherwise provided herein or in the related Trust Supplement).
Section 6.04. Waiver of Claims. Except as provided in Article IV,
----------------
the Trustee hereby waives all claims, liens, charges, equities and rights of
setoff that it may now or at any time
-26-
<PAGE>
hereafter have against any of the Underlying Assets of any Trust transferred to
the related Collection Account.
Section 6.05. Prevention or Delay in Performance by the Trustee.
-------------------------------------------------
Neither the Trustee nor the Company shall incur any liability to any Holder, if,
by reason of any provision of any present or future law or regulation
thereunder, of the Government or of any other governmental authority, or by
reason of any act of God or war or other circumstance beyond the control of the
relevant party, the Trustee or the Company shall be prevented or forbidden from
doing or performing any act or thing which the terms of this Agreement or the
related Trust Supplement provide shall be done or performed.
Section 6.06. Ownership of and Transactions in Underlying Assets and
------------------------------------------------------
Certificates; Optional Call Right. (a) Unless otherwise provided in the Trust
- ---------------------------------
Supplement, the Company and the Trustee may own and deal in securities of the
same issue and maturity as any of the Underlying Assets of a Trust and may own
and deal in Certificates and withdraw from the custody of the Trustee Underlying
Assets in an amount equal to the interest in the Underlying Assets represented
by Certificates owned by the Company or the Trustee, as applicable, and, upon
effecting such withdrawal, may own and deal in such Underlying Assets.
(b) Unless otherwise provided in the related Indenture, if any, or the
related Trust Supplement, the Company, an affiliate of the Company or a Person
unaffiliated with the Company as specified in the related Trust Supplement (the
"Optionholder") may have the right (the "Optional Call Right") at the time or
times specified in the related Trust Supplement to purchase all, but not less
than all, the Certificates or the Underlying Assets as specified in the related
Trust Supplement at a cash purchase price (the "Call Purchase Price") equal to
the aggregate Stated Amount of all such Certificates then outstanding, together
with that portion, if any, of the amount due on the Certificates on the next
Payment Date that is then accrued and unpaid. The Optionholder shall give the
Trustee at least 30 days' prior written notice of the date on which the
Optionholder intends to exercise the Optional Call Right. The Trustee shall
promptly give notice thereof to each Holder of the related Series pursuant to
Section 8.04. Upon the exercise of the Optional Call Right, the Optionholder
shall transfer to the Trustee an amount in cash equal to the Call Purchase
Price. The Available Funds with respect to the cash proceeds received by the
Trustee upon the exercise of the Optional Call Right shall be distributed in
accordance with Article V. Such distribution shall be deemed made in full
satisfaction of all rights pertaining to the Certificates held by such Holders,
and immediately after such distribution has been effected, such Certificates
shall no longer evidence any interest in the related Trust. Concurrently with
such distribution, the Trustee will, to
-27-
<PAGE>
the extent specified in the related Trust Supplement and as required by the
Optionholder, either (i) issue to the Optionholder, in accordance with Article
III, a new Certificate representing the entire beneficial interest in the
related Trust, after which the Optionholder may at any time terminate the
related Trust Supplement and the related Trust upon written notice to the
Trustee to such effect or (ii) transfer to the Optionholder all related
Underlying Assets and terminate the related Trust Supplement and the Trust.
Section 6.07. Exculpation of the Company and the Transferor. The
---------------------------------------------
Trustee hereby agrees, and each Holder, by and upon accepting a Certificate of a
Series agrees and shall be deemed to agree, that except as expressly provided
herein or in the related Trust Supplement neither the Company nor the Transferor
shall be obligated or liable to the Trustee or the Holders of any Series or
holders of any beneficial interests in Certificates with respect to (i) any
payment or default with respect to the Underlying Assets, (ii) any breach by the
Trustee of its obligations under this Agreement or any Trust Supplement or (iii)
any other event or circumstance relating to the execution, delivery, issuance,
transfer, exchange or surrender of Certificates, the distribution of payments
with respect to the Underlying Assets or the enforcement of the rights of the
Holders against the Trustee or with respect to the Underlying Assets.
Section 6.08. Exculpation of the Trustee. (a) The Trustee assumes
--------------------------
no obligation or liability under this Agreement or any Trust Supplement to
Holders of any Series other than by reason of the Trustee's willful misconduct,
bad faith or negligence in the performance of such duties as are specifically
set forth in this Agreement or any Trust Supplement except as expressly provided
herein or in the related Trust Supplement.
(b) The Trustee shall not be liable for any action or any failure to
act by it in reliance upon the advice of or information from legal counsel or
accountants or any other person believed by it in good faith to be competent to
give such advice or information. The Trustee may rely and shall be protected in
acting upon any written notice, request, direction or other document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(c) Neither any bank in which the Collection Account is maintained nor
DTC will be deemed agents of the Trustee.
(d) The statements contained in the Trust Agreement, Trust Supplement,
the Prospectus, the Prospectus Supplement and the Certificates are the
statements of the Company, and the Trustee shall have no liability therefor.
Section 6.09. Fidelity Bond; Indemnity. The Trustee shall maintain a
------------------------
fidelity bond in customary amounts for the
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<PAGE>
protection of the Company and the Holders of each Series against losses relating
to the trust arrangement set forth in this Agreement due to dishonest or
fraudulent action by officers or employees of the Trustee.
Section 6.10. Resignation and Removal of the Trustee; Appointment of
------------------------------------------------------
Successor Trustee. (a) The Trustee may at any time resign as Trustee hereunder
- -----------------
with respect to one or more Series by written notice thereof delivered to the
Company, each Holder of each affected Series and the Rating Agency, such
resignation to take effect only upon the appointment of a qualified successor
Trustee and its acceptance of such appointment as hereinafter provided. In the
event the Trustee resigns hereunder, the Trustee shall use its best efforts to
assist the Company in obtaining a successor Trustee.
(b) The Trustee may at any time be removed with respect to one or more
Series by the Company with or without cause, or by Holders of a majority in
Stated Amount of the Certificates of any Series with cause, upon 30 days'
written notice of such removal delivered to the Trustee (and in the case of
removal by Holders, to the Company), such removal to take effect only upon the
appointment of a qualified successor Trustee and its acceptance of such
appointment as hereinafter provided.
(c) In the event that the Trustee becomes incapable of acting, is
adjudged to be bankrupt or insolvent, or a receiver of the Trustee or of its
property is appointed, or any public officer takes charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Trustee may be removed with respect to one
or more Series by court action instituted by the Company or any Holder who has
been a Holder for six months or by Holders of 10% in Stated Amount of
Certificates of any such Series.
(d) Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or delivery of any paper or any further act on the part of the
parties hereto; provided that if, upon the occurrence of such event, such
--------
corporation shall not be eligible to serve as trustee pursuant to paragraph (e)
below, such event shall be deemed to be an act of resignation by the Trustee
pursuant to paragraph (a) above with respect to all Series and such Trustee
shall deliver notice thereof pursuant to paragraph (a) above upon the occurrence
of such event.
(e) In case at any time the Trustee acting hereunder shall resign or
be removed, the Company may appoint a successor
-29-
<PAGE>
trustee after the delivery of a notice of resignation or a notice of removal.
Any successor trustee shall be a bank or trust company organized and doing
business under the laws of the United States of America or of any State thereof,
authorized to act as trustee, having a combined capital and surplus of at least
$50,000,000, rated at least BBB- by Standard & Poor's, subject to supervision or
examination by federal or state authority and meeting any applicable
requirements of Rule 3a-7 (a)(4)(i) under the Investment Company Act. If no
successor trustee has been appointed as successor trustee within 90 days after
the Trustee has given written notice of its election to resign, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee.
(f) Any successor trustee appointed hereunder shall execute and
deliver to the Company and the retiring Trustee an instrument accepting such
appointment and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor trustee shall become vested with all
the rights and duties of the retiring Trustee. The retiring Trustee shall (i)
upon payment of its charges, duly cause the Underlying Assets of each affected
Trust to be transferred to such successor trustee which shall deposit the same
in separate Collection Accounts held by such successor trustee and duly assign,
transfer and deliver to such successor trustee all records, Certificates and
rights to all moneys held by such retiring Trustee hereunder, and (ii) pay over
to such successor trustee any fees or charges previously paid to the Trustee in
respect of duties not yet performed under this Agreement or any related Trust
Supplement which remain to be performed by such successor trustee. Any
successor Trustee shall (i) promptly mail notice of its appointment to all
affected Holders and the Rating Agency, (ii) automatically be bound by all terms
of this Agreement and each related Trust Supplement and (iii) promptly take such
steps and establish such books and records as may be necessary or appropriate
for it to comply with the provisions of this Agreement and each related Trust
Supplement.
Section 6.11. Fees and Expenses of the Trustee. Unless otherwise
--------------------------------
provided in the related Trust Supplement, the charges, fees or reimbursements
for services provided by the Trustee under this Agreement and each Trust
Supplement shall be determined by mutual agreement of the Company and the
Trustee and the Company shall pay all such agreed charges, fees and
reimbursements of the Trustee; provided that the Company shall not pay or be
--------
liable for the charges, fees and reimbursements that are expressly required by
this Agreement or any Trust Supplement to be paid by Holders or that the Holders
may elect to provide pursuant to Section 3.05, 3.09, 4.01, 4.02 or 5.04, as
applicable; provided further that the Trustee shall not be released from any of
-------- -------
its duties hereunder or under any Trust Supplement as a result of the failure of
the Company to pay any such agreed charges, fees or reimbursements.
-30-
<PAGE>
Section 6.12. Indemnification. (a) The Company agrees to indemnify
---------------
the Trustee and any of its agents, officers, directors or employees against, to
defend, and to hold them harmless from, any losses, claims, damages, expenses or
other liabilities, joint or several, arising for any reason (including, without
limitation, violation of applicable laws or trademarks or service marks)
(referred to in this Section 6.12 as "liabilities"), and any related out-of-
pocket expenses (including, without limitation, reasonable fees and expenses of
legal counsel), which may arise out of acts performed by the Trustee and any of
its agents, officers, directors or employees in accordance with this Agreement
or any Trust Supplement, as the same may be amended, supplemented or modified
from time to time, in relation to the Certificates of any Series, or the
Underlying Assets of any Trust, other than any liabilities and expenses arising
out of (i) negligence, willful misconduct or bad faith on the part of the
Trustee and any of its agents, officers, directors or employees, (ii) the breach
of any of the Trustee's representations, warranties or covenants set forth in
this Agreement, any Trust Supplement or in any amendment, supplement or
modification hereto or thereto, or (iii) any charges, fees or reimbursements
that are expressly required by this Agreement or any Trust Supplement to be paid
by the Holders or for which the Holders are required or may elect to provide
security or indemnity to the Trustee pursuant to Section 3.05, 3.09, 4.01, 4.02
or 5.04, as applicable.
(b) Promptly after receipt by the Trustee of actual knowledge or
notice of any demand, claim or circumstances which gives rise or which, with the
lapse of time, would or might give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation that may
result in a liability for which indemnity may be sought hereunder, the Trustee
shall give notice thereof to the Company. Such notice shall describe the claim,
action, proceeding or investigation in reasonable detail, and shall indicate, to
the extent known, the amount (estimated, if necessary and to the extent
feasible) of the liability and expenses that have been or may be incurred by the
Trustee. The Company may elect to compromise or assume the defense of, at its
own expense and by its own counsel, any such claim, action, proceeding or
investigation and the Trustee shall cooperate in the compromise of, or defense
against, such claim, action, proceeding or investigation. The Trustee shall not
enter into any settlement of any such claim, action, proceeding or investigation
without the written consent of the Company.
Section 6.13. Swap Agreements; Underlying Enhancement, Indentures,
----------------------------------------------------
etc. The Trustee is hereby authorized, at the direction of the Company, to
- ---
enter into any agreement or other instrument governing the terms of the Swap
Agreements, Underlying Enhancement, Indentures or other similar rights and/or
obligations relating to a Trust. As the context requires, the terms "Swap
Agreements", "Underlying Enhancement" and
-31-
<PAGE>
"Indentures" shall mean either (i) Swap Agreements, Underlying Enhancement or
Indentures or (ii) the rights and/or obligations of the related Trust with
respect thereto. On or before the date of the Transfer with respect to a Trust,
the Trustee shall enter into the Swap Agreements, Underlying Enhancement and/or
Indentures and any related agreements specified in the related Trust Supplement.
Section 6.14. Delaware Trustee. At all times each Trust established
----------------
pursuant to the terms of this Agreement and the related Trust Supplement shall
have at least one trustee which meets the requirements of 12 Del. C. (S) 3807
and which shall be responsible for compliance with applicable Delaware law.
ARTICLE VII
-----------
AMENDMENT AND TERMINATION
-------------------------
Section 7.01. Amendment. This Agreement may be amended by the
---------
Trustee and the Company without notice to or consent of Holders of any Series
(but with prior notice to the Rating Agency) to (i) cure any defect, omission,
inconsistency or ambiguity in this Agreement or in the Certificates of any
Series, (ii) add to the covenants and agreements of the Trustee or the Company
or to surrender any right or power therein conferred upon the Company, (iii)
effectuate the assignment of the Trustee's rights and duties thereunder to a
qualified successor as provided therein, (iv) comply with the Securities Act,
the Trust Indenture Act of 1939, as amended, the Investment Company Act or the
Code, or (v) modify, alter, amend or supplement this Agreement in any other
respect which is not adverse in any material respect to any Holders of any
Series. Any such amendment pursuant to clause (v) of the preceding sentence
shall be deemed not adverse in any material respect to any such Holders if the
Trustee receives written confirmation from each Rating Agency then rating the
Certificates of each Series that such amendment will not cause such Rating
Agency to reduce or withdraw its then current rating thereof (it being
understood that the delivery of such written confirmation may be conditioned
upon, among other things, receipt by each such Rating Agency of one or more
opinions of counsel satisfactory in form and substance to each such Rating
Agency with respect to the subject matter of any such amendment, provided that
the cost of any such opinions shall not be borne by the Trustee). With respect
to each separate Trust and the Series of Certificates relating thereto, this
Agreement also may be amended by the Trustee and the Company with the consent of
Holders possessing not less than a majority in Stated Amount of the Certificates
of such Series, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement with respect to
such Series or modifying in any manner the rights of such Holders; provided,
--------
however, that no such amendment may (a) reduce the amount or
- -------
-32-
<PAGE>
delay the timing of payments on any Certificate of such Series without the
consent of the Holder of such Certificate; or (b) reduce the aforesaid
percentage in Stated Amount of Certificates of such Series, the Holders of which
are required to consent to any such amendment without the consent in either case
of Holders of 100% in Stated Amount of Certificates of such Series. The related
Trust Supplement may impose further restrictions on amendments or otherwise
modify this Section 7.01. No amendment or waiver of any provision of this
Agreement nor consent to any departure from this Agreement shall in any event be
effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that any amendment
-------- -------
which affects the Delaware Trustee shall not be effective unless the same has
been consented to in writing by the Delaware Trustee.
Section 7.02. Termination; Unclaimed Moneys. (a) This Agreement is
-----------------------------
to remain in effect until the later of (i) the date upon which all the
Underlying Assets of each Trust have been paid in full at the maturity thereof
or otherwise liquidated and the payments on such Underlying Assets have been
distributed to Holders in accordance with Article V and as provided in the
related Trust Supplements or (ii) the date specified by the Optionholder in its
written notice to the Trustee pursuant to Section 6.06; provided, however, that
-------- -------
in no event shall the trusts created hereby continue beyond the expiration of 21
years from the death of the survivor of the descendants of Joseph P. Kennedy,
the late ambassador of the United States to the Court of St. James, living on
the date hereof.
(b) In the event any moneys payable in respect of any Certificates are
not claimed by the Holder entitled thereto, the Trustee shall segregate and hold
such moneys in trust, without liability for interest thereon, for the account of
the Holder entitled thereto. All such moneys that remain unclaimed on the date
that is two years and eleven months after the date on which such moneys were
originally due shall be disbursed to the Company, and such Holder shall
thereafter look only to the Company for payment.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
Section 8.01. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and by the Company and the Trustee on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. By and upon acceptance of a Certificate, each
Holder shall have agreed and be deemed to have agreed to be bound
-33-
<PAGE>
by all the terms and conditions of this Agreement and the related Trust
Supplement. Copies of this Agreement and the related Trust Supplement shall be
filed with the Trustee and shall be open to inspection upon reasonable written
notice in advance during regular business hours at the Corporate Trust Office of
the Trust at _______________________, ___________________ by any Holder holding
a Certificate.
Section 8.02. Exclusive Benefit of Parties. This Agreement is for
----------------------------
the exclusive benefit of the parties hereto and the Holders, and their
respective successors hereunder, and shall not be deemed to give any legal or
equitable right, remedy or claim to any other Person whatsoever.
Section 8.03. Invalidity of Provisions. In case any one or more of
------------------------
the provisions contained in this Agreement, the Trust Supplements or in the
Certificates should be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall in no way be affected, prejudiced or disturbed
thereby, provided that the intent of the parties hereto is not thereby
materially altered.
Section 8.04. Notices. Any and all notices to be given to the
-------
Company shall be deemed to have been duly given if sent by first class mail,
postage prepaid, personally delivered, delivered by overnight courier or sent by
facsimile transmission, addressed to the Company as follows:
CS First Boston Structured Products Corporation
55 East 52nd Street
New York, New York 10055
Facsimile number: 212-318-0531
Telephone number: 212-909-4085
Attention: Gina Hubbell
Reference: _________
, or to any other place specified by it by notice hereunder, with a copy to the
Trustee in the case of any notice given by a Holder.
Any and all notices and instructions to be given to the Trustee shall
be deemed to have been duly given if sent by first class mail, postage prepaid,
personally delivered, delivered by overnight courier or sent by facsimile
transmission, addressed to the Trustee as follows:
__________________________________
__________________________________
__________________________________
Facsimile number: (___) ___-____
Telephone number: (___) ___-____
Attention: ______________________
-34-
<PAGE>
Reference: __________
, or to any other place to which the Trustee or any transfer agent appointed by
it shall have transferred its Designated Office as permitted by this Agreement.
Any and all notices to be given to any (i) Holder shall be deemed to
have been duly given if personally delivered or sent by first class mail postage
prepaid, addressed to such Holder at the address of such Holder as it appears on
the Register and (ii) Rating Agency shall be deemed to have been duly given if
personally delivered, sent by first class mail postage prepaid, delivered by
overnight courier or sent by facsimile transmission, addressed to such Rating
Agency at the address of such Rating Agency set forth in the related Trust
Supplement.
Section 8.05. GOVERNING LAW. THIS AGREEMENT AND ALL RIGHTS HEREUNDER
-------------
AND PROVISIONS HEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF DELAWARE, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
Section 8.06. Headings. The headings of articles and sections in
--------
this Agreement have been inserted for convenience only and are not to be
regarded as a part of this Agreement, or to have any bearing upon the meaning or
interpretation of any provision contained herein or in the Certificates.
-35-
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have duly executed
this Agreement as of the day and year first above set forth. By and upon
acceptance of a Certificate, each Holder shall have agreed and be deemed to have
agreed to be bound by all the terms and conditions of this Agreement and the
related Trust Supplement.
* * * * *
CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
By:_________________________
Name:
Title:
___________________________________,
Trustee
By:_________________________
Name:
Title:
-36-
<PAGE>
DRAFT 4/30/96
Exhibit 4.2.2
[Certificates]
================================================================================
SERIES _____ TRUST SUPPLEMENT
dated as of __________
to
TRUST AGREEMENT
dated as of __________
between
CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
and
_____________________________________
Trustee
$__________
SERIES _____
================================================================================
<PAGE>
Table of Contents
-----------------
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions............................... 1
ARTICLE II
ORGANIZATION
Section 2.01. Declaration of Trust...................... 6
Section 2.02. Name...................................... 6
Section 2.03. Office.................................... 6
Section 2.04. Purposes, Authority and Powers............ 6
Section 2.05. Initial Deposit; Transfer of Underlying
Securities to the Trust................... 7
Section 2.06. Tax Treatment; Construction............... 7
Section 2.07. Sale...................................... 7
ARTICLE III
THE CERTIFICATES
Section 3.01. The Certificates.......................... 8
ARTICLE IV
PAYMENTS
Section 4.01. Payment Date Payments..................... 9
Section 4.02. Notices with respect to Special Payment
Date Payments............................. 9
Section 4.03. Tax Withholding........................... 9
ARTICLE V
TERMINATION
Section 5.01. [Sale of Underlying Securities upon
Termination of Swap Agreement;
Distribution of Proceeds of
Sale][Reserved]............................ 9
Section 5.02. Sale of Underlying Securities upon an
Underlying Event of Default;
Distribution of Proceeds of Sale.......... 10
Section 5.03. Termination............................... 10
-i-
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.01. Counterparts.............................. 11
Section 6.02. Exclusive Benefit of Parties and
Holders................................... 12
Section 6.03. Invalidity of Provisions.................. 12
Section 6.04. Trust Agreement Ratified.................. 12
Section 6.05. Governing Law............................. 12
Section 6.06. Headings.................................. 12
Section 6.07. Business Days............................. 12
EXHIBIT A Form of Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Co-Trustee Agreement
EXHIBIT D-1 Form of Swap Agreement
EXHIBIT D-2 Form of Swap Guaranty
EXHIBIT E Form of Transfer Document
-ii-
<PAGE>
SERIES TRUST SUPPLEMENT
-------------------------------
Series ______ Trust Supplement dated as of __________ (this "Trust
Supplement") between CS First Boston Structured Products Corporation, a Delaware
corporation (the "Company"), and ____________________, a __________ banking
corporation, as trustee (the "Trustee"), to the ______________ Trust Agreement
dated as of __________ between the Company and the Trustee (the "Trust
Agreement").
WHEREAS the Company and the Trustee have heretofore executed and
delivered the Trust Agreement, which provides for an unlimited aggregate stated
amount of Certificates that may be issued thereunder pursuant to separate
supplements thereto as contemplated by Article II thereof;
WHEREAS this Trust Supplement constitutes a "Trust Supplement" as such
term is used in, and with the consequences specified in, the Trust Agreement;
WHEREAS the Company, in its capacity as depositor, is establishing the
Trust and in connection therewith is making an initial deposit to the Trust of
$1.00;
WHEREAS, pursuant to the terms and conditions of the Trust Agreement,
as supplemented by this Trust Supplement, the Trust shall acquire the Underlying
Securities from the Transferor in the manner contemplated by Section 2.05, shall
hold such Underlying Securities in trust and shall enter into such other
transactions and agreements as are contemplated hereby, all for the benefit of
the Holders of the Certificates; and
WHEREAS all the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all respects
duly authorized;
NOW, THEREFORE, in consideration of the premises herein and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged by the parties hereto, it is agreed between the Company
and the Trustee as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.01. Definitions. Unless otherwise specified herein,
-----------
capitalized terms used herein without definition have the respective meanings
specified in the Trust Agreement. In
<PAGE>
addition, in this Trust Supplement, the following terms shall have the following
meanings:
"Available Funds" shall mean with respect to each Payment Date the sum
---------------
of the following amounts: (i) the aggregate amount received on or prior to such
Payment Date in respect of the Underlying Securities, the Underlying
Enhancement, Reinvestment Income[, plus or minus the net amount received or paid
on the Swap Agreement] [and the cash proceeds received upon the exercise of the
Optional Call Right]; less (ii) any amounts theretofore paid to Holders of
Certificates and any amounts payable on such Payment Date to the Trustee, or the
provider of any Underlying Enhancement.
"Business Day" shall mean a day on which commercial banks settle
------------
payments in U.S. Dollars in New York.
"Certificate" shall mean a physical certificate, substantially in the
-----------
form of Exhibit A, evidencing a fractional undivided interest in the Trust and
executed, delivered and authenticated by the Trustee.
"Certificate of Trust" shall mean a certificate of trust
--------------------
substantially in the form of Exhibit B.
"Closing Date" shall mean __________.
------------
"Collection Account" shall have the meaning specified in the Trust
------------------
Agreement.
"Corporate Trust Office" means the office of the Trustee located at
----------------------
____________________, ____________________, Attn: __________, or the office of
the New York Presenting Agent, ____________________, ____________________, or at
such other location as may be specified by the Trustee in any notice of final
distribution of principal delivered to Certificateholders.
"Co-Trustee Agreement" shall mean the agreement among the Trustee, the
--------------------
Delaware Trustee and the Company substantially in the form of Exhibit C.
"Coupon Payment" shall mean payments to the Trust on each Quarterly
--------------
Coupon Payment Date in an amount equal to the aggregate interest on the Notional
Principal Amount with interest calculated at the Swap Rate.
"CSFB" shall mean CS First Boston Corporation, a Massachusetts
----
corporation.
"Delaware Business Trust Act" shall mean Title 12, Chapter 38, of the
---------------------------
Delaware Code.
-2-
<PAGE>
"Delaware Trustee" shall mean ____________________, as co-trustee
----------------
hereunder, not in its individual capacity but solely as co-trustee hereunder, or
any successor thereto.
"Eligible Investments" shall have the meaning specified in the Trust
--------------------
Agreement and shall also include such overnight investments as the Trustee may
make in accordance with its customary policies for such investments.
"Final Scheduled Payment Date" shall mean __________.
----------------------------
"Issue Date" shall mean __________.
----------
"Notice of an Underlying Event of Default" shall mean written notice
----------------------------------------
of the occurrence of an Underlying Event of Default received from the Underlying
Issuer or any trustee, fiscal agent or other Person acting on behalf of the
Underlying Issuer.
"Notional Principal Amount" shall mean the aggregate stated amount
-------------------------
of the Certificates.
"Payment Date" shall mean each __________, __________, __________ and
------------
__________, commencing __________, _____, and ending on the Final Scheduled
Payment Date and any Special Payment Date; provided, however, that in the event
-------- -------
any day that would be a Payment Date but for this proviso is not a Business Day,
the Business Day next succeeding such day shall be such Payment Date and no
interest shall accrue with respect to the intervening period.
"Principal Payment" shall mean an amount equal to $__________, payable
-----------------
by the Underlying Issuer to the Trust with respect to the Final Scheduled
Payment Date.
"Prospectus Supplement" shall mean the Prospectus Supplement dated
---------------------
__________, delivered in conjunction with the Prospectus dated ___________ by
CSFB in connection with the sale of the Certificates.
"Quarterly Coupon Payment Date" shall mean a Payment Date (other
-----------------------------
than a Special Payment Date).
"Rating Agency" means _______________ or, if no such organization or
-------------
successor is any longer in existence, a nationally recognized statistical rating
organization designated by the Company, notice of which designation shall be
given to the Trustee.
"Record Date" shall mean the date on which a determination is made
-----------
regarding the Holders to which a payment is due and payable on the Certificates,
which date shall be, with respect to each Payment Date, 15 days prior to such
date.
-3-
<PAGE>
"Reinvestment Income" shall mean any net income earned on the
-------------------
investment of payments received by the Trustee relating to the Underlying
Securities or the Swap Agreement during such period as such payments are held by
the Trustee pending the distribution to the Holders of the Certificates. Any
such investment shall be made in the absolute discretion of the Trustee and, if
made, shall be in Eligible Investments. The Trustee shall not be liable for any
loss arising from any such investment in Eligible Investments made in accordance
with the terms of this Agreement.
"Series" shall mean the Trust Certificates Series _____ created
------
hereby.
"Special Payment Date" shall mean a date fixed as such by the Trustee
--------------------
pursuant to Section 4.02.
"Special Record Date" shall mean a date fixed as such by the Trustee
-------------------
pursuant to Section 4.02.
["Swap Agreement" shall mean the master agreement (including any
--------------
schedules thereto) between the Trust and the Swap Counterparty, together with a
confirmation or confirmations entered into pursuant thereto, all substantially
in the form of Exhibit D-1.]
["Swap Counterparty" shall mean ____________________, a __________
-----------------
corporation.]
["Swap Guarantor" shall mean _______________, a _______________
--------------
corporation.]
["Swap Guaranty" shall mean the guaranty of the Swap Guarantor
-------------
relating to the obligations of the Swap Counterparty under the Swap Agreement,
all substantially in the form of Exhibit D-2.]
["Swap Rate" shall mean the interest rate applicable to the
---------
Certificates.]
["Swap Termination Amount" shall mean the amount payable by the Swap
-----------------------
Counterparty to the Trust or by the Trust to the Swap Counterparty, as
applicable, upon an early termination of the Swap Agreement determined in
accordance with Section 6 of the Swap Agreement.]
"Transfer Document" shall mean the document from the Transferor, as
-----------------
transferor of the Underlying Securities in exchange for the Certificates, to the
Trust, as transferee of the Underlying Securities, substantially in the form of
Exhibit E.
"Transferor" shall mean CSFB.
----------
-4-
<PAGE>
"Trust" shall mean the Series _____ Trust created hereby.
-----
"Underlying Assets" shall mean the Underlying Securities[, the rights
-----------------
of the Trust under the Swap Agreement [and the Swap Guaranty]] and all proceeds
of any of the foregoing.
"Underlying Enhancement" shall mean __________________.
----------------------
"Underlying Event of Default" shall mean the occurrence of an event of
---------------------------
default with respect to the Underlying Securities as described in the Underlying
Prospectus.
"Underlying Issuer" shall mean ____________________, a __________
-----------------
corporation.
"Underlying Prospectus" shall mean the Prospectus dated __________
---------------------
relating to the debt securities of the Underlying Issuer, of which the
Underlying Securities constitute a series.
"Underlying Securities" shall mean $__________, __________, due
---------------------
__________, issued by the Underlying Issuer on __________.
"Underlying Securities Interest Payment" shall mean each regularly
--------------------------------------
scheduled payment of interest on the Underlying Securities.
ARTICLE II
----------
ORGANIZATION
------------
Section 2.01. Declaration of Trust. The Trustee is hereby appointed
--------------------
to hold and agrees to hold the Underlying Assets upon the trusts set forth
herein and for the use and benefit of the Holders. It is the intention of the
parties hereto that the Trust constitute a business trust under the Delaware
Business Trust Act and that the Trust Agreement as supplemented by this Trust
Supplement constitutes the governing instrument of the Trust. Simultaneously
with the execution and delivery of this Trust Supplement, the Trustee shall
enter into the Co-Trustee Agreement with the Delaware Trustee and the Company
and the Co-Trustee Agreement is hereby incorporated herein by reference thereto
as part of the governing instrument of the Trust. The Trustee and the Delaware
Trustee shall file a Certificate of Trust with the Secretary of State of the
State of Delaware pursuant to 12 Del. C. (S) 3810.
Section 2.02. Name. The name of the Trust shall be the "Series _____
----
Trust", in which name the Trustee, on behalf of the Trust, may engage in the
transactions contemplated hereby;
-5-
<PAGE>
make and execute contracts and other instruments; acquire the Underlying
Securities; [enter into the Swap Agreement;] sue and be sued; and, subject to
Section 2.04, enter into such other transactions and take such other actions as
are necessary or desirable to carry out the provisions hereof.
Section 2.03. Office. The principal office of the Trustee is at
------
____________________, Attention: __________. The Delaware office of the Trust
shall be in care of the Delaware Trustee, at ____________________,
____________________, Attention: __________, or at such other address as the
Trustee or the Delaware Trustee, as applicable, may designate by notice to the
Company.
Section 2.04. Purposes, Authority and Powers. The purposes for which
------------------------------
the Trust is created and established are (i) to acquire and hold the Underlying
Securities[,] [and] (ii) to issue the Certificates [and (iii) to enter into the
Swap Agreement]. In addition to all authority, express or implied, otherwise
granted to the Trustee under this Trust Supplement, the Trust Agreement and
under applicable law, the Trustee shall have the authority on behalf of the
Trust to enter into all transactions and agreements described in the immediately
preceding sentence and contemplated by the Prospectus Supplement, and to perform
all acts in furtherance thereof, including, without limitation, the execution
and delivery of the Certificates [and the Swap Agreement] and the exercise and
enforcement of all rights and remedies under the Underlying Securities [and the
Swap Agreement] [and the Swap Guaranty]; provided, however, that the Trust shall
-------- -------
not have power to perform any act or engage in any business whatsoever except
for the foregoing and any activity reasonably incidental thereto or appropriate
therefor. The primary investments to be made by the Trust are in the Underlying
Securities [and the Swap Agreement]; provided, however, that the Trust may in no
-------- -------
event make investments other than in the Underlying Securities[, the Swap
Agreement and] Eligible Investments pending distribution to the holders of the
Certificates. After the date of issuance of the Certificates, the Trust will
not issue additional Certificates or purchase or otherwise acquire any
additional securities (other than Eligible Investments) and will not dispose of
Underlying Securities, in each case except as described in this Trust
Supplement.
Section 2.05. Initial Deposit; Transfer of Underlying Securities to
-----------------------------------------------------
the Trust. Simultaneously with the execution and delivery of this Trust
- ---------
Supplement, the Company hereby transfers to the Trust $1.00 in cash in exchange
for the entire beneficial interest in the Trust (which interest shall not be
certificated); and effective as of the Closing Date (i) the entire beneficial
interest of the Company in the Trust shall be automatically cancelled and the
Trust shall transfer to the Company $1.00 in cash and (ii) the Transferor, in
exchange for the Certificates,
-6-
<PAGE>
pursuant to the Transfer Document, will transfer, sell, convey and assign to the
Trust, forever, all right, title and interest of the Transferor in the
Underlying Securities to have and to hold all of the same, together with all
revenues, issues, profits and proceeds thereof and therefrom and appurtenances
thereto to the Trust, in each case for the common and equal use, benefit and
security of all Persons who shall from time to time be Holders of any of the
Certificates and without preference of any of the Certificates over any of the
others by reason of priority in the time of issue, sale or negotiation thereof.
Section 2.06. Tax Treatment; Construction. It is the intention of
---------------------------
the parties hereto, and each Holder by its acceptance of a Certificate shall be
deemed to agree, that the Trust will be treated as a grantor trust for federal
income tax purposes and all transactions contemplated by this Trust Supplement
will be reported, to the extent applicable, on all applicable tax returns
consistently with such treatment. The provisions of this Trust Supplement shall
be construed, and the affairs of the Trust shall be conducted as provided
herein, so as to achieve treatment of the Trust as a grantor trust for federal
income tax purposes.
Section 2.07. Sale. The parties hereto agree and intend that the
----
transfer of the Underlying Securities to the Trust shall be a sale and purchase
by the Trust and not a loan or a pledge to secure a loan.
ARTICLE III
-----------
THE CERTIFICATES
----------------
Section 3.01. The Certificates. There is hereby created a Series of
----------------
Certificates to be issued under the Trust Agreement to be distinguished and
known as the "Series _____" (herein referred to as the "Certificates"). The
terms and conditions applicable to the Certificates are as follows:
(a) The initial aggregate Stated Amount of the Certificates is
$__________. Certificates shall be issued in denominations of
$__________ and integral multiples of $__________ in excess
thereof.
(b) [The] [There is no] Optional Call Right [is] applicable to the
Certificates.
(c) The Final Scheduled Payment Date is __________.
(d) Payments on the Certificates shall be made as described in
Article IV and Article V.
-7-
<PAGE>
(e) The Certificates are [not] being issued in separate Classes.
(f) The Certificates shall be issued as [Definitive Certificates]
[Book-Entry Certificates].
(g) The Certificates are Dollar-denominated, with interest and
principal payable in Dollars.
(h) The Trust may not issue any indebtedness.
(i) The aggregate principal amount of the Underlying Securities is
$__________. The Underlying Issuer is ____________________. The
title of the Underlying Securities is ____________________ issued
by the Underlying Issuer on __________.
(j) [The Underlying Assets include the rights of the Trust under [the
Swap Agreement] [the Swap Guaranty]].
(k) [No portion of the] [Any of all of] Underlying Assets may be
loaned or pledged to the Company, any affiliate of the Company or
any other person.
(l) [There is no Cut-Off Date with respect to the Trust.] [The Cut-
Off Date is ______________.]
ARTICLE IV
----------
PAYMENTS
--------
Section 4.01. Payment Date Payments. Subject to the provisions of
---------------------
Article IV of the Trust Agreement, the Trustee shall pay on each Payment Date
(or as promptly thereafter as practicable in the ordinary course of business) to
Holders of Certificates as of the applicable Record Date all Available Funds in
the Collection Account (net of any withholdings) in proportion to the respective
Stated Amounts of such Certificates. The payments required to be made to
Holders pursuant to this Section 4.01 shall be paid by the Trustee to the
Holders of Certificates by wire transfer of immediately available funds to the
respective accounts of such Holders; provided, however, that, (i) if any such
-------- -------
Holder has not provided to the Trustee, at least 15 days prior to the date of
such payment, information as to an account to which such payment may be wire
transferred, the Trustee shall mail, by first class mail, a check for the amount
of such payment to the most recent address of such Holder set forth in the
Register and (ii) the final distribution of principal in retirement of a
Certificate will be made only upon presentation and surrender of such
Certificate at the Corporate Trust Office of the Trustee.
-8-
<PAGE>
Section 4.02. Notices with respect to Special Payment Date Payments.
-----------------------------------------------------
(i) If any amount becomes payable to the Trust other than the scheduled payments
under or with respect to the Underlying Securities [or the Swap Agreement],
including without limitation
(x) (a) any net proceeds from the sale of the Underlying Securities
pursuant to Section 5.01 or 5.02[, (b) any Swap Termination
Amount payable by the Swap Counterparty to the Trust upon the
early termination of the Swap Agreement or (c)] [or (b)] any
defaulted amount (plus interest, if any, on such defaulted
amount) or
(y) Reinvestment Income on any amount under paragraph (x) above,
the Trustee shall fix a Special Record Date and a Special Payment Date with
respect to such amount. As promptly as practicable, but at least five Business
Days before any such Special Record Date, the Trustee shall distribute to each
Certificateholder at the most recent address of such Holder as set forth in the
Register [and to the Swap Counterparty] a notice that states the Special Record
Date, Special Payment Date and the amount to be paid to Certificateholders on
such Special Payment Date.
Section 4.03. Tax Withholding. The Trustee will withhold from any
---------------
payment received on any Underlying Asset an amount on account of taxes required
to be so withheld, and the amount paid to Holders pursuant to this Article IV or
Article V shall be reduced accordingly.
ARTICLE V
---------
TERMINATION
-----------
Section 5.01. [Sale of Underlying Securities upon Termination of Swap
------------------------------------------------------
Agreement; Distribution of Proceeds of Sale. (a) Subject to Section 5.02, upon
- -------------------------------------------
the receipt or giving of any notice of an early termination of the Swap
Agreement pursuant to Section 6 thereof, the Trustee shall use its reasonable
best efforts to sell the Underlying Securities through a broker (which shall be
instructed by the Trustee to sell the Underlying Securities in a reasonable
manner designed to maximize the sales proceeds) selected by the Company with
reasonable care.
(b) The net proceeds from the sale of the Underlying Securities shall
be distributed (i) first, to the Swap Counterparty to the extent that any Swap
-----
Termination Amount is payable by the Trust to the Swap Counterparty under the
Swap Agreement and (ii) second, to Holders of the Certificates pursuant to
------
Section 4.01, together with any Reinvestment Income,
-9-
<PAGE>
in proportion to the respective amounts of the Certificates held by the
holders.] [Reserved]
Section 5.02. Sale of Underlying Securities upon an Underlying Event
------------------------------------------------------
of Default; Distribution of Proceeds of Sale. (a) Upon receipt of a Notice of
- --------------------------------------------
an Underlying Event of Default, the Trustee shall use its reasonable best
efforts to sell the Underlying Securities through a broker (which shall be
instructed by the Trustee to sell the Underlying Securities in a reasonable
manner designed to maximize the sales proceeds) selected by the Company with
reasonable care.
(b) The net proceeds from the sale of the Underlying Securities shall
be distributed [(i) first, to the Swap Counterparty to the extent that any Swap
-----
Termination Amount is payable by the Trust to the Swap Counterparty under the
Swap Agreement and (ii) second,] to Holders of the Certificates pursuant to
------
Section 4.01, together with any Reinvestment Income, in proportion to the
respective amounts of the Certificates held by the holders of the Certificates.
Section 5.03. Termination. (a) This Trust Supplement and the Trust
-----------
created hereby are to remain in effect until _______________, ____; provided,
--------
however, that the provisions of this Trust Supplement shall continue through the
- -------
winding up of the affairs of the Trust as provided in this Article V.
(b) Upon the termination of the Trust, the Trustee shall proceed as
promptly as practicable to wind up the affairs of the Trust and distribute any
remaining assets thereof; provided that the assets of the Trust shall be
--------
distributed in an orderly and businesslike manner. As part of the winding up of
the affairs of the Trust, the following steps shall be taken in the following
order:
(1) If on __________ (or as promptly thereafter as practicable
after sale of all Underlying Securities) any funds remain in the Trust, the
Trustee shall take, or cause to be taken, appropriate action to [(i) first,
-----
wire funds to the Swap Counterparty to the extent any Swap Termination
Amount owing to the Swap Counterparty remains unpaid, and (ii) second,]
------
mail, by first class mail, to the most recent address of each Holder set
forth in the Register a check in respect of such Holder's pro rata share of
such remaining amount. If any moneys payable in respect of any
Certificates are not for any reason paid to any Holder entitled thereto as
described above, the Trustee shall disburse all such undistributed moneys
to the Company and such Holder shall thereafter look only to the Company
for payment.
-10-
<PAGE>
(2) The Trustee shall pay all liabilities of the Trust (which
payments, if any, shall be a reimbursable expense of the Trustee).
(3) The Delaware Trustee shall prepare, the Delaware Trustee and
the Trustee shall sign and the Delaware Trustee shall file a certificate of
cancellation for the Trust under the Delaware Business Trust Act with the
Secretary of State of the State of Delaware pursuant to 12 Del. C. (S)
3810.
(c) No Holder shall be entitled to revoke the Trust.
ARTICLE VI
----------
MISCELLANEOUS
-------------
Section 6.01. Counterparts. This Trust Supplement may be executed in
------------
any number of counterparts, and by the Company and the Trustee on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. By and upon acceptance of a Certificate, each
Holder shall have agreed and be deemed to have agreed to be bound by all the
terms and conditions of this Trust Supplement and the Trust Agreement. Copies
of this Trust Supplement and the Trust Agreement shall be filed with the Trustee
and shall be open to inspection during regular business hours at any Designated
Office by any Holder holding a Certificate.
Section 6.02. Exclusive Benefit of Parties and Holders. This Trust
----------------------------------------
Supplement is for the exclusive benefit of the parties hereto and the Holders,
and their respective successors hereunder, and shall not be deemed to give any
legal or equitable right, remedy or claim to any other Person whatsoever.
Section 6.03. Invalidity of Provisions. In case any one or more of
------------------------
the provisions contained in this Trust Supplement, the Trust Agreement or in the
Certificates should be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall in no way be affected, prejudiced or disturbed
thereby, provided that the intent of the parties hereto is not thereby
materially altered.
Section 6.04. Trust Agreement Ratified. Except and so far as herein
------------------------
expressly provided, all the provisions, terms and conditions of the Trust
Agreement are in all respects ratified and confirmed; and the Trust Agreement
and this Trust Supplement shall be taken, read and construed as one and the same
instrument.
-11-
<PAGE>
Section 6.05. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE
-------------
CERTIFICATES AND ALL RIGHTS HEREUNDER AND THEREUNDER AND PROVISIONS HEREOF AND
THEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
Section 6.06. Headings. The headings of articles and sections in
--------
this Trust Supplement have been inserted for convenience only and are not to be
regarded as a part of this Trust Supplement, or to have any bearing upon the
meaning or interpretation of any provision contained herein or in the
Certificates.
Section 6.07. Business Days. If a date on which a payment is
-------------
scheduled to be made hereunder (or any other date with respect to which action
is required to be taken hereunder) is other than a Business Day, payment (or
such other action) shall be made or taken on the next succeeding day that is a
Business Day. Notwithstanding the foregoing, if a Record Date is other than a
Business Day, the Record Date shall not be affected.
IN WITNESS WHEREOF, the Company and the Trustee have duly executed
this Trust Supplement as of the day and year first above set forth. By and upon
acceptance of a Certificate, each Holder shall have agreed and be deemed to have
agreed to be bound by all the terms and conditions of this Trust Supplement and
the Trust Agreement.
* * * * *
CS FIRST BOSTON STRUCTURED
PRODUCTS CORPORATION
By:___________________________
Name:
Title:
______________________________
Trustee
By:___________________________
Name:
Title:
-12-
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
-------------------
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SERIES _________
CERTIFICATE NO.: STATED AMOUNT: $_____________
CUSIP NO.: _________ FINAL SCHEDULED PAYMENT DATE:_____
(Stated Amount issuable in denominations of $______
and integral multiples of $____ in excess thereof.)
This certificate (this "Certificate") of the Series ______ Trust (the
"Trust") evidences the fractional undivided interest of
___________________________ (the "Holder") in the Underlying Assets of the
Trust, established pursuant to the Trust Agreement dated as of _______________
and the Series ______ Trust Supplement thereto dated as of _____________
(collectively, the "Trust Agreement"), in each case as amended and supplemented
from time to time, between CS First Boston Structured Products Corporation (the
"Company") and _____________________, as trustee (the "Trustee"), pursuant to
which this Certificate is being executed and delivered by the Trust.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Trust Agreement. By and upon accepting this Certificate, the Holder
agrees that such Holder is bound by all the terms and conditions of the Trust
Agreement. Any statement herein is qualified in its entirety by the applicable
provisions of the Trust Agreement.
This Certificate entitles the Holder hereof to a proportionate
undivided interest in all Trust payments to Holders of Certificates in respect
of the Underlying Assets[, including payments under the Swap Agreement (and
subject to the obligation of the Trust to pay certain amounts to the Swap
Counterparty)]. The Trustee shall pay on each Payment Date to Holders of
Certificates as of the applicable Record Date or Special Record Date all
Available Funds in the Collection Account (net of any withholdings) in
proportion to the respective Stated Amounts of
A-1
<PAGE>
such Certificates. Such payments shall be paid by the Trustee to the Holders of
Certificates by wire transfer of immediately available funds to the respective
accounts of such Holders; provided, however, that, (i) if any such Holder has
-------- -------
not provided to the Trustee, at least 15 days prior to the date of such payment,
information as to an account to which such payment may be wire transferred, the
Trustee shall mail, by first class mail, a check for the amount of such payment
to the most recent address of such Holder set forth in the Register and (ii) the
final distribution of principal in retirement of a Certificate will be made only
upon presentation and surrender of such Certificate at the corporate trust
office of the Trustee located at _______________________, _______________, Attn:
_________________, or the office of the New York Presenting Agent,
__________________, ________________, or at such other location as may be
specified by the Trustee in a notice of such final distribution of principal
delivered to Certificateholders.
If the Underlying Issuer [or the Swap Counterparty [and the related
Swap Guarantor]] defaults on a payment required to be made by it with respect to
the Underlying Assets, the Trustee shall promptly give notice thereof to the
Company and to the Holders. If an event of default occurs with respect to the
Underlying Securities, the Trustee may proceed to enforce its rights as holder
of the related Underlying Assets unless otherwise directed by Holders of a
majority in Stated Amount of the Certificates. The Trustee shall use its
reasonable best efforts to sell the Underlying Securities through a broker
(which shall be instructed by the Trustee to sell the Underlying Securities in a
reasonable manner designed to maximize the sales proceeds) selected by the
Company with reasonable care. The Trustee may, in its discretion, and will, if
so directed by Holders of a majority in Stated Amount of the Certificates,
exercise or enforce any other rights which it may have as holder of the related
Underlying Assets. [Notwithstanding the foregoing, for so long as the Swap
Agreement [and the related Swap Guaranty] is in effect, the Trustee shall not
sell the Underlying Securities and, upon any early termination of the Swap
Agreement [or the related Swap Guaranty], shall sell the Underlying Securities
only in accordance with Section 5.01 or 5.02, as applicable, of the Trust
Supplement.] In addition, Holders of a majority in Stated Amount of the
Certificates may together direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee as holder of such Underlying
Assets. Notwithstanding the foregoing, the Trustee shall be under no obligation
to exercise or enforce any of its rights with respect to the Underlying Assets
of the Trust, whether or not at the request or direction of any Holders, unless
such Holders have offered to the Trustee security or indemnity satisfactory to
it against loss, liability or expense incurred in compliance with such request
or direction or if such request or direction is in conflict with any law or the
Trust Agreement. No Holder will have the right to institute any proceeding with
A-2
<PAGE>
respect to the Trust Agreement unless (a) Holders of not less than 25% in Stated
Amount of the Certificates have made written request to the Trustee to institute
such proceeding in its own name as Trustee and have offered the Trustee
reasonable indemnity, (b) the Trustee has for 60 days neglected or refused to
institute any such proceeding and (c) no direction inconsistent with such
written request has been given by Holders of a majority in Stated Amount of the
Certificates.
As provided more fully in the Trust Agreement, a Holder of a
Certificate may (i) transfer to one or more Persons such Holder's interest in
such Certificate or a pro rata portion of such Holder's interest in such
Certificate and (ii) exchange such Certificate for one or more Certificates in
similar form of equal aggregate amount of any authorized denomination or
denominations. Each Certificate issued upon transfer or exchange of this
Certificate is required to be in a Stated Amount of $_______ or an integral
multiple of $_____ in excess thereof.
Such transfer or exchange shall be effected by the submission of this
Certificate to the Designated Office of the Trustee, accompanied by a written
instruction of transfer or exchange satisfactory to the Trustee executed by the
Holder or the Holder's attorney duly authorized in writing. The office for the
transfer or exchange of Certificates is the office of the Trustee at
_______________________, ________________________, Attention:
____________________ or the office of the New York Presenting Agent,
__________________________, _________________, or, in the event of a change of
the Trustee or New York Presenting Agent or of the Trustee's or New York
Presenting Agent's office, such other office in The City of New York, State of
New York of which notice is provided to Holders at the time of such change of
Trustee, New York Presenting Agent or office.
As a condition to any registration of transfer or exchange of this
Certificate, the Trustee may require payment by the Holder of a reasonable
service charge and of a sum sufficient to cover any applicable tax or
governmental charge payable in connection with such transfer and exchange and
provision by the Holder of such information and assurances as the Trustee may
reasonably deem necessary or proper and compliance by the Holder with reasonable
regulations of the Trustee.
The Trustee and the Company may treat the Holder of this Certificate
identified above as the owner of this Certificate for all purposes, including
for purposes of making payments with respect to this Certificate and effecting
the transfer, exchange or surrender of this Certificate, and neither the Trustee
nor the Company shall be affected by any notice to the contrary.
The Trust Agreement may be amended by the Trustee and the Company
without notice to or consent of Holders to (i) cure
A-3
<PAGE>
any defect, omission, inconsistency or ambiguity in the Trust Agreement or in
the Certificates, (ii) add to the covenants and agreements of the Trustee or the
Company or to surrender any right or power therein conferred upon the Company,
(iii) effectuate the assignment of the Trustee's rights and duties thereunder to
a qualified successor as provided therein, (iv) comply with the Securities Act,
the Trust Indenture Act of 1939, the Investment Company Act or the Code or (v)
modify, alter, amend or supplement the Trust Agreement in any other respect
which is not adverse in any material respect to any Holders. The Trust
Agreement also may be amended by the Trustee and the Company with the consent of
Holders possessing not less than a majority in Stated Amount of the
Certificates, [and Holders possessing not less than a majority of the
outstanding principal balance of the Notes,] for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Trust Agreement or modifying in any manner the rights of Holders; provided,
--------
however, that no such amendment may (a) reduce the amount or delay the timing of
- -------
payments on any Certificate without the consent of the Holder of such
Certificate; or (b) reduce the aforesaid percentage in Stated Amount of
Certificates, the Holders of which are required to consent to any such amendment
without the consent in either case of Holders of 100% in Stated Amount of
Certificates. No amendment or waiver of any provision of the Trust Agreement
nor consent to any departure from the Trust Agreement shall in any event be
effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that any amendment
-------- -------
which affects the Delaware Trustee shall not be effective unless the same has
been consented to in writing by the Delaware Trustee.
[The Trust Agreement provides for special termination and winding up
procedures upon the early termination of the Swap Agreement, including the sale
of the Underlying Securities and the distribution of the net proceeds therefrom
in accordance with Section 5.01 or 5.02 of the Trust Supplement.]
A-4
<PAGE>
This Certificate shall not be valid or become obligatory for any
purpose unless and until duly authenticated by the Trustee by manual signature.
Series ______ Trust
By: ______________, not in
its individual capacity
but solely as Trustee
By: _________________________
Name:
Title:
Date: _____________
Authentication
--------------
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
_____________________,
as Trustee
By:___________________________
Name:
Title:
A-5
<PAGE>
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.
Optional:
[Insert wire transfer instructions for transferee.] Neither the transferor nor
the Trustee shall have any responsibility for the accuracy of such wire transfer
instructions, if provided.
Dated:___________
______________________________________
(Signature)
NOTE: Signature must conform in every particular to
the name in which this security is registered, without
any alteration or change whatsoever.
Signature guaranteed by:_________________________
A-6
<PAGE>
EXHIBIT B
Form of Certificate of Trust
[Intentionally Omitted]
B-1
<PAGE>
EXHIBIT C
Form of Co-Trustee Agreement
[Intentionally Omitted]
C-1
<PAGE>
EXHIBIT D-1
Form of Swap Agreement
[Intentionally Omitted]
D-1-1
<PAGE>
EXHIBIT D-2
Form of Swap Guaranty
[Intentionally Omitted]
D-2-1
<PAGE>
EXHIBIT E
Form of Transfer Document
[Intentionally Omitted]
E-1
<PAGE>
DRAFT 4/30/96
Exhibit 4.2.3
[Notes/Certificates]
================================================================================
SERIES _____ TRUST SUPPLEMENT
dated as of __________
to
TRUST AGREEMENT
dated as of __________
between
CS FIRST BOSTON STRUCTURED PRODUCTS CORPORATION
and
_____________________________________
Trustee
$__________
SERIES _____
================================================================================
<PAGE>
Table of Contents
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.................................... 2
ARTICLE II
ORGANIZATION
Section 2.01. Declaration of Trust........................... 8
Section 2.02. Name........................................... 8
Section 2.03. Office......................................... 8
Section 2.04. Purposes, Authority and Powers................. 9
Section 2.05. Initial Deposit; Transfer of Underlying
Securities to the Trust........................ 9
Section 2.06. Tax Treatment; Construction.....................10
Section 2.07. Liability of the Owners.........................10
Section 2.08. Sale............................................10
Section 2.09. Federal Income Tax Allocations..................11
ARTICLE III
THE CERTIFICATES
Section 3.01. The Certificates............................... 12
Section 3.02. Ownership by Company of Certificates........... 13
ARTICLE IV
PAYMENTS
Section 4.01. Establishment of Distribution Account.......... 13
Section 4.02. Application of Trust Funds..................... 13
Section 4.03. Payment Date Payments.......................... 14
Section 4.04. Notices with respect to Special Payment
Date Payments.................................. 14
Section 4.05. Tax Withholding................................ 15
ARTICLE V
TERMINATION
Section 5.01. [Sale of Underlying Securities upon
Termination of Swap Agreement;
Distribution of Proceeds of Sale] [Revised].... 15
Section 5.02. Sale of Underlying Securities upon an
Underlying Event of Default; Distribution of
Proceeds of Sale............................... 15
Section 5.03. Termination.................................... 16
ARTICLE VI
MISCELLANEOUS
Section 6.01. Counterparts................................... 16
Section 6.02. Exclusive Benefit of Parties and Holders....... 17
Section 6.03. Invalidity of Provisions....................... 17
Section 6.04. Trust Agreement Ratified....................... 15
-i-
<PAGE>
Section 6.05. Governing Law.................................. 17
Section 6.06. Headings....................................... 17
Section 6.07. Business Days.................................. 17
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Co-Trustee Agreement
Exhibit D-1 Form of Swap Agreement
Exhibit D-2 Form of Swap Guaranty
Exhibit E Form of Transfer Document
-ii-
<PAGE>
SERIES TRUST SUPPLEMENT
-----------------------------
Series ______ Trust Supplement dated as of __________ (this "Trust
Supplement") between CS First Boston Structured Products Corporation, a Delaware
corporation (the "Company"), and ____________________, a __________ banking
corporation, as trustee (the "Trustee"), to the ______________ Trust Agreement
dated as of __________ between the Company and the Trustee (the "Trust
Agreement").
WHEREAS the Company and the Trustee have heretofore executed and
delivered the Trust Agreement, which provides for an unlimited aggregate stated
amount of Certificates that may be issued thereunder pursuant to separate
supplements thereto as contemplated by Article II thereof;
WHEREAS this Trust Supplement constitutes a "Trust Supplement" as such
term is used in, and with the consequences specified in, the Trust Agreement;
WHEREAS the Company, in its capacity as depositor, is establishing the
Trust and in connection therewith is making an initial deposit to the Trust of
$1.00;
WHEREAS, pursuant to the terms and conditions of the Trust Agreement,
as supplemented by this Trust Supplement, the Trust shall acquire the Underlying
Securities from the Transferor in the manner contemplated by Section 2.05, shall
enter into the Indenture, shall hold such Underlying Securities in trust subject
to the lien of the Indenture and shall enter into such other transactions and
agreements as are contemplated hereby, all for the benefit of the Holders of the
Certificates; and
WHEREAS all the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all respects
duly authorized;
NOW, THEREFORE, in consideration of the premises herein and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged by the parties hereto, it is agreed between the Company
and the Trustee as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.01. Definitions. Unless otherwise specified herein,
-----------
capitalized terms used herein without definition have the respective meanings
specified in the Trust Agreement or the Indenture, as applicable. In addition,
in this Trust Supplement, the following terms shall have the following meanings:
"Available Funds" shall mean with respect to each Payment Date the sum
---------------
of the following amounts: (i) the aggregate amount received on or prior to such
Payment Date in respect of the Underlying Securities, the Underlying
Enhancement, Reinvestment Income[, plus or minus the net amount received or paid
on the Swap Agreement [and the Swap Guaranty]] [and the cash proceeds received
upon the exercise of the Optional Call Right]; less (ii) any amounts theretofore
paid to Holders of Certificates and any amounts payable on such Payment Date to
the Trustee, or the provider of any Underlying Enhancement.
"Business Day" shall mean a day on which commercial banks settle
------------
payments in U.S. Dollars in New York.
"Certificate" shall mean a physical certificate, substantially in the
-----------
form of Exhibit A, evidencing a fractional undivided interest in the Trust and
executed, delivered and authenticated by the Trustee.
"Certificate Balance" equals, initially, $___________ and, thereafter,
-------------------
equals such initial Certificate Balance reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Distribution Account" shall have the meaning assigned to
--------------------------------
such term in Section 4.01.
"Certificateholders' Distributable Amount" means, with respect to any
----------------------------------------
Payment Date, the sum of the Certificateholders' Principal Distributable Amount
and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with respect
------------------------------------------------
to any Payment Date, the excess of the sum of the Certificateholders' Quarterly
Interest Distributable Amount for the preceding Payment Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Payment Date,
over the amount in respect of interest that is actually deposited in the
Certificate Distribution Account on such preceding Payment Date, plus 90 days'
interest on such excess, to the extent permitted by law, at the Certificate
Pass-Through Rate.
-2-
<PAGE>
"Certificateholders' Interest Distributable Amount" means, with
-------------------------------------------------
respect to any Payment Date, the sum of the Certificateholders' Quarterly
Interest Distributable Amount for such Payment Date and the Certificateholders'
Interest Carryover Shortfall for such Payment Date. Interest with respect to
the Certificates shall be computed on the basis of a 360-day year consisting of
twelve 30-day months for all purposes of this Trust Supplement and the Basic
Documents.
"Certificate Interest Rate" means __% per annum.
-------------------------
"Certificate of Trust" shall mean a certificate of trust substantially
--------------------
in the form of Exhibit B.
"Certificateholders' Principal Carryover Shortfall" means, as of the
-------------------------------------------------
close of any Payment Date, the excess of the Certificateholders' Quarterly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Payment Date, over the amount in respect
of principal that is actually deposited in the Certificate Distribution Account
on such current Payment Date.
"Certificateholders' Principal Distributable Amount" means, with
--------------------------------------------------
respect to any Payment Date, the sum of the Certificateholders' Quarterly
Principal Distributable Amount for such Payment Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Payment Date;
provided, however, that the Certificateholders' Principal Distributable Amount
shall not exceed the Certificate Balance. In addition, on the Final Scheduled
Payment Date, the principal required to be included in the Certificateholders'
Principal Distributable Amount will equal the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on such Payment Date and allocable to principal) to reduce
the Certificate Balance to zero.
"Certificateholders' Quarterly Interest Distributable Amount" means,
-----------------------------------------------------------
with respect to any Payment Date, 90 days of interest (or, in the case of the
first Payment Date, interest accrued from and including the Closing Date to but
excluding ________) at the Certificate Pass-Through Rate on the Certificate
Balance on the last day of the preceding Collection Period (or, in the case of
the first Payment Date, on the Closing Date).
"Certificateholders' Quarterly Principal Distributable Amount" means
------------------------------------------------------------
with respect to any Payment Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Payment Date on or after
the Payment Date on which the Notes are paid in full, that portion of all
collections on Underlying Securities allocable to principal received during the
related Collection Period (less, on the Payment Date on which
-3-
<PAGE>
the Notes are paid in full, the portion thereof payable on the Notes).
"Closing Date" shall mean __________.
------------
"Collection Account" shall have the meaning specified in the Trust
------------------
Agreement.
"Collection Period" means, with respect to any Payment Date, the
-----------------
period commencing on [the preceding Payment Date] [the __ day of the month in
which the preceding Payment Date occurred] (or in the case of the first Payment
Date, the Closing Date) and ending on [the day preceding such Payment Date] [the
__ day on the month preceding the month in which such Payment Date occurs].
"Corporate Trust Office" means the office of the Trustee located at
----------------------
____________________, ____________________, Attn: __________, or the office of
the New York Presenting Agent, ____________________, ____________________, or at
such other location as may be specified by the Trustee in any notice of final
distribution of principal delivered to Certificateholders.
"Co-Trustee Agreement" shall mean the agreement among the Trustee, the
--------------------
Delaware Trustee and the Company substantially in the form of Exhibit C.
"CSFB" shall mean CS First Boston Corporation, a Massachusetts
----
corporation.
"Delaware Business Trust Act" shall mean Title 12, Chapter 38, of the
---------------------------
Delaware Code.
"Delaware Revised Uniform Limited Partnership Act" shall mean Title 6,
------------------------------------------------
Chapter 17, of the Delaware Code.
"Delaware Trustee" shall mean ____________________, as co-trustee
----------------
hereunder, not in its individual capacity but solely as co-trustee hereunder, or
any successor thereto.
"Eligible Investments" shall have the meaning specified in the Trust
--------------------
Agreement and shall also include such overnight investments as the Trustee may
make in accordance with its customary policies for such investments.
"Final Scheduled Payment Date" shall mean __________.
----------------------------
"Indenture" shall mean the indenture dated as of __________, between
---------
the Trust and __________, as indenture trustee.
"Interest Accrual Period" means, with respect to any Payment Date, the
-----------------------
period commencing on [the preceding Payment Date] [the __ day of the month in
which the preceding Payment
-4-
<PAGE>
Date occurred] (or in the case of the first Payment Date, the Closing Date) and
ending on [the day preceding such Payment Date] [the __ day of the month
preceding the month in which such Payment Date occurs].
"Issue Date" shall mean __________.
----------
"Noteholders' Distributable Amount" means, with respect to any Payment
---------------------------------
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount for such Payment Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
-----------------------------------------
Payment Date, the excess of the sum of the Noteholders' Interest Distributable
Amount for the preceding Payment Date and any outstanding Noteholders' Interest
Carryover Shortfall on such preceding Payment Date, over the amount in respect
of interest that is actually deposited in the Note Distribution Account on such
preceding Payment Date, plus interest on the amount of interest due but not paid
to Noteholders on the preceding Payment Date, to the extent permitted by law, at
the Interest Rate borne by each Class of the Notes for the related Interest
Accrual Period.
"Noteholders' Interest Distributable Amount" means, with respect to
------------------------------------------
any Payment Date, the sum of the Noteholders' Quarterly Interest Distributable
Amount for such Payment Date and the Noteholders' Interest Carryover Shortfall
for such Payment Date. For all purposes of this Trust Supplement and the Basic
Documents, interest with respect to all Classes of Notes shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
------------------------------------------
any Payment Date, the excess of the Noteholders' Quarterly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Payment Date, over the amount in respect of
principal that is actually deposited in the Note Distribution Account on such
current Payment Date.
"Noteholders' Principal Distributable Amount" means, with respect to
-------------------------------------------
any Payment Date, the sum of the Noteholders' Quarterly Principal Distributable
Amount for such Payment Date and the Noteholders' Principal Carryover Shortfall
as of the close of the preceding Payment Date; provided, however, that the
Noteholders' Principal Distributable Amount shall not exceed the outstanding
principal balance of the Notes. In addition, (a) on the Class A-1 Final
Scheduled Payment Date, the principal required to be deposited in the Note
Distribution Account will include the amount necessary (after giving effect to
the other amounts to be deposited in the Note Distribution Account on such
Payment Date and allocable to principal) to reduce the
-5-
<PAGE>
Outstanding Amount of the Class A-1 Notes to zero; and (b) on the Class A-2
Final Scheduled Payment Date, the principal required to be deposited in the Note
Distribution Account will include the amount necessary (after giving effect to
the other amounts to be deposited in the Note Distribution Account on such
Payment Date and allocable to principal) to reduce the Outstanding Amount of the
Class A-2 Notes to zero.
"Noteholders' Quarterly Interest Distributable Amount" means, with
----------------------------------------------------
respect to any Payment Date, interest accrued for the related Interest Accrual
Period on each Class of Notes at the Interest Rate for such Class on the
outstanding principal balance of the Notes of such Class on the immediately
preceding Payment Date (or, in the case of the first Payment Date, the Closing
Date), after giving effect to all distributions of principal to Holders of the
Notes of such Class on or prior to such Payment Date (or, in the case of the
first Payment Date, on the Closing Date).
"Noteholders' Quarterly Principal Distributable Amount" means, with
-----------------------------------------------------
respect to any Payment Date, the aggregate of that portion of all collections on
Underlying Securities allocable to principal received during the related
Collection Period.
"Notice of an Underlying Event of Default" shall mean written notice
----------------------------------------
of the occurrence of an Underlying Event of Default received from the Underlying
Issuer or any trustee, fiscal agent or other Person acting on behalf of the
Underlying Issuer.
"Notional Principal Amount" shall mean the aggregate stated amount of
-------------------------
the Certificates.
"Payment Date" shall mean each __________, __________, __________ and
------------
__________, commencing __________, _____, and ending on the Final Scheduled
Payment Date and any Special Payment Date; provided, however, that in the event
-------- -------
any day that would be a Payment Date but for this proviso is not a Business Day,
the Business Day next succeeding such day shall be such Payment Date and no
interest shall accrue with respect to the intervening period.
"Payment Determination Date" with respect to any Payment Date shall
--------------------------
mean the Business Day immediately preceding such Payment Date.
"Principal Payment" shall mean an amount equal to $__________, payable
-----------------
by the Underlying Issuer to the Trust with respect to the Final Scheduled
Payment Date.
"Prospectus Supplement" shall mean the Prospectus Supplement dated
---------------------
__________, delivered in conjunction with the
-6-
<PAGE>
Prospectus dated ___________ by CSFB in connection with the sale of the
Certificates and the Notes.
"Quarterly Coupon Payment Date" shall mean a Payment Date (other than
-----------------------------
a Special Payment Date).
"Rating Agency" means _________________ or, if no such organization or
-------------
successor is any longer in existence, a nationally recognized statistical rating
organization designated by the Company, notice of which designation shall be
given to the Indenture Trustee and the Trustee.
"Record Date" shall mean the date on which a determination is made
-----------
regarding the Holders to which a payment is due and payable on the Certificates,
which date shall be, with respect to each Payment Date, 15 days prior to such
date.
"Reinvestment Income" shall mean any net income earned on the
-------------------
investment of payments received by the Trustee relating to the Underlying
Securities or the Swap Agreement [or the Swap Guaranty] during such period as
such payments are held by the Trustee pending the distribution to the Holders of
the Certificates. Any such investment shall be made in the absolute discretion
of the Trustee and, if made, shall be in Eligible Investments. The Trustee
shall not be liable for any loss arising from any such investment in Eligible
Investments made in accordance with the terms of this Agreement.
"Series" shall mean the Trust Certificates Series _____ created
------
hereby
"Special Payment Date" shall mean a date fixed as such by the Trustee
--------------------
pursuant to Section 4.04.
"Special Record Date" shall mean a date fixed as such by the Trustee
-------------------
pursuant to Section 4.04.
["Swap Agreement" shall mean the master agreement (including any
--------------
schedules thereto) between the Trust and the Swap Counterparty, together with a
confirmation or confirmations entered into pursuant thereto, all substantially
in the form of Exhibit D-1.]
["Swap Counterparty" shall mean ____________________, a
-----------------
________________ corporation.]
["Swap Guaranty" shall mean the guaranty of the Swap Guarantor
-------------
relating to the obligations of the Swap Counterparty under the Swap Agreement,
all substantially in the form of Exhibit D-2.]
["Swap Guarantor" shall mean _______________________, a ____________
--------------
corporation.]
-7-
<PAGE>
["Swap Rate" shall mean the interest rate applicable to the
---------
Certificates.]
["Swap Termination Amount" shall mean the amount payable by the Swap
-----------------------
Counterparty to the Trust or by the Trust to the Swap Counterparty, as
applicable, upon an early termination of the Swap Agreement determined in
accordance with Section 6 of the Swap Agreement.]
"Transfer Document" shall mean the document from the Transferor, as
-----------------
transferor of the Underlying Securities in exchange for the Certificates, to the
Trust, as transferee of the Underlying Securities, substantially in the form of
Exhibit E.
"Transferor" shall mean CSFB.
----------
"Trust" shall mean the Series _____ Trust created hereby.
-----
"Underlying Assets" shall mean the Underlying Securities[, the rights
-----------------
of the Trust under the Swap Agreement [and the Swap Guaranty]] and all proceeds
of any of the foregoing.
"Underlying Enhancement" shall mean __________________.
----------------------
"Underlying Event of Default" shall mean the occurrence of an event of
---------------------------
default with respect to the Underlying Securities as described in the Underlying
Prospectus.
"Underlying Issuer" shall mean ____________________, a __________
-----------------
corporation.
"Underlying Prospectus" shall mean the Prospectus dated __________
---------------------
relating to the debt securities of the Underlying Issuer, of which the
Underlying Securities constitute a series.
"Underlying Securities" shall mean $__________, __________, due
---------------------
__________, issued by the Underlying Issuer on __________.
"Underlying Securities Interest Payment" shall mean each regularly
--------------------------------------
scheduled payment of interest on the Underlying Securities.
-8-
<PAGE>
ARTICLE II
----------
ORGANIZATION
------------
Section 2.01. Declaration of Trust. The Trustee is hereby appointed
--------------------
to hold and agrees to hold the Underlying Assets upon the trusts set forth
herein and for the use and benefit of the Holders subject to the obligations of
the Trust under the Indenture. It is the intention of the parties hereto that
the Trust constitute a business trust under the Delaware Business Trust Act and
that the Trust Agreement as supplemented by this Trust Supplement constitutes
the governing instrument of the Trust. Simultaneously with the execution and
delivery of this Trust Supplement, the Trustee shall enter into the Co-Trustee
Agreement with the Delaware Trustee and the Company and the Co-Trustee Agreement
is hereby incorporated herein by reference thereto as part of the governing
instrument of the Trust. The Trustee and the Delaware Trustee shall file a
Certificate of Trust with the Secretary of State of the State of Delaware
pursuant to 12 Del. C. (S) 3810.
Section 2.02. Name. The name of the Trust shall be the "Series _____
----
Trust", in which name the Trustee, on behalf of the Trust, may engage in the
transactions contemplated hereby; make and execute contracts and other
instruments; acquire the Underlying Securities; enter into the Indenture; [enter
into the Swap Agreement;] sue and be sued; and, subject to Section 2.04, enter
into such other transactions and take such other actions as are necessary or
desirable to carry out the provisions hereof.
Section 2.03. Office. The principal office of the Trustee is at
------
____________________, Attention: __________. The Delaware office of the Trust
shall be in care of the Delaware Trustee, at ____________________,
____________________, Attention: __________, or at such other address as the
Trustee or the Delaware Trustee, as applicable, may designate by notice to the
Company.
Section 2.04. Purposes, Authority and Powers. The purposes for which
------------------------------
the Trust is created and established are (i) to acquire and hold the Underlying
Securities[,] [and] (ii) to issue the Certificates[,] [and] (iii) to enter into
the Indenture [and (iv) to enter into the Swap Agreement]. In addition to all
authority, express or implied, otherwise granted to the Trustee under this Trust
Supplement, the Trust Agreement and under applicable law, the Trustee shall have
the authority on behalf of the Trust to enter into all transactions and
agreements described in the immediately preceding sentence and contemplated by
the Prospectus Supplement, and to perform all acts in furtherance thereof,
including, without limitation, the execution and delivery of the Certificates [,
the Swap Agreement] and the Indenture and the exercise and enforcement of all
rights and remedies under the Underlying Securities [and the Swap Agreement
-9-
<PAGE>
[and the Swap Guaranty]]; provided, however, that the Trust shall not have power
-------- -------
to perform any act or engage in any business whatsoever except for the foregoing
and any activity reasonably incidental thereto or appropriate therefor. The
primary investments to be made by the Trust are in the Underlying Securities
[and the Swap Agreement]; provided, however, that the Trust may in no event make
-------- -------
investments other than in the Underlying Securities[, the Swap Agreement and]
Eligible Investments pending distribution to the holders of the Certificates.
After the date of issuance of the Certificates, the Trust will not issue
additional Certificates or purchase or otherwise acquire any additional
securities (other than Eligible Investments) and will not dispose of Underlying
Securities, in each case except as described in this Trust Supplement.
Section 2.05. Initial Deposit; Transfer of Underlying Securities to
-----------------------------------------------------
the Trust. Simultaneously with the execution and delivery of this Trust
- ---------
Supplement, the Company hereby transfers to the Trust $1.00 in cash in exchange
for the entire beneficial interest in the Trust (which interest shall not be
certificated); and effective as of the Closing Date (i) the entire beneficial
interest of the Company in the Trust shall be automatically cancelled and the
Trust shall transfer to the Company $1.00 in cash and (ii) the Transferor, in
exchange for the Certificates, pursuant to the Transfer Document, will transfer,
sell, convey and assign to the Trust, forever, all right, title and interest of
the Transferor in the Underlying Securities to have and to hold all of the same,
together with all revenues, issues, profits and proceeds thereof and therefrom
and appurtenances thereto to the Trust, in each case for the common and equal
use, benefit and security of all Persons who shall from time to time be Holders
of any of the Certificates and without preference of any of the Certificates
over any of the others by reason of priority in the time of issue, sale or
negotiation thereof.
Section 2.06. Tax Treatment; Construction. It is the intention of
---------------------------
the parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being the
Underlying Assets and other assets held by the Trust, the partners of the
partnership being the Holders, and the Notes being debt of the partnership. The
parties agree that, unless otherwise required by appropriate tax authorities,
the Trust will file or cause to be filed annual or other necessary returns,
reports and other forms consistent with the characterization of the Trust as a
partnership for such tax purposes. Effective as of the date hereof, the Trustee
shall have all rights, powers and duties set forth herein and in the Delaware
Business Trust Act with respect to accomplishing the purposes of the Trust.
Section 2.07. Liability of the Owners. (a) The Company shall be
-----------------------
liable directly to and will indemnify any injured party for all losses, claims,
damages, liabilities and
-10-
<PAGE>
expenses of the Trust to the extent that the Company would be liable if the
Trust were a partnership under the Delaware Revised Uniform Limited Partnership
Act in which the Company were a general partner; provided, however, that the
Company shall not be liable for any losses incurred by a Holder in the capacity
of an investor in the Certificates or by a holder of a Note in the capacity of
an investor in the Notes. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the preceding
sentence for which the Company shall not be liable) shall be deemed third party
beneficiaries of this paragraph.
(b) No Holder, other than to the extent set forth in paragraph (a)
above, shall have any personal liability for any liability or obligation of the
Trust.
Section 2.08. Sale. The parties hereto agree and intend that the
----
transfer of the Underlying Securities to the Trust shall be a sale and purchase
by the Trust and not a loan or a pledge to secure a loan.
Section 2.09. Federal Income Tax Allocations. Net income of the
------------------------------
Trust for any quarter as determined for federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation thereof)
shall be allocated:
(a) among the Holders of Certificates as of the first day following
the end of such quarter, in proportion to their ownership of principal amount of
Certificates on such date, net income in an amount up to the sum of (i) the
Certificateholders' Quarterly Interest Distributable Amount for such month, (ii)
interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by law, at
the Certificate Pass-Through Rate from such preceding Distribution Date through
the current Distribution Date, (iii) the portion of the market discount on the
accrued during such quarter that is allocable to the excess, if any, of the
initial aggregate principal amount of the Trust Certificates over their initial
aggregate issue price, and (iv) any other amounts of income payable to the
Holders of Certificates for such quarter; such sum to be reduced by any
amortization by the Trust of premium on Underlying Securities that corresponds
to any excess of the issue price of Certificates over their principal amount;
and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any quarter is insufficient for the
allocations described in clause (a) above, subsequent net
-11-
<PAGE>
income shall first be allocated to make up such shortfall before being allocated
as provided in the preceding sentence. Net losses of the Trust, if any, for any
quarter as determined for federal income tax purposes (and each item of income,
gain, loss an deduction entering into the computation thereof) shall be
allocated to the Company to the extent the Company is reasonably expected to
bear the economic burden of such net losses and any remaining net losses shall
be allocated among the Holders of Certificates as of the first Record Date
following the end of such quarter in proportion to their ownership of principal
amount of Certificates on such Record Date. The Company is authorized to modify
the allocations in this paragraph, if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Company or to the Holders of Certificates, or as otherwise required
by the Code.
ARTICLE III
-----------
THE CERTIFICATES
----------------
Section 3.01. The Certificates. There is hereby created a Series of
----------------
Certificates to be issued under the Trust Agreement to be distinguished and
known as the "Series _____" (herein referred to as the "Certificates"). The
terms and conditions applicable to the Certificates are as follows:
(a) The initial aggregate Stated Amount of the Certificates is
$__________. Certificates shall be issued in denominations of
$__________ and integral multiples of $__________ in excess
thereof.
(b) [The] [There is no] Optional Call Right [is] applicable to the
Certificates.
(c) The Final Scheduled Payment Date is __________.
(d) Payments on the Certificates shall be made as described in
Article IV and Article V.
(e) The Certificates are [not] being issued in separate Classes.
(f) The Certificates shall be issued as [Definitive Certificates]
[Book-Entry Certificates].
(g) The Certificates are Dollar-denominated, with interest and
principal payable in Dollars.
(h) The Trust shall enter into the Indenture.
-12-
<PAGE>
(i) The aggregate principal amount of the Underlying Securities is
$__________. The Underlying Issuer is ____________________. The
title of the Underlying Securities is ____________________ issued
by the Underlying Issuer on __________.
(j) [The Underlying Assets include the rights of the Trust under [the
Swap Agreement] [the Swap Guaranty]].
(k) [No portion of the] [Any of all of] Underlying Assets may be
loaned or pledged to the Company, any affiliate of the Company or
any other person.
(l) [There is no Cut-Off Date with respect to the Trust.] [The Cut-
Off Date is ______________.]
Section 3.02. Ownership by Company of Certificates. The Company
------------------------------------
shall on the Closing Date purchase Certificates representing at least 1% of the
initial Certificate Balance and shall thereafter retain beneficial and record
ownership of Certificates representing at least 1% of the Certificate Balance.
Any attempted transfer of any Certificate that would reduce such interest of the
Company below 1% of the Certificate Balance shall be void. The Trustee shall
cause any Certificate issued to the Company to contain a legend stating "THIS
CERTIFICATE IS NON-TRANSFERABLE AS DESCRIBED IN SECTION 3.02 OF THE TRUST
SUPPLEMENT".
ARTICLE IV
----------
PAYMENTS
--------
Section 4.01. Establishment of Distribution Account. The Trustee,
-------------------------------------
for the benefit of the Noteholders and the Certificateholders, shall establish
and maintain in the name of the Trustee an account (the "Certificate
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders.
Section 4.02. Application of Trust Funds. (a) On each Payment
--------------------------
Determination Date, the Trustee shall calculate all amounts required to be
deposited in the Note Distribution Account and the Certificate Distribution
Account as follows:
(i) to the Note Distribution Account, to the extent of Available
Funds, the Noteholders' Interest Distributable Amount;
-13-
<PAGE>
(ii) to the Note Distribution Account, to the extent of Available
Funds remaining after the application of clause (i), the Noteholders'
Principal Distributable Amount;
(iii) to the Certificate Distribution Account, to the extent of
Available Funds remaining after the application of clauses (i) and (ii),
the Certificateholders' Interest Distributable Amount; and
(iv) to the Certificate Distribution Account, to the extent of
Available Funds remaining after the application of clauses (i) through
(iii), the Certificateholders' Principal Distributable Amount.
(b) On each Payment Date, the Trustee shall make distributions from the
Collection Account for deposit in the applicable account to the extent of
Available Funds, to the accounts and in the order of priority listed in clauses
(a)(i) through (iv) above.
Section 4.03. Payment Date Payments. Subject to the provisions of
---------------------
Article IV of the Trust Agreement, the Trustee shall pay on each Payment Date
(or as promptly thereafter as practicable in the ordinary course of business) to
Holders of Certificates as of the applicable Record Date all amounts deposited
in the Certificate Distribution Account (net of any withholdings) in proportion
to the respective Stated Amounts of such Certificates. The payments required to
be made to Holders pursuant to this Section 4.03 shall be paid by the Trustee to
the Holders of Certificates by wire transfer of immediately available funds to
the respective accounts of such Holders; provided, however, that, (i) if any
-------- -------
such Holder has not provided to the Trustee, at least 15 days prior to the date
of such payment, information as to an account to which such payment may be wire
transferred, the Trustee shall mail, by first class mail, a check for the amount
of such payment to the most recent address of such Holder set forth in the
Register and (ii) the final distribution of principal in retirement of a
Certificate will be made only upon presentation and surrender of such
Certificate at the Corporate Trust Office of the Trustee.
Section 4.04. Notices with respect to Special Payment Date Payments.
-----------------------------------------------------
(i) If any amount becomes payable to the Trust other than the scheduled payments
under or with respect to the Underlying Securities [or the Swap Agreement],
including without limitation
(x) (a) any net proceeds from the sale of the Underlying Securities
pursuant to Section 5.01 or 5.02[, (b) any Swap Termination
Amount payable by the Swap Counterparty to the Trust upon the
early termination of the Swap Agreement or (c)] [or
-14-
<PAGE>
(b)] any defaulted amount (plus interest, if any, on such
defaulted amount) or
(y) Reinvestment Income on any amount under paragraph (x) above,
the Trustee shall fix a Special Record Date and a Special Payment Date with
respect to such amount. As promptly as practicable, but at least five Business
Days before any such Special Record Date, the Trustee shall distribute to the
Swap Counterparty, each Noteholder and each Certificateholder [pro rata] [other
method of apportionment] at the most recent address of such Holder as set forth
in the Register [and to the Swap Counterparty] a notice that states the Special
Record Date, Special Payment Date and the amount to be paid to
Certificateholders on such Special Payment Date.
Section 4.05. Tax Withholding. The Trustee will withhold from any
---------------
payment received on any Underlying Asset an amount on account of taxes required
to be so withheld, and the amount paid to Holders pursuant to this Article IV or
Article V shall be reduced accordingly.
ARTICLE V
---------
TERMINATION
-----------
Section 5.01. [Sale of Underlying Securities upon Termination of Swap
------------------------------------------------------
Agreement; Distribution of Proceeds of Sale. (a) Subject to Section 5.02, upon
- -------------------------------------------
the receipt or giving of any notice of an early termination of the Swap
Agreement pursuant to Section 6 thereof, the Trustee shall use its reasonable
best efforts to sell the Underlying Securities through a broker (which shall be
instructed by the Trustee to sell the Underlying Securities in a reasonable
manner designed to maximize the sales proceeds) selected by the Company with
reasonable care.
(b) The net proceeds from the sale of the Underlying Securities shall
be distributed (i) first, [to the Swap Counterparty to the extent that any Swap
-----
Termination Amount is payable by the Trust to the Swap Counterparty under the
Swap Agreement and (ii) second,] to the Holders of the Notes, to the extent of
------
the sum of the outstanding Noteholders' Interest Distributable Amount and
Noteholders' Principal Distributable Amount, and [(ii) second,][(iii) third,] to
Holders of the Certificates pursuant to Section 4.02, together with any
Reinvestment Income, in proportion to the respective amounts of the Certificates
held by the holders.] [Reserved]
Section 5.02. Sale of Underlying Securities upon an Underlying Event
------------------------------------------------------
of Default; Distribution of Proceeds of Sale. (a) Upon receipt of a Notice of
- --------------------------------------------
an Underlying Event of Default,
-15-
<PAGE>
the Trustee shall use its reasonable best efforts to sell the Underlying
Securities through a broker (which shall be instructed by the Trustee to sell
the Underlying Securities in a reasonable manner designed to maximize the sales
proceeds) selected by the Company with reasonable care.
(b) The net proceeds from the sale of the Underlying Securities shall
be distributed (i) first, [to the Swap Counterparty to the extent that any Swap
-----
Termination Amount is payable by the Trust to the Swap Counterparty under the
Swap Agreement and (ii) second,] to the holders of the Notes, to the extent of
------
the sum of the outstanding Noteholders' Interest Distributable Amount and
Noteholders' Principal Distributable Amount, and [(ii) second,][(iii) third,] to
Holders of the Certificates pursuant to Section 4.02, together with any
Reinvestment Income, in proportion to the respective amounts of the Certificates
held by the holders of the Certificates.
Section 5.03. Termination. (a) This Trust Supplement and the Trust
-----------
created hereby are to remain in effect until February __, ____; provided,
--------
however, that the provisions of this Trust Supplement shall continue through the
- -------
winding up of the affairs of the Trust as provided in this Article V.
(b) Upon the termination of the Trust, the Trustee shall proceed as
promptly as practicable to wind up the affairs of the Trust and distribute any
remaining assets thereof; provided that the assets of the Trust shall be
--------
distributed in an orderly and businesslike manner. As part of the winding up of
the affairs of the Trust, the following steps shall be taken in the following
order:
(1) If on __________ (or as promptly thereafter as practicable
after sale of all Underlying Securities) any funds remain in the Trust, the
Trustee shall take, or cause to be taken, appropriate action to [(i) first,
-----
wire funds to the Swap Counterparty to the extent any Swap Termination
Amount owing to the Swap Counterparty remains unpaid, and (ii) second,]
------
mail, by first class mail, to the most recent address of each Holder set
forth in the Register a check in respect of such Holder's pro rata share of
such remaining amount. If any moneys payable in respect of any
Certificates are not for any reason paid to any Holder entitled thereto as
described above, the Trustee shall disburse all such undistributed moneys
to the Company and such Holder shall thereafter look only to the Company
for payment.
(2) The Trustee shall pay all liabilities of the Trust (which
payments, if any, shall be a reimbursable expense of the Trustee).
-16-
<PAGE>
(3) The Delaware Trustee shall prepare, the Delaware Trustee and
the Trustee shall sign and the Delaware Trustee shall file a certificate of
cancellation for the Trust under the Delaware Business Trust Act with the
Secretary of State of the State of Delaware pursuant to 12 Del. C. (S)
3810.
(c) No Holder shall be entitled to revoke the Trust.
ARTICLE VI
----------
MISCELLANEOUS
-------------
Section 6.01. Counterparts. This Trust Supplement may be executed in
------------
any number of counterparts, and by the Company and the Trustee on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. By and upon acceptance of a Certificate, each
Holder shall have agreed and be deemed to have agreed to be bound by all the
terms and conditions of this Trust Supplement and the Trust Agreement. Copies
of this Trust Supplement and the Trust Agreement shall be filed with the Trustee
and shall be open to inspection during regular business hours at any Designated
Office by any Holder holding a Certificate.
Section 6.02. Exclusive Benefit of Parties and Holders. This Trust
----------------------------------------
Supplement is for the exclusive benefit of the parties hereto and the Holders,
and their respective successors hereunder, and shall not be deemed to give any
legal or equitable right, remedy or claim to any other Person whatsoever.
Section 6.03. Invalidity of Provisions. In case any one or more of
------------------------
the provisions contained in this Trust Supplement, the Trust Agreement or in the
Certificates should be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall in no way be affected, prejudiced or disturbed
thereby, provided that the intent of the parties hereto is not thereby
materially altered.
Section 6.04. Trust Agreement Ratified. Except and so far as herein
------------------------
expressly provided, all the provisions, terms and conditions of the Trust
Agreement are in all respects ratified and confirmed; and the Trust Agreement
and this Trust Supplement shall be taken, read and construed as one and the same
instrument.
Section 6.05. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE
-------------
CERTIFICATES AND ALL RIGHTS HEREUNDER AND THEREUNDER AND PROVISIONS HEREOF AND
THEREOF SHALL BE GOVERNED BY, AND CONSTRUED
-17-
<PAGE>
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 6.06. Headings. The headings of articles and sections in
--------
this Trust Supplement have been inserted for convenience only and are not to be
regarded as a part of this Trust Supplement, or to have any bearing upon the
meaning or interpretation of any provision contained herein or in the
Certificates.
Section 6.07. Business Days. If a date on which a payment is
-------------
scheduled to be made hereunder (or any other date with respect to which action
is required to be taken hereunder) is other than a Business Day, payment (or
such other action) shall be made or taken on the next succeeding day that is a
Business Day. Notwithstanding the foregoing, if a Record Date is other than a
Business Day, the Record Date shall not be affected.
IN WITNESS WHEREOF, the Company and the Trustee have duly executed
this Trust Supplement as of the day and year first above set forth. By and upon
acceptance of a Certificate, each Holder shall have agreed and be deemed to have
agreed to be bound by all the terms and conditions of this Trust Supplement and
the Trust Agreement.
* * * * *
CS FIRST BOSTON STRUCTURED
PRODUCTS CORPORATION
By:___________________________
Name:
Title:
______________________________
Trustee
By:___________________________
Name:
Title:
-18-
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
-------------------
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SERIES _________
CERTIFICATE NO.: __ STATED AMOUNT: $_____________
CUSIP NO.: _________ FINAL SCHEDULED PAYMENT DATE:_____
(Stated Amount issuable in denominations of $______
and integral multiples of $____ in excess thereof.)
This certificate (this "Certificate") of the Series ______ Trust (the
"Trust") evidences the fractional undivided interest of
___________________________ (the "Holder") in the Underlying Assets of the
Trust, established pursuant to the Trust Agreement dated as of _______________
and the Series ______ Trust Supplement thereto dated as of _____________
(collectively, the "Trust Agreement"), in each case as amended and supplemented
from time to time, between CS First Boston Structured Products Corporation (the
"Company") and _____________________, as trustee (the "Trustee"), pursuant to
which this Certificate is being executed and delivered by the Trust. [Also
issued under the Indenture are the Notes designated as "_______ Notes".]
Capitalized terms used but not defined herein shall have the meanings set forth
in the Trust Agreement. By and upon accepting this Certificate, the Holder
agrees that such Holder is bound by all the terms and conditions of the Trust
Agreement. Any statement herein is qualified in its entirety by the applicable
provisions of the Trust Agreement.
This Certificate entitles the Holder hereof to a proportionate
undivided interest in all Trust payments to Holders of Certificates in respect
of the Underlying Assets[, including payments under the Swap Agreement (and
subject to the obligation of the Trust to pay certain amounts to the Swap
Counterparty)]. The Trustee shall pay on each Payment Date to Holders of
Certificates as of the applicable Record Date or Special Record
A-1
<PAGE>
Date all available funds in the Collection Account (net of any withholdings) in
proportion to the respective Stated Amounts of such Certificates. Such payments
shall be paid by the Trustee to the Holders of Certificates by wire transfer of
immediately available funds to the respective accounts of such Holders;
provided, however, that, (i) if any such Holder has not provided to the Trustee,
- -------- -------
at least 15 days prior to the date of such payment, information as to an account
to which such payment may be wire transferred, the Trustee shall mail, by first
class mail, a check for the amount of such payment to the most recent address of
such Holder set forth in the Register and (ii) the final distribution of
principal in retirement of a Certificate will be made only upon presentation and
surrender of such Certificate at the corporate trust office of the Trustee
located at _______________________, _______________, Attn: _________________, or
the office of the New York Presenting Agent, __________________,
________________, or at such other location as may be specified by the Trustee
in a notice of such final distribution of principal delivered to
Certificateholders.
The Holder of this Certificate acknowledges and agrees that its rights to
receive distributions in respect of this Certificate are subordinated to the
rights of the Holders of Notes as described in the Indenture. No distributions
of principal will be made on any Certificate until all of the Notes have paid in
full.
If the Underlying Issuer [or the Swap Counterparty [and the related
Swap Guarantor]] defaults on a payment required to be made by it with respect to
the Underlying Assets, the Trustee shall promptly give notice thereof to the
Company and to the Holders. If an event of default occurs with respect to the
Underlying Securities, the Trustee may proceed to enforce its rights as holder
of the related Underlying Assets unless otherwise directed by Holders of a
majority in Stated Amount of the Certificates. The Trustee shall use its
reasonable best efforts to sell the Underlying Securities through a broker
(which shall be instructed by the Trustee to sell the Underlying Securities in a
reasonable manner designed to maximize the sales proceeds) selected by the
Company with reasonable care. The Trustee may, in its discretion, and will, if
so directed by Holders of a majority in Stated Amount of the Certificates,
exercise or enforce any other rights which it may have as holder of the related
Underlying Assets. [Notwithstanding the foregoing, for so long as the Swap
Agreement [and the related Swap Guaranty] is in effect, the Trustee shall not
sell the Underlying Securities and, upon any early termination of the Swap
Agreement [or the related Swap Guaranty], shall sell the Underlying Securities
only in accordance with Section 5.01 or 5.02, as applicable, of the Trust
Supplement.] In addition, Holders of a majority in Stated Amount of the
Certificates may together direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee as holder of
A-2
<PAGE>
such Underlying Assets. Notwithstanding the foregoing, the Trustee shall be
under no obligation to exercise or enforce any of its rights with respect to the
Underlying Assets of the Trust, whether or not at the request or direction of
any Holders, unless such Holders have offered to the Trustee security or
indemnity satisfactory to it against loss, liability or expense incurred in
compliance with such request or direction or if such request or direction is in
conflict with any law or the Trust Agreement. No Holder will have the right to
institute any proceeding with respect to the Trust Agreement unless (a) Holders
of not less than 25% in Stated Amount of the Certificates have made written
request to the Trustee to institute such proceeding in its own name as Trustee
and have offered the Trustee reasonable indemnity, (b) the Trustee has for 60
days neglected or refused to institute any such proceeding and (c) no direction
inconsistent with such written request has been given by Holders of a majority
in Stated Amount of the Certificates.
As provided more fully in the Trust Agreement, a Holder of a
Certificate may (i) transfer to one or more Persons such Holder's interest in
such Certificate or a pro rata portion of such Holder's interest in such
Certificate and (ii) exchange such Certificate for one or more Certificates in
similar form of equal aggregate amount of any authorized denomination or
denominations. Each Certificate issued upon transfer or exchange of this
Certificate is required to be in a Stated Amount of $_______ or an integral
multiple of $_____ in excess thereof.
Such transfer or exchange shall be effected by the submission of this
Certificate to the Designated Office of the Trustee, accompanied by a written
instruction of transfer or exchange satisfactory to the Trustee executed by the
Holder or the Holder's attorney duly authorized in writing. The office for the
transfer or exchange of Certificates is the office of the Trustee at
_______________________, ________________________, Attention:
____________________ or the office of the New York Presenting Agent,
__________________________, _________________, or, in the event of a change of
the Trustee or New York Presenting Agent or of the Trustee's or New York
Presenting Agent's office, such other office in The City of New York, State of
New York of which notice is provided to Holders at the time of such change of
Trustee, New York Presenting Agent or office.
As a condition to any registration of transfer or exchange of this
Certificate, the Trustee may require payment by the Holder of a reasonable
service charge and of a sum sufficient to cover any applicable tax or
governmental charge payable in connection with such transfer and exchange and
provision by the Holder of such information and assurances as the Trustee may
reasonably deem necessary or proper and compliance by the Holder with reasonable
regulations of the Trustee.
A-3
<PAGE>
The Trustee and the Company may treat the Holder of this Certificate
identified above as the owner of this Certificate for all purposes, including
for purposes of making payments with respect to this Certificate and effecting
the transfer, exchange or surrender of this Certificate, and neither the Trustee
nor the Company shall be affected by any notice to the contrary.
The Trust Agreement may be amended by the Trustee and the Company
without notice to or consent of Holders to (i) cure any defect, omission,
inconsistency or ambiguity in the Trust Agreement or in the Certificates, (ii)
add to the covenants and agreements of the Trustee or the Company or to
surrender any right or power therein conferred upon the Company, (iii)
effectuate the assignment of the Trustee's rights and duties thereunder to a
qualified successor as provided therein, (iv) comply with the Securities Act,
the Trust Indenture Act of 1939, the Investment Company Act or the Code or (v)
modify, alter, amend or supplement the Trust Agreement in any other respect
which is not adverse in any material respect to any Holders. The Trust
Agreement also may be amended by the Trustee and the Company with the consent of
Holders possessing not less than a majority in Stated Amount of the
Certificates, [and Holders possessing not less than a majority of the
outstanding principal balance of the Notes,] for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Trust Agreement or modifying in any manner the rights of Holders; provided,
--------
however, that no such amendment may (a) reduce the amount or delay the timing of
- -------
payments on any Certificate without the consent of the Holder of such
Certificate; or (b) reduce the aforesaid percentage in Stated Amount of
Certificates, the Holders of which are required to consent to any such amendment
without the consent in either case of Holders of 100% in Stated Amount of
Certificates. No amendment or waiver of any provision of the Trust Agreement
nor consent to any departure from the Trust Agreement shall in any event be
effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that any amendment
-------- -------
which affects the Delaware Trustee shall not be effective unless the same has
been consented to in writing by the Delaware Trustee.
[The Trust Agreement provides for special termination and winding up
procedures upon the early termination of the Swap Agreement, including the sale
of the Underlying Securities and the distribution of the net proceeds therefrom
in accordance with Section 5.01 or 5.02 of the Trust Supplement.]
A-4
<PAGE>
This Certificate shall not be valid or become obligatory for any
purpose unless and until duly authenticated by the Trustee by manual signature.
Series ______ Trust
By: ______________, not in
its individual capacity
but solely as Trustee
By: _________________________
Name:
Title:
Date: _____________
Authentication
--------------
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
_____________________,
as Trustee
By:___________________________
Name:
Title:
A-5
<PAGE>
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.
Optional:
[Insert wire transfer instructions for transferee.] Neither the transferor nor
the Trustee shall have any responsibility for the accuracy of such wire transfer
instructions, if provided.
Dated:___________
______________________________________
(Signature)
NOTE: Signature must conform in every particular to
the name in which this security is registered, without
any alteration or change whatsoever.
Signature guaranteed by:_________________________
A-6
<PAGE>
EXHIBIT B
Form of Certificate of Trust
[Intentionally Omitted]
B-1
<PAGE>
EXHIBIT C
Form of Co-Trustee Agreement
[Intentionally Omitted]
C-1
<PAGE>
EXHIBIT D-1
Form of Swap Agreement
[Intentionally Omitted]
D-1
<PAGE>
EXHIBIT D-2
Form of Swap Guaranty
[Intentionally Omitted]
D-2
<PAGE>
EXHIBIT E
Form of Transfer Document
[Intentionally Omitted]
E-1
<PAGE>
[Sidley & Austin Letterhead]
Exhibit 5.1
May 29, 1996
CS First Boston Structured Products Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Re: CS First Boston Structured Products Corporation
Registration Statement on Form S-3
(Registration No. 33-83818)
------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for CS First Boston Structured Products
Corporation, a Delaware corporation (the "Registrant"), in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") on September 9, 1994, of the Registration Statement on Form S-3
(File No. 33-83818), as amended by Amendment No. 1 filed with the Commission on
May 29, 1996 (the "Registration Statement"), in connection with the registration
under the Securities Act of 1933, as amended (the "Act"), of (i) trust
certificates (the "Trust Certificates") evidencing beneficial ownership
interests in underlying assets, which shall consist of a combination of bonds,
debentures, notes and other debt securities issued by Underlying Issuers (the
"Underlying Assets") deposited by the Registrant into a trust (a "Trust")
established or controlled by the Registrant and (ii) bonds (the "Bonds") issued
by a Trust or by the Registrant and secured by Underlying Assets (the Trust
Certificates and the Bonds are referred to herein, collectively, as the
"Securities"). As described in the Registration Statement, the Securities will
be issued from time to time in series (each, a "Series") which may consist of
Bonds, Trust Certificates or a combination of Bonds and Trust Certificates.
Each Series of Trust Certificates will be issued by a Trust formed pursuant to a
master trust agreement (a "Master Trust Agreement") between the Registrant and
the Trustee named therein. Each Series of Bonds will be issued by the
Registrant or a Trust formed pursuant to a Master Trust Agreement and an
indenture (an "Indenture") between the Registrant or a Trust and the Indenture
Trustee named therein. The Master Trust Agreement and/or Indenture pursuant to
which a Series of Securities is issued are referred to herein, as applicable, as
the
<PAGE>
CS First Boston Structured Products Corporation
May 29, 1996
Page 2
"Governing Document" or "Governing Documents" with respect to such Series of
Securities. Capitalized terms used but not otherwise defined herein are defined
in the Registration Statement or in the forms of Trust Agreement or Indenture
filed as exhibits to the Registration Statement. The Securities of each Series
are to be sold as described in the Registration Statement, any amendment
thereto, and the prospectus and prospectus supplement relating to such
Securities (the "Prospectus" and the "Prospectus Supplement", respectively).
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion. In our examination, we have assumed the following: (a) the genuineness
of all signatures; (b) the authenticity of all documents submitted to us as
originals; (c) the conformity to original documents of all documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such documents; and (d) the truth, accuracy and completeness of the
information, representations and warranties in the records, documents,
instruments and certificates we have reviewed. As to any facts material to the
opinions expressed herein, which were not known to us, we have relied upon
certificates, statements and representations of officers and other
representatives of the Registrant and others.
Based on and subject to the foregoing and assuming that each Governing
Document with respect to each Series of Securities is executed and delivered in
substantially the related form that we have examined and that the transactions
contemplated to occur under the Registration Statement and the related Governing
Document or Governing Documents with respect to such Series of Securities in
fact occur in accordance with the terms thereof, we are of the opinion that when
(i) the Registration Statement becomes effective pursuant to the
provisions of the Act,
(ii) the issuance and principal terms of such Securities have been duly
authorized by appropriate corporate action,
(iii) the Governing Document or Governing Documents with respect to
such Series of Securities have been duly completed, executed and delivered by
the parties thereto substantially in the forms filed as exhibits to the
Registration Statement reflecting the terms established as described above and
(iv) such Securities have been duly executed, authenticated and delivered
in accordance with the terms and conditions of the related Governing Document or
Governing Documents with respect to such Series of Securities, and in the manner
described in the
<PAGE>
CS First Boston Structured Products Corporation
May 29, 1996
Page 3
Registration Statement, any amendment thereto and the Prospectus and Prospectus
Supplement relating thereto,
such Securities (a) in the case of Trust Certificates, will be legally issued
and will duly evidence all the beneficial ownership interest in the related
Trust and (b) in the case of Bonds, will be legally issued and binding
obligations of the Registrant or the related Trust, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium or other laws relating to or
affecting the rights of creditors generally and general principles of equity,
including concepts of materiality, reasonableness, good faith and fair dealing,
and the possible unavailability of specific performance or injunctive relief,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus and the Prospectus Supplement forming a part of the Registration
Statement, and we hereby consent to such use of our name in the Registration
Statement and to the use of this opinion for filing with the Registration
Statement as Exhibit 5.1 thereto. In giving such consent, we do not consider
that we are "experts" within the meaning of the term as used in the Act or the
rules and regulations of the Commission issued thereunder, with respect to any
part of the Registration Statement, including this opinion as an exhibit or
otherwise.
We are members of the bar of the State of New York and we do not
express any opinion as to any laws other than the law of the State of New York
and the federal law of the United States of America.
Very truly yours,
/s/ Sidley & Austin
<PAGE>
[Sidley & Austin Letterhead]
Exhibit 8.1
May 29, 1996
CS First Boston Structured Products Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Re: CS First Boston Structured Products Corporation
Registration Statement on Form S-3
(Registration No. 33-83818)
------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel for CS First Boston
Structured Products Corporation, a Delaware corporation (the "Registrant"), in
connection with the preparation and filing with the Securities and Exchange
Commission (the "Commission") on September 9, 1994, of the Registration
Statement on Form S-3 (File No. 33-83818), as amended by Amendment No. 1 filed
with the Commission on May 29, 1996 (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of (i) trust certificates (the "Trust Certificates") evidencing
beneficial ownership interests in underlying assets, which shall consist of a
combination of bonds, debentures, notes and other debt securities issued by
Underlying Issuers (the "Underlying Assets") deposited by the Registrant into a
trust (a "Trust") established or controlled by the Registrant and (ii) bonds
(the "Bonds") issued by a Trust or by the Registrant and secured by Underlying
Assets (the Trust Certificates and the Bonds are referred to herein,
collectively, as the "Securities"). As described in the Registration Statement,
the Securities will be issued from time to time in series (each, a "Series")
which may consist of Bonds, Trust Certificates or a combination of Bonds and
Trust Certificates. Each Series of Trust Certificates will be issued by a Trust
formed pursuant to a master trust agreement (a "Master Trust Agreement") between
the Registrant and the Trustee named therein. Each Series of Bonds will be
issued by the Registrant or a Trust formed pursuant to a Master Trust Agreement
and an indenture (an "Indenture") between the Registrant or a Trust and the
Indenture Trustee named therein. The Master Trust Agreement and/or Indenture
pursuant to which a Series of Securities is issued are referred to herein, as
applicable, as
<PAGE>
CS First Boston Structured Products Corporation
May 29, 1996
Page 2
the "Governing Document" or "Governing Documents" with respect to such Series of
Securities. Capitalized terms used but not otherwise defined herein are defined
in the Registration Statement or in the forms of Trust Agreement or Indenture
filed as exhibits to the Registration Statement. The Securities of each Series
are to be sold as described in the Registration Statement, any amendment
thereto, and the prospectus and prospectus supplement relating to such
Securities (the "Prospectus" and the "Prospectus Supplement", respectively).
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion. In our examination, we have assumed: (a) the genuineness of all
signatures; (b) the authenticity of all documents submitted to us as originals;
(c) the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
documents; and (d) the truth, accuracy and completeness of the information,
representations and warranties contained in the records, documents, instruments
and certificates we have reviewed. As to any facts material to the opinions
expressed herein, which were not independently established or verified, we have
relied upon certificates, statements and representations of officers and other
representatives of the Registrant and others.
Based on and subject to the foregoing and assuming that each Governing
Document with respect to each Series of Securities is executed and delivered in
substantially the related form that we have examined and that the transactions
contemplated to occur under the Registration Statement and the related Governing
Document or Governing Documents with respect to such Series of Securities in
fact occur in accordance with the terms thereof, we are of the opinion that the
description set forth under the caption "Certain Federal Income Tax
Consequences" in the Prospectus included as part of the Registration Statement
correctly describes the material aspects of the federal income tax treatment to
United States investors as of the date hereof of an investment in the Securities
and where expressly indicated therein, to Non-United States Holders (as defined
in the Registration Statement) of the Securities.
Members of our firm are admitted to the Bar of the State of New York
and we express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States of America.
We know that we are referred to under the heading "Certain Federal
Income Tax Consequences" in the Prospectus forming part of the Registration
Statement, and we hereby consent to such use of our name in the Registration
Statement and to the use of this opinion for filing with the Registration
Statement as Exhibit 8.1 thereto. In giving such consent, we do not consider
that we are "experts" within the meaning of the term as used in the Act or the
rules and regulations of the
<PAGE>
CS First Boston Structured Products Corporation
May 29, 1996
Page 3
Commission issued thereunder with respect to any part of the Registration
Statement, including the opinion as an exhibit or otherwise.
Very truly yours,
/s/ Sidley & Austin
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
[SUBJECT TO COMPLETION, DATED _______________, 199__]
PROSPECTUS SUPPLEMENT
(To Prospectus Dated _______, 1996
CS FIRST BOSTON STRUCTURED PRODUCTS TRUST 199__
$_________________
AGGREGATE ORIGINAL PRINCIPAL AMOUNT OF
LINKED CERTIFICATES/SM/
SERIES 199__ - _____
CS First Boston Structured Products Trust 199__ (the "Issuer") is offering
$__________ aggregate original principal amount of Linked Certificates Series
199__ -_____ in the Classes and in the original principal amounts listed below
(collectively, the "Trust Certificates" or "LINCs/SM/"). The LINCs will
represent, in the aggregate, the entire beneficial ownership interest in the
following underlying assets (the "Underlying Assets"): [modify as appropriate]
[(i)] [[trust certificates] [receipts] representing a beneficial ownership
interest in] [bonds] [debentures] [notes] [describe other debt securities] (the
"Underlying Securities") [specify currency denomination] of [identify obligors
or describe types of obligors]; [(ii) enhancements (the "Underlying
Enhancements") consisting of [describe:] [financial guaranty insurance] [letter
of credit] [describe other credit enhancement and liquidity facilities];] [(iii)
a swap agreement (the "Swap Agreement") consisting of [describe:] [interest rate
swap agreement] [interest rate cap agreement] [interest rate floor agreement];
and [(iv) certain miscellaneous assets, such as [cash] [describe other
miscellaneous assets]]. See the additional information set forth [in the table
below and] under "The Underlying Assets" herein.
<TABLE>
<CAPTION>
[Modify the following tabular description of the Securities as appropriate.]
Original Final
Class of Principal Interest Scheduled
Securities Amount Rate Payment Date
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[Interest-Only Trust Certificates]
- --------------------------------------------------------------------------------------------
[Stripped Principal Trust Certificates]
- --------------------------------------------------------------------------------------------
</TABLE>
LINCS ARE DIFFERENT FROM, AND SHOULD NOT BE DEEMED TO BE A SUBSTITUTE FOR,
AN INVESTMENT IN THE UNDERLYING SECURITIES.
This Prospectus Supplement provides certain information with respect to the
Underlying Issuers and other information with respect to the material terms of
the Underlying Securities, however, the information provided herein with respect
to the Underlying Issuers, the Underlying Securities, risk factors relating
thereto and the rights and obligations, legal, financial or otherwise, arising
thereunder or related thereto is not complete. In the event of a default on an
Underlying Security, the risk of loss lies entirely with the holders of the
LINCs. See "Risk Factors". An investor in the LINCs should consider the same
information concerning the Underlying Issuers as it would if it were purchasing
the Underlying Securities. See "The Underlying Assets -- Underlying
Securities".
[If appropriate, provide the following information with respect to the
Underlying Securities: (i) title; (ii) Underlying Issuer; (iii) outstanding
principal amount deposited; (iv) maturity date; (v) interest rate; (vi)
redeemability by Underlying Issuer; and (vii) other material provisions. If
appropriate, the information may be provided in the following tabular form, with
appropriate modifications.]
<TABLE>
<CAPTION>
Outstanding
Title of Principal
Underlying Underlying Amount Maturity Interest Redeemability by
Securities Issuer Deposited Date Rate Underlying Issuer
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
[If appropriate, provide comparable information with respect to any Underlying
Enhancements and the Swap Agreement]
--------------------
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 ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
(COVER CONTINUED ON NEXT PAGE)
<PAGE>
(Cover continued from previous page)
AS MORE FULLY DESCRIBED UNDER "RISK FACTORS" HEREIN AND IN THE PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
FOLLOWING FACTORS [IF APPROPRIATE, DESCRIBE THE FOLLOWING AND CERTAIN OTHER
SIGNIFICANT RISKS (INCLUDING CREDIT, CONCENTRATION, PREPAYMENT, YIELD,
SUBORDINATION AND STRUCTURAL RISKS)]:
. THE LINCS MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS DUE TO
THEIR COMPLEX NATURE. NO INVESTOR SHOULD PURCHASE THE LINCS UNLESS
SUCH INVESTOR UNDERSTANDS AND IS ABLE TO BEAR THE CREDIT, PREPAYMENT,
YIELD, LIQUIDITY AND OTHER RISKS ASSOCIATED WITH THE LINCS.
. HOLDERS OF LINCS WILL HAVE RECOURSE FOR PAYMENT ON THE SECURITIES ONLY
TO THE SPECIFIC UNDERLYING ASSETS RELATING TO THE LINCS. THE LINCS
WILL BE SUBJECT, AMONG OTHER THINGS, TO THE CREDIT RISK OF THE
OBLIGORS ON THE UNDERLYING SECURITIES [AND CORRESPONDING RISKS WITH
RESPECT TO THE UNDERLYING ENHANCEMENTS, THE SWAP AGREEMENT AND
MISCELLANEOUS ASSETS CONSTITUTING PARTY OF THE UNDERLYING ASSETS].
. THE RATING[S] ASSIGNED TO THE LINCS BY [_______] REFLECT[S] SUCH
RATING [AGENCY'S] [AGENCIES'] ASSESSMENT SOLELY OF THE LIKELIHOOD THAT
HOLDERS OF LINCS WILL RECEIVE PAYMENTS REQUIRED TO BE MADE WITH
RESPECT TO LINCS. SUCH RATING[S] [DOES] [DO] NOT CONSTITUTE AN
ASSESSMENT OF THE LIKELIHOOD OF REDEMPTIONS OF THE UNDERLYING ASSETS
OR THE IMPACT THEREON ON THE YIELD ON THE LINCS.
. [THE LINCS ARE ZERO COUPON OBLIGATIONS THAT WILL BE OFFERED AT
SUBSTANTIAL DISCOUNTS FROM THEIR NOTIONAL [OR FACE] AMOUNTS AND WILL
NOT ENTITLE THE HOLDERS THEREOF TO ANY PERIODIC PAYMENT OF INTEREST.
THE MARKET PRICES OF ZERO COUPON OBLIGATIONS ARE PARTICULARLY
SENSITIVE TO FLUCTUATIONS IN MARKET INTEREST RATES. SEE "RISK FACTORS"
HEREIN FOR A DISCUSSION OF PRICE VOLATILITY OF THE LINCS AND "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" IN THE PROSPECTUS FOR A DISCUSSION OF
CERTAIN FEDERAL INCOME TAX CONSEQUENCES, INCLUDING IMPLICATIONS OF
ORIGINAL ISSUE DISCOUNT AND POSSIBLE TAX WITHHOLDING.]
. [IN THE CASE OF THE INTEREST-ONLY TRUST CERTIFICATES, A FASTER THAN
ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE UNDERLYING SECURITIES IS
LIKELY TO RESULT IN A LOWER THAN ANTICIPATED YIELD, AND IN CERTAIN
CASES, AN ACTUAL LOSS ON THE INVESTMENT.]
. THE YIELD ON ANY FLOATING RATE OR INVERSE FLOATING RATE CLASS WILL BE
SENSITIVE TO THE LEVEL OF THE INDEX RELATING TO SUCH CLASS,
PARTICULARLY IF THE INTEREST RATE THEREON FLUCTUATES AS A MULTIPLE OF
SUCH INDEX.]
[Interest will be paid [monthly] [quarterly] [semi-annually] on the [Class
__] Trust Certificates to the extent funds are available therefor as described
herein on [the __ day of each month] [each __, __, __ and __] [each __ and __]
or, if any such day is not a business day, on the next succeeding business day,
commencing on _________, 199_; provided, however, that if the distributions on
-------- -------
the Underlying Assets that relate to such interest payments have not been
received prior to 1:00 p.m. (New York City time) on such day, payments will be
made on the next succeeding business day (each a "Payment Date"). [To the
extent there are deficiencies in the interest available for payment on a Payment
Date, such deficiencies will be deferred to succeeding Payment Dates and will
bear interest at the rate or rates otherwise borne by the applicable Class of
Trust Certificates until paid.] [Describe alternative interest payment terms.]
See "The Trust Certificates -- Interest".] [Principal payments on the [Class __]
Trust Certificates will be made on each Payment Date to the extent funds are
available therefor as described herein until each such Class is paid in full.
[Describe alternative principal payment terms.] See "The Trust Certificates --
Principal".]
[The Interest-Only Trust Certificates are issued in __ Classes,
corresponding to the number of Interest Payment Dates remaining until and
including [___199_, the first date on which the Underlying Issuers may redeem
the Underlying Securities (the "First Call Date")] [the maturity date of the
Underlying Securities]. Each Interest-Only Trust Certificate of a Class
represents the right to receive its pro rate share of a specified portion (equal
to [___ basis points] of the then outstanding principal amount of the Underlying
Securities) of an Interest Payment due on a single Interest Payment Date on the
Underlying Securities [on or before the First Call Date]. The Interest-Only
Trust Certificates are not entitled to any periodic payments of interest. Thus,
no payment will be made on any Class of Interest-Only Trust Certificates prior
to the corresponding Interest Payment Date on the Underlying Securities.]
[The Trust Certificates Principal Trust Certificates are issued in a single
Class. Each Stripped Principal Trust Certificate represents the right to
receive its pro rate share of [(1)] any payment of principal of the Underlying
Securities by the Underlying Issuers, whether at maturity or upon redemption,
including any redemption premium, [[and] (2) [prior to ________,____,] the
portion of the Interest Payments on the Underlying Securities not payable to any
Class of Interest-Only Trust Certificates, equivalent to interest on the
principal amount of the Stripped Principal Trust Certificates at a rate equal to
[describe rate] [, and (3) after the First Call Date, the entire amount of any
Interest Payments made on the Underlying Securities, equivalent to interest on
the principal amount of the Stripped Principal Trust Certificates at a rate
equal to __%].]]
[Describe payment characteristics of other Classes.]
The Trust Certificates represent the entire beneficial ownership interest
in the Underlying Assets and are not insured or guaranteed by the United States
government or any other government agency or instrumentality or any other person
or entity, including CS First Boston Corporation or any of its affiliates.
<TABLE>
<CAPTION>
Price Underwriting Proceeds to
Public(1) Discount the [Issuer][Company](1)(2)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Linked Certificates $ % $
Series 199
- ----------------------------------------------------------------------------
Total $ % $
- ----------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest from _____________, ____, 199__ .
(2) Before deducting expenses, estimated to be $__________.
_____________________________
(cover continued on next page)
<PAGE>
It is a condition to the issuance of the LINCs that the LINCs be rated
"_____" [or better] by [_________] [and "________" [or better] by [__________]].
[Describe any unusual limitation of rating.] See "Rating of the Securities".
The LINCs will be offered from time to time by [CS First Boston Corporation]
(the "Underwriter") [at the prices set forth above] [in negotiated transactions
at varying prices to be determined at the time of sale]. The aggregate proceeds
to the [Issuer] [Company] from the sale of the LINCs, before deducting estimated
expenses of $______, will be approximately $______. The Underwriter may make a
market in the LINCs but is not obligated to do so. There is currently no
secondary market for the LINCs and there can be no assurance that such market
will develop or, if such market does develop, that it will continue for any
period of time.
The LINCs are offered by the Underwriter subject to prior sale, when, as
and if issued, delivered to an accepted by the Underwriter and subject to
certain other conditions. The Underwriter reserves the right to withdraw,
cancel or modify the offer and to reject orders in whole or in part. It is
excepted that delivery of the LINCs will be made in book-entry form only through
the same-day funds settlement system of The Depository Trust Company on or about
_________, 199_.
CS FIRST BOSTON
- --------------------------------------------------------------------------------
The Date of this Prospectus Supplement is _________, 199__.
<PAGE>
This Prospectus Supplement does not contain complete information about the
LINCs. Additional information is contained in the accompanying Prospectus dated
_______, 1994, and prospective investors should purchase LINCs only after
carefully reading this Prospectus Supplement and the accompanying Prospectus.
[IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.]
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and to the Trust Agreement and Series Supplement
described below, together with any other agreements or instruments related
thereto. For definitions of capitalized terms not defined herein, see the
accompanying Prospectus (including the Glossary contained therein).
TRUST CERTIFICATES OFFERED Linked Certificates Series 199__-___
(the "Trust Certificates" or
"Lincs/SM/") in the [Classes and]
aggregate original principal
amount[s] set forth on the cover page
hereof.
[The Trust Certificates will be
issued pursuant to a Series
Supplement to the Master Trust
Agreement dated as of
_________________, 199__
[(collectively, the "Trust
Agreement")], between CS First Boston
Structured Products Corporation (the
"Company") and [____________], as
trustee (the "Trustee").]
BOOK ENTRY; DENOMINATIONS The Trust Certificates will be issued
in fully registered, certificated
form and will be held by a nominee of
The Depository Trust Company ("DTC"),
and beneficial interests will be held
by investors through the book-entry
facilities of DTC in denominations of
$[1,000] and integral multiples
thereof. The Trust Certificates will
constitute Book-Entry Only Trust
Certificates within the meaning of
the Prospectus. No person acquiring
an interest in the Trust Certificates
will be entitled to receive a
definitive certificate representing
such person's interest, except in the
limited circumstances described in
the Prospectus under "The Securities
-- Book-Entry Registration --
Issuance of Definitive Securities for
Book-Entry Only Securities."
ISSUER The Issuer is a special purpose
Delaware business trust organized
pursuant to the Trust Agreement.
UNDERLYING ASSETS The Trust Certificates will
represent, in the aggregate, the
entire beneficial ownership interest
in the following Underlying Assets:
[modify as appropriate] [(i)]
Underlying Securities consisting of
[bonds] [debentures] [notes]
[describe other debt securities]
[specify currency denomination] of
[identify Underlying Issuers] [; (ii)
Underlying Enhancements consisting of
[describe:] [financial guaranty
insurance] [letter of credit]
[describe other credit enhancement
and liquidity facilities];] [(iii)
the Swap Agreement consisting of
[describe:] [interest rate swap
agreement] [interest rate cap
agreement] [interest rate floor
agreement];] [and (iv) certain
miscellaneous assets, such as [cash]
[describe other miscellaneous
assets]].
COLLECTION ACCOUNT All distributions on the Underlying
Assets will be remitted directly to a
collection account (the "Collection
Account") to be established with the
Trustee on the closing date. Such
distributions will be available for
application to the payment of
principal of, and interest on, the
Trust Certificates [and for payment
of certain expenses].
NON-RECOURSE SECURITIES The sole assets from which payments
will be made with respect to the
Trust Certificates will be the
Underlying Assets and the
S-3
<PAGE>
Trust Certificateholders will not have
recourse for payment on the Trust
Certificates other than on the basis of
their beneficial ownership interest in
the Underlying Assets and the Collection
Account.
[STRUCTURAL ENHANCEMENT As described herein, the rights of
the holders of Class ___ Trust
Certificates (the "Subordinated Trust
Certificates") to receive
distributions will be subordinated to
the rights of the holders of Class
___ Trust Certificates (the "Senior
Trust Certificates") to receive
distributions. This subordination
provides the Senior Trust
Certificateholders the preferential
right to receive, prior to
distributions being made on the Class
___ Trust Certificates, in respect of
the Subordinated Trust
Certificateholders, the amounts of
interest and principal due the Senior
Trust Certificateholders.
In addition, realized losses on the
Underlying Assets will be borne by
the Subordinated Trust
Certificateholders until the
aggregate unpaid principal balance of
such Subordinated Trust Certificates
has been reduced to zero.
Thereafter, such losses will be borne
by the Senior Trust
Certificateholders.]
INTEREST [Interest will be paid [monthly]
[quarterly] [semi-annually] on the
[Class ___] Trust Certificates to the
extent funds are available therefor
as described herein on [the ___ day
of each month] [each ___, ___, ___
and ___] [each ___ and ___] or, if
any such day is not a business day,
on the next succeeding business day,
commencing on _________________,
199__; provided, however, that if the
distributions on the Underlying
Assets that relate to such interest
payments have not been received prior
to 1:00 p.m. (New York City time) on
such day, payments will be made on
the next succeeding business day
(each a "Payment Date"). [To the
extent there are deficiencies in the
interest available for payment on a
Payment Date, such deficiencies will
be deferred to succeeding Payment
Dates and will bear interest at the
rate or rates otherwise borne by the
applicable Class of Trust
Certificates until paid.]
[The Interest-Only Trust Certificates
are issued in ____ Classes,
corresponding to the number of
Interest Payment Dates remaining
until and including [_________ 199__,
the first date on which the
Underlying Issuers may redeem the
Underlying Securities (the "First
Call Date")] [the maturity date of
the Underlying Securities]. Each
Interest-Only Trust Certificate of a
Class represents the right to receive
its pro rata share of a specified
portion (equal to [______ basis
points] of the then outstanding
principal amount of the Underlying
Securities) of an Interest Payment
due on a single Interest Payment Date
on the Underlying Securities [on or
before the First Call Date]. The
Interest-Only Trust Certificates are
not entitled to any periodic payments
of interest. Thus, no payment will
be made on any Class of Interest-Only
Trust Certificates prior to the
corresponding Interest Payment Date
on the Underlying Securities.]
PRINCIPAL [On each Payment Date, principal will
be paid to holders of the [Class ___]
Trust Certificates in an amount equal
to the "Minimum Principal Payment
Amount". The "Minimum Principal
Payment Amount" for any Payment Date
will be an amount equal to
S-4
<PAGE>
the aggregate distributions of principal
made on the Underlying Assets during the
[one month] [quarterly] [semi-annual]
period ending on the [day] [prior to the
Payment Date] [in the month in which
such Payment Date occurs]. On each
Payment Date, the Minimum Principal
Payment Amount will be allocated among
the Classes of Trust Certificates [other
than the Class ___ Trust Certificates]
in the manner set forth herein. [Specify
principal allocations among Classes.]]
[The Stripped Principal Trust
Certificates are issued in a single
Class. Each Stripped Principal Trust
Certificate represents the right to
receive its pro rata share of [(1)] any
payment of principal of the Underlying
Securities by the Underlying Issuers,
whether at maturity or upon redemption,
including any redemption premium, [[and]
(2) [prior to ______________,
______________,] the portion of the
Interest Payments on the Underlying
Securities not payable to any Class of
Interest-Only Trust Certificates,
equivalent to interest on the principal
amount of the Stripped Principal Trust
Certificates at a rate equal to
[describe rate] [, and (3) after the
First Call Date, the entire amount of
any Interest Payments made on the
Underlying Securities, equivalent to
interest on the principal amount of the
Stripped Principal Trust Certificates at
a rate equal to ___%].]]
[Describe alternative principal payment
terms.]
PAYMENTS [As more fully described herein, on each
Payment Date while the Trust
Certificates are outstanding, [after
payment of certain expenses,] amounts
received on the Underlying Assets during
the period commencing on the preceding
Payment Date (or commencing the closing
date in the case of the first Payment
Date) and ending on the day preceding
the applicable Payment Date, will be
applied as follows: (i) first, as
interest on the [Senior] Trust
Certificates; [and] (ii) second, as
principal of the [Senior] Trust
Certificates [; (iii) third, as interest
on the Subordinated Trust Certificates;
and (iv) fourth, as principal of the
Subordinated Trust Certificates]. [Any
funds available after the Senior and
Subordinated Trust Certificates have
been paid in full [and all expenses have
been paid], will be paid to the
[Issuer].]]
FINAL SCHEDULED PAYMENT DATE The Final Scheduled Payment Date of the
[Class ___] Trust Certificates is
__________. The Final Scheduled Payment
Date is the Payment Date [[one] [three]
[six] month[s]] after the Payment Date
on or immediately following the final
scheduled distribution on the last to
mature of the Underlying Securities. [As
of _________, 199__, the weighted
average final payment date of the
Underlying Securities will be
___________________.] [Because the rate
of payment of principal on the
Underlying Securities may exceed the
rate of payments used in calculating
such final scheduled distribution, the
date of the final payment on the [Class
___] Trust Certificates may be earlier,
and could be substantially earlier, than
the Final Scheduled Payment Date of such
Trust Certificates.]
YIELD CONSIDERATIONS
General Considerations [The following discussion and the
discussion contained elsewhere in this
Prospectus Supplement with respect to
yield and redemption considerations
would be modified to reflect transaction
structures
S-5
<PAGE>
that do not involve material prepayment
risks.] The yield to maturity of the
Trust Certificates will be affected by
the amount and timing of principal
payments on and redemptions of the
Underlying Securities, the payment
priorities and other characteristics of
the Underlying Securities [and the level
of the Index], the purchase price paid
for the Trust Certificates and the
allocations among the [Class ___]
Securities. [If multiple Classes of
Trust Certificates are issued, describe
Class-specific effects of principal
payments and redemptions.] No
representation is made as to the
anticipated rate of principal payments
on or redemptions of the Underlying
Securities or as to the anticipated
yield to maturity of the Trust
Certificates. Prospective investors are
urged to consider their own estimates of
theanticipated rate of principal
payments on and redemptions of the
Underlying Securities and the
suitability of the Trust Certificates to
their investment objectives. [Describe
any mitigating or other effects
Underlying Enhancements or the Swap
Agreement on redemptions of Underlying
Securities.] In addition to the
discussion below, prospective investors
should review the discussion under
"Certain Yield and Redemption
Considerations" herein and "Certain
Yield and Redemption Considerations" in
the Prospectus.
[Redemptions If prevailing interest rates fall
significantly below the interest
rates on the Underlying Securities,
the Underlying Securities are likely
to be subject to higher redemption
rates than if prevailing rates remain
at or above the interest rates on the
Underlying Securities. Other factors
affecting redemptions of Underlying
Securities include the term of the
Underlying Securities, the
availability of credit, the general
economic situation, tax, legal and
other factors.]
Timing of Payments The timing and amount of principal
payments on the Underlying Securities
may significantly affect an
investor's yield. In general, other
things being equal, the earlier the
redemption of an Underlying
Securities, the greater will be the
effect on the investor's yield to
maturity. As a result, the effect on
an investor's yield of redemptions
occurring at a rate higher (or lower)
than the rate anticipated by the
investor during the period
immediately following the issuance of
the Trust Certificates may not be
offset by a subsequent like reduction
(or increase) in the rate of
redemptions.
[Underlying Securities The Underlying Securities which were
issued at different times, have
different allocations of principal
and interest among various classes,
and will perform differently in
various interest and prepayment rate
environments. The performance
characteristics of the Trust
Certificates will reflect a
combination of the performance
characteristics of the various
Underlying Securities. As a result,
it may be more difficult to analyze
the likely yield and payment
experience of the Trust Certificates.]
[The Index The Class ___ Trust Certificates will
be sensitive to changes in the level
of the Index. If the level of the
Index increases, there will be a
higher rate of interest accruing on
the Class ___ Trust Certificates, but
the amounts of interest received with
respect to certain Underlying
Securities will be reduced.]
[Discounts and Premiums In the case of any Class ___ Trust
Certificate purchased at a
S-6
<PAGE>
discount, a slower than anticipated rate
of principal payments, other things
being equal, could result in an actual
yield that is lower than the anticipated
yield. In the case of any Class ___
Trust Certificate purchased at a
premium, a faster than anticipated rate
of principal payments, other things
being equal, could result in an actual
yield that is lower than the anticipated
yield.]
[Reinvestment Risk Because prevailing interest rates are
subject to fluctuation, there can be
no assurance that investors in any
Class of Trust Certificates will be
able to reinvest the distributions
thereon at yields equaling or
exceeding the yields on the
respective Class of Trust
Certificates. Yields on any such
reinvestments may be significantly
lower than yields on the respective
Class of Trust Certificates.
Generally, when prevailing interest
rates increase, redemption rates on
debt obligations tend to decrease,
resulting in a reduced return of
principal to investors at a time when
reinvestment at such higher prevailing
rates would be desirable. Conversely,
when prevailing interest rates decline,
redemption rates on debt obligations
tend to increase, resulting in a greater
return of principal to investors at a
time when reinvestment at comparable
yields may not be possible. Prospective
investors in each Class of Trust
Certificates should consider the related
reinvestment risks in light of other
investments that may be available to
such investors.]
LIQUIDITY There is currently no secondary market
for the Trust Certificates, and there
can be no assurance that one will
develop. There is no assurance that any
such market, if developed, will continue
for any period of time. The Underwriter
may make a market in the Trust
Certificates, but it is not obligated to
do so and may discontinue such market-
making at any time without notice.
CERTAIN FEDERAL INCOME TAX [The Trust Certificates [may] [will]
CONSEQUENCES be issued with original issue discount
for federal income tax purposes.] [The
Trust Certificates will be Partnership-
Taxed Securities for federal income tax
purposes.] See "Certain Federal Income
Tax Consequences" in the Prospectus.
CERTAIN ERISA CONSIDERATIONS A fiduciary of any employee benefit or
other retirement arrangement subject to
ERISA or Section 4975 of the Code (each
a "Plan") should review carefully with
its legal advisors as to whether the
purchase, transfer or holding of the
Trust Certificates could give rise to a
transaction prohibited under ERISA or
the Code or could subject the assets of
the Issuer to the fiduciary standards of
ERISA. [Describe any particular features
of the Trust Certificates or exemptions
relating to the Trust Certificates that
may affect the ERISA analysis.] For
additional information on certain
circumstances under which the holding of
the Trust Certificates by a Plan may
have ramifications under ERISA or
Section 4975 of the Code, see "Certain
ERISA Considerations" [herein and] in
the Prospectus.
LEGAL INVESTMENT Institutions the investment activities
of which are subject to legal investment
laws and regulations or to review by
certain regulatory authorities may be
subject to restrictions on investment in
the Trust Certificates. Any such
institution should consult its legal
advisors in determining whether and to
what extent there may be
S-7
<PAGE>
restrictions on its ability to invest in
the Trust Certificates. See "Legal
Investment" in the Prospectus.
USE OF PROCEEDS The net proceeds of the offering of the
Trust Certificates will be used to
purchase the Underlying Assets
simultaneously with the issuance of the
Trust Certificates. See "Use of
Proceeds" in the Prospectus.
RATING As a condition of their issuance, the
Trust Certificates will be rated [[____]
by Standard & Poor's Corporation
("S&P")] [[____] by Moody's Investors
Service, Inc. ("Moody's)] [[___] by Duff
& Phelps Credit Rating Co. ("D&P")]
[[____] by Fitch Investors Service, Inc.
("Fitch")] ([each, a] [the] "Rating
Agency"). [The rating[s] assigned
address only the likelihood of return of
an invested amount, not the possibility
of full payment of interest on such
amount.] A securities 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 agency. The
rating[s] assigned to the Trust
Certificates by the Rating [Agency]
[Agencies] reflects such Rating
[Agency's] [Agencies'] assessment solely
of the likelihood that Trust
Certificateholders willreceive principal
[and interest] payments required to be
made with respect to Trust Certificates.
Such rating[s] [does] [do] not represent
an assessment of the likelihood or rate
of redemptions of the Underlying Assets
or the impact thereon on the yield on
the Trust Certificates. In addition, if
the rating[s] initially assigned to the
Trust Certificates [is] [are]
subsequently lowered for any reason, no
person or entity is obligated to provide
any additional support or credit
enhancement with respect to the Trust
Certificates.
RISK FACTORS For a discussion of certain risks
involved in an investment in LINCs,
see "Risk Factors" herein and in the
accompanying Prospectus.
S-8
<PAGE>
RISK FACTORS
Prospective investors should consider, among other things, the following risk
factors in connection with the purchase of the Trust Certificates as well as the
risk factors described under "Risk Factors" in the Prospectus. Certain risk
factors described in the Prospectus that are applicable to the Trust
Certificates have not been restated in this Prospectus Supplement; however, the
risk factors described herein and in the Prospectus should be considered
collectively. [Certain risk factors relating to the Underlying Securities and
the Underlying Issuers may also apply in various respects to other Underlying
Assets (such as Underlying Enhancements and the Swap Agreement) and the related
obligors or counterparties with respect thereto, whether or not so expressed
herein.]
LIMITED OBLIGATIONS AND INTERESTS
The Trust Certificates do not represent an obligation of or interest in the
Company and represent the beneficial ownership interest in the Underlying Assets
and Collection Account, with respect to which recourse shall be available only
against the Underlying Assets and the Collection Account. The Trust
Certificates will not be insured or guaranteed by any government agency or
instrumentality, the Company, any Person affiliated with the Company [or the
Issuer], or any other Person. The obligations of the Company with respect to
the Trust Certificates will only be pursuant to certain limited representations
and warranties. The Company does not have, and is not expected in the future to
have, any significant assets with which to satisfy any claims arising from a
breach of any representation or warranty. If, for example, the Company were
required to repurchase an Underlying Asset with respect to which the Company has
breached a representation or warranty, its only sources of funds to make such
repurchase would be from funds obtained from the enforcement of a corresponding
obligation, if any, on the part of the seller of such Underlying Asset to the
Company.
LIMITED UNDERLYING ASSETS
Holders of Trust Certificates must rely solely upon distributions on the
Underlying Assets for distributions on the Trust Certificates. If such
Underlying Assets are insufficient to make required payments with respect to
such Trust Certificates, no other assets of the [Company or the] Issuer will be
available for payment of the deficiency, and holders of the Trust Certificates
will [likely] not be paid and will [likely] suffer losses. The Trust
Certificates will not have any claim against or security interest in the
underlying assets relating to the securities of any other series issued by the
Issuer. [Because payments of principal and interest with respect to the
Underlying Securities shall be applied first to the Class __ Trust
Certificates, a deficiency that arises after the Class ___ Trust Certificates
have been fully or partially repaid will have a disproportionately greater
effect on the Class ___ Trust Certificates.]
LIMITED LIQUIDITY
There will be no market for the Trust Certificates prior to the issuance
thereof and there can be no assurance that a secondary market for the Trust
Certificates will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue for the life of the Trust
Certificates. [The Trust Certificates will not be redeemable [except as
provided herein]]. Although the Underwriter, directly or through one or more
affiliates, may make a secondary market in the Trust Certificates, it has no
obligation to do so and any such market-making, if commenced, may be
discontinued at any time without notice.
[PRICE VOLATILITY OF TRUST CERTIFICATES AND POSSIBILITY OF LOSS
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The purchase at a discount of a Trust Certificate will likely result in
greater percentage price volatility than the purchase of an obligation of a
similar maturity that pays interest periodically. The Interest-Only Trust
Certificates are zero coupon obligations. The market prices of zero coupon
obligations, such as those represented by the Interest-Only Trust Certificates,
are particularly sensitive to fluctuations in market interest rates. The stated
yield to maturity on an ordinary bond often deviates from its actual yield
because the stated rate presumes that the periodic payments on those bonds will
be reinvested at a constant interest rate. Zero coupon instruments, by contrast,
have a fixed yield to maturity if held to maturity because the reinvestment rate
of bond appreciation is embedded in the original issue discount. Thus when
market interest rates fall, absent other factors such as changes in the
perceived creditworthiness of the Underlying Securities, there will be a
significant rise in the market price of Interest-Only Trust Certificates and,
when market interest rates rise, there will be a corresponding significant fall
in the market price of Interest-Only Certificates, relative to coupon bearing
instruments of a similar maturity. Potential investors should consider whether
such secondary market price volatility is appropriate for them.]
CERTAIN YIELD AND REDEMPTION CONSIDERATIONS
[The Underlying Securities are subject to redemption as described herein
under "The Underlying Assets --Underlying Securities". The rate of redemptions
of Underlying Securities may be dependent on the financial or other condition of
the related Underlying Issuer and from time to time may be influenced by a
variety of economic, tax, legal and other factors. There can be no assurance
as to the rate of redemptions of the Underlying Securities [or that the rate of
redemptions will conform to any model described herein]. Redemptions of the
Underlying Securities generally will result in a faster rate of principal
payments on the Securities than if payments on such Underlying Securities were
made as scheduled. Thus, the redemption experience on the Underlying Securities
will affect the average life of each Class secured thereby and the extent to
which each such Class is paid prior to its Final Scheduled Payment Date. If a
Class is retired prior to its Final Scheduled Payment Date, investors in such
Class might be unable to reinvest the proceeds in instruments bearing similar
interest rates. [The Senior Trust Certificates are entitled to certain payments
before the Subordinated Trust Certificates and, as a result, yields on the
Subordinated Trust Certificates may be more sensitive to redemptions of the
Underlying Securities.] [The Class__ Trust Certificates will be offered at a
significant premium and the Class __ Trust Certificates will be offered at a
significant discount. Yields on such Classes will be sensitive, and in some
cases extremely sensitive, to redemptions of the Underlying Securities and, in
the case of the Class __ Trust Certificates, because the amount of interest
payable with respect to such Class is [extremely] disproportionate to principal,
a holder might, in some redemption scenarios, fail to recoup its original
investment.] If the purchaser of a Trust Certificate offered at a discount
calculates its anticipated yield to maturity based on an assumed rate of
distributions of principal that is faster than that actually experienced on the
Underlying Securities, the actual yield to maturity will be lower than that so
calculated. Conversely, if the purchaser of a Trust Certificate offered at a
premium calculates its anticipated yield to maturity based on an assumed rate of
distributions of principal that is slower than actually experienced on the
Underlying Securities, the actual yield to maturity or final distribution will
be lower than that so calculated. [Describe any mitigating or other effects of
Underlying Enhancements or the Swap Agreement on redemptions of Underlying
Securities.]
[Describe structural risks applicable to each Class, for example, allocation
of interest rate risk among classes.]
[Describe prepayment risks from events of default on Underlying Securities.]
RATE DIFFERENCES BETWEEN TRUST CERTIFICATES AND UNDERLYING SECURITIES
The Underlying Securities bear interest at rates (the "Underlying Rates")
that are based on the indices specified in Schedule 1. However, the Trust
Certificates bear interest based on the lesser of (i) the Index plus ____%[,
subject to a cap of __%] (the "Index Rate") and (ii) the weighted average of the
Underlying Rates on
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the Underlying Securities on the immediately preceding Underlying Securities
interest payment date (the "Available Funds Rate"). It will be possible for the
Available Funds Rate to be less than the Index Rate. For example, the Index Rate
might remain the same (or rise) during the periods in which the Available Funds
Rate declined. Even if both the Index Rate and the Available Funds Rate rise
during the same period, the Index Rate may rise more rapidly than the Available
Funds. Rate. Such a situation might continue to exist indefinitely, and would
adversely affect the yield on the [Class__] Trust Certificates, relative to the
yield that would have been produced had interest been paid at the Index rate.
[To protect Trust Certificateholders in such a situation, the Issuer will
enter into an interest rate cap that will entitle the Issuer, to the extent that
the Index Rate exceeds the Available Funds Rate, to receive payments of interest
on a notional principal amount from the party selling such interest rate cap.
The Issuer's obligations under the interest rate cap will be guaranteed by
[____________,] [an affiliate of the [Issuer] [Company]]. Because interest rate
caps are recent innovations, they are relatively illiquid. Although the terms
of interest rate caps may provide for termination, there can be no assurance
that the [Issuer, on instructions of the Trustee,] [Trustee] will be able to
sell or offset any interest rate cap that it purchases. Finally, the
Securityholders will be exposed to the credit risk of the counterparty to the
interest rate cap. Therefore, there can be no assurance that, should the Index
Rate exceed the Available Funds Rate, Trust Certificateholders will continue to
receive interest based on the Index Rate.]
LIMITED INVESTIGATION OF UNDERLYING ASSETS; DESCRIPTIONS BASED ON CERTAIN
MATERIALS
The Issuer's [and the Company's] investigation, if any, and the description
contained herein of any Underlying Asset and any Underlying Issuer [or obligor,
counterparty or guarantor with respect to any Underlying Enhancement, the Swap
Agreement or any miscellaneous asset included in the Underlying Assets] are
based entirely on publicly available information filed by the Underlying Issuers
[or by such obligor, counterparty or guarantor] with the SEC and may not be
adequate for purposes of an informed investment decision relating thereto. The
Issuer is under no obligation to verify any information so filed. This
Prospectus Supplement does not provide detailed information with respect to the
Underlying Securities or Underlying Issuers, any risk factors relating thereto,
or any rights or obligations, legal, financial or otherwise, arising thereunder
or related thereto. See "The Underlying Assets--Underlying Securities" in this
Prospectus Supplement.
[CONCENTRATION OF CREDIT RISK
Because the Trust Certificates relate [primarily] to Underlying Securities
issued by a limited number of Underlying Issuers, the Trust Certificates will be
subject to credit risk greater than that usually encountered in investments in
asset-backed securities, because the diversification of credit risk generally
present with such securities will not exist. In particular, the Trust
Certificates will be subject to greater risk with respect to such factors as the
geographic location of the Underlying Issuers, including any special local
economic or other risks, changes in interest rates, the availability of
financing for operating or capital needs, changes in tax rates and other
operating expenses, adverse changes in governmental rules and fiscal policies,
acts of God, condemnation and other factors.] [Further describe such credit
risk.]
[If an Underlying Issuer were to become a debtor in a bankruptcy,
reorganization, insolvency, liquidation or similar proceeding (a "Bankruptcy
Case"), a delay or substantial reduction in payments on the related Underlying
Securities would likely occur, and the Underlying Issuer might have insufficient
funds to make all required payments on such Underlying Securities. Such events
would also delay foreclosure on assets securing the Underlying Securities, delay
payments on the Trust Certificates and delay or prohibit application of amounts
in any Reserve Fund or other Underlying Enhancement to their intended uses until
the conclusion of such Bankruptcy Case.]
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[Describe concentration of credit risk attributable to industries or
geographical locations of Underlying Issuers.]
[SUBSTANTIAL LEVERAGE
The Underlying Issuers are highly leveraged. This could adversely affect
holders of the Trust Certificates because under such circumstances: (i) an
Underlying Issuer's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes will be restricted; (ii) a significant portion of any
Underlying Issuer's cash flow from operations must be dedicated to the payment
of principal and interest on its indebtedness, thereby reducing the funds
available to the Underlying Issuer for its operations; (iii) certain of an
Underlying Issuer's borrowings are and will continue to be at variable rates of
interest, which could result in higher interest expense in the event of an
increase in interest rates; and (iv) such indebtedness contains financial and
restrictive covenants, the failure to comply with which may result in an event
of default which, if not cured or waived, would likely have a material adverse
effect on the Underlying Issuer's ability to make payments to holders of the
Underlying Securities, such as the Issuer (with a concomitant material adverse
effect on the Issuer's ability to make payments on the Securities).]
[UNSECURED [AND SUBORDINATED] STATUS OF UNDERLYING SECURITIES
The Underlying Securities are general unsecured obligations of the Underlying
Issuers [and, in addition, are subordinate in right of payment to the respective
Underlying Issuer's existing and future senior indebtedness]. In the event of a
Bankruptcy Case involving an Underlying Issuer or any default in the payment of
any secured indebtedness of the Underlying Issuer, holders of such secured
indebtedness will be entitled to payment in full from all assets (and proceeds
thereof) of the Underlying Issuer, pledged to secure such indebtedness prior to
any payment of such assets (or proceeds) to holders of the Underlying
Securities. [In addition, in the event of a Bankruptcy Case involving an
Underlying Issuer or any default of any indebtedness of the Underlying Issuer to
which the Underlying Securities are subordinated, holders of such senior
indebtedness may be entitled to payment in full prior to any payments to holders
of the Underlying Securities.]]
[STRUCTURAL SUBORDINATION OF UNDERLYING SECURITIES
Direct creditors or preferred stockholders of any subsidiary of an Underlying
Issuer, although not holders of senior indebtedness of the Underlying Issuer,
will have a direct claim on the assets and cash flows of such subsidiary, prior
to the claims of holders of the Underlying Securities. Therefore, all existing
and future liabilities (if any) of the Underlying Issuer's subsidiaries will be
effectively senior to the Underlying Securities. To the extent that assets of
an Underlying Issuer, which would otherwise be available to pay holders of the
related Underlying Securities, are owned by the Underlying Issuer's subsidiary,
such structural subordination may adversely affect the holders of such
Underlying Securities.]
[ABSENCE OR INEFFECTIVENESS OF CONTRACTUAL PROTECTIONS
The Underlying Securities do not contain any significant contractual
protections (such as financial covenants, rights of redemption upon changes of
control of the Underlying Issuer or restrictions on changes of control of the
Underlying Issuer, restrictions on sales of assets or dividends, limitations on
incurrence of secured indebtedness and provisions protecting against structural
subordination [or, in the case of subordinated Underlying Securities, against
additional subordination] of the Underlying Securities) against actions by or
events affecting the Underlying Issuer. The occurrence of such actions or
events could materially adversely affect the value and likelihood of repayment
of the Underlying Securities. Such actions or events could include significant
changes in the debt-to-equity ratio or capitalization of the Underlying Issuer
caused by a change of control, a sale of assets or extraordinary dividend, the
incurrence of significant amounts of debt secured by existing assets of the
Underlying Issuer or structural or other subordination of the Underlying
Securities.
S-12
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In addition, any contractual protection provided with respect to the
Underlying Securities may not effectively provide significant protection for
such Underlying Securities because the enforcement of such protections requires
the affirmative vote of holders of a majority in outstanding amount of such
obligations. Because the Underlying Securities represent __% of such
outstanding obligations, the Trustee's or Securityholders' ability to influence
any such vote is correspondingly limited.]
[SEASONALITY AND CYCLICALITY
Traditionally, the industries of the following Underlying Issuers have been
seasonal: ______. The following Underlying Issuers have peak sales seasons in
____: ____. In addition, downturns in consumer spending associated with
recessionary economic environments may adversely affect the ability of
Underlying Issuers to make payments on the Underlying Securities, thus
increasing the likelihood of a default on such Underlying Securities.] [Modify
as appropriate to reflect particular characteristics of Underlying Securities.]
[RISK OF LOSS OF MATERIAL CUSTOMER
____'s largest customer accounted for __% of its gross sales in the last
fiscal year. A loss of such account (or a material portion thereof) would have
an adverse effect on _____'s business, which would increase the likelihood of
default on _______'s debt.] [Modify as appropriate to reflect particular
characteristics of Underlying Securities.]
[SWAP AGREEMENT
The Underlying Assets include a Swap Agreement consisting of an [interest
rate swap][interest rate cap][interest rate floor]. Fluctuations in interest or
exchange rates may have a significant effect on the yield to maturity of such
Swap Agreement or the levels of support that Swap Agreements can provide the
Trust Certificates. [In addition, the enhancement provided by such Swap
Agreement is limited to cover only certain interest rate or other risks to which
the Trust Certificates may be subject.] Payments on the Swap Agreement will be
dependent on the financial condition of the counterparty thereto [and the
guarantor thereof]. There can be no assurance that such counterparty [and the
guarantor] will be able to perform [its][their] obligations thereunder. Failure
of the counterparty [and the guarantor] to make required payments under the Swap
Agreement may result from the deterioration of such counterparty's [and
guarantor's] financial condition or a general disruption of the swap markets
that impairs the ability of such counterparty to make required payments [or
forces such counterparty to terminate prematurely the Swap Agreement in order
for such counterparty to settle its position under its other derivative
obligations]. The Swap Agreement does not provide any significant contractual
protection (such as financial covenants, change of control provisions or
restrictions on sales of assets, dividends or incurrence of secured
indebtedness) with respect to the financial condition of the counterparty [and
the guarantor], which condition may be subject to adverse changes. Failure by
the counterparty [and the guarantor] to make payments required under the Swap
Agreement may result in the delay or failure to make payments on the
Securities.]
LIMITED NATURE OF RATING
As a condition of their issuance, the Trust Certificates will be rated
[[__]by Standard & Poor's Rating Services, Inc. ("S&P")] [[__] by Moody's
Investors Service, Inc. ("Moody's)] [[__] by Duff & Phelps Credit Rating Co.
("D&P") [[__] by Fitch Investors Service, L.P. ("Fitch")] ([each, a] [the]
"Rating Agency"). [The rating[s] assigned address only the likelihood of return
of an invested amount, not the possibility of full payment of interest on such
amount.] 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
related rating agency. If the rating[s] initially assigned to the Trust
Certificates [is][are] subsequently lowered for any reason, no person or entity
is obligated to provide any additional support or credit enhancement with
respect to the Trust Certificates.
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In addition, the rating assigned to the Trust Certificates by the Rating
[Agency][Agencies] reflects such Rating [Agency's [Agencies'] assessment solely
of the likelihood that Trust Certificateholders will receive principal [and
interest] payments required to be made with respect to Trust Certificates. Such
rating[s] [does][do] not constitute an assessment of the likelihood of
redemptions of the Underlying Assets or the impact thereon on the yield on the
Trust Certificates.
[ENHANCEMENT LIMITATIONS
Because the Senior Trust Certificates will be paid certain amounts before the
Subordinated Trust Certificates, the impact of significant losses on the
Underlying Assets may primarily affect the Subordinated Trust Certificates.
Although such subordination is intended to reduce the risk of delinquent
distributions or ultimate losses to holders of Senior Trust Certificates, the
amount of subordination is limited and will decline under certain circumstances.
[Describe.]]
REMEDIES FOLLOWING DEFAULT
The market value of the Underlying Assets may fluctuate based on changes in
interest rates, the credit rating of the Underlying Issuers and other factors.
Following an event of default with respect thereto, there is no assurance that
the market value of the Underlying Assets will be equal to or greater than then
unpaid principal and accrued interest due on the Trust Certificates, together
with any other expenses or liabilities payable thereon. If the Underlying Assets
are sold by the Trustee following such an event of default, the proceeds of such
sale may be insufficient to pay in full the principal of and interest on such
Trust Certificates. However, in certain events the Trustee may be restricted
from selling the Underlying Assets. See "The Trust Agreement - Events of
Default" in the Prospectus. In addition, upon the occurrence of such an event of
default and a resulting sale of the Underlying Assets, the proceeds of such sale
will be applied to the payment of certain amounts due to the Trustee and certain
other administrative and other expenses prior to the payment of accrued interest
on, and then to the payment of the then principal balance of, such Trust
Certificates. Consequently, in the event of any such event of default and sale
of Underlying Assets, any Classes of Trust Certificates on which principal
payments have previously been made may have, in the aggregate, a greater
proportion of their principal repaid than will Classes of Trust Certificates on
which principal payments have not previously been made.
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THE TRUST CERTIFICATES
INTEREST
[Interest will be paid [monthly] [quarterly] [semi-annually] on the [Class__]
Trust Certificates to the extent funds are available therefor as described
herein on [the __day of each month] [each __, __, __, and ___] [each __ and __]
or, if any such day is not a business day, on the next succeeding business day,
commencing on _______________, 199__; provided, however, that if the
-------- -------
distributions on the Underlying Assets that relate to such interest payments
have not been received prior to 1:00 p.m. (New York City time) on such day,
payments will be made on the next succeeding business day (each a "Payment
Date"). The amount of interest payable on the [Class __] Trust Certificates on
each Payment Date will equal the interest accrued during the period from the
preceding Payment Date through the day preceding such current Payment Date,
commencing _______________, 199__. [To the extent there are deficiencies in the
interest available for payment on a Payment Date, such deficiencies will be
deferred to succeeding Payment Dates and will bear interest at the rate or rates
otherwise borne by the applicable Class of Trust Certificates until paid.]
[The Interest-Only Trust Certificates are issued in ___ Classes,
corresponding to the number of Interest Payment Dates remaining until and
including [__________ 199_, the first date on which the Underlying Issuers may
redeem the Underlying Securities (the "First Call Date")] [the maturity date of
the Underlying Securities]. Each Interest-Only Trust Certificate of a Class
represents the right to receive its pro rata share of a specified portion (equal
to [__basis points] of the then outstanding principal amount of the Underlying
Securities) of an Interest Payment due on a single Interest Payment Date on the
Underlying Securities [on or before the First Call Date]. The Interest-Only
Trust Certificates are not entitled to any periodic payments of interest. Thus,
no payment will be made on any Class of Interest-Only Trust Certificates prior
to the corresponding Interest Payment Date on the Underlying Securities.]
PRINCIPAL
[On each Payment Date, principal will be paid to holders of the [Class__]
Trust Certificates in the amount equal to the "Minimum Principal Payment
Amount". The "Minimum Principal Payment Amount" for any Payment Date will be an
amount equal to the aggregate distributions of principal made on the Underlying
Assets during the [one month] [quarterly] [semi-annual] period ending on the
[day] [prior to the Payment Date] [in the month in which such Payment Date
occurs]. On each Payment Date, the Minimum Principal Payment Amount will be
allocated among the Classes of Trust Certificates [other than the Class __ Trust
Certificates] in the manner set forth herein. [Specify principal allocations
among Classes.]]
[The Stripped Principal Trust Certificates are issued in a single Class. Each
Stripped Principal Trust Certificate represents the right to receive its pro
rata share of [(1)] any payment of principal of the Underlying Securities by the
Underlying Issuers, whether at maturity or upon redemption, including any
redemption premium, [[and] (2) [prior to _____________, ___,] the portion of the
Interest Payments on the Underlying Securities not payable to any Class of
Interest-Only Trust Certificates, equivalent to interest on the principal amount
of the Stripped Principal Trust Certificates at a rate equal to [describe rate]
[, and (3) after the First Call Date, the entire amount of any Interest Payments
made on the Underlying Securities, equivalent to interest on the principal
amount of the Stripped Principal Trust Certificates at a rate equal to ___%].]]
[Describe alternative principal payment terms.]
RECORD DATE
The record date for each Payment Date for the Trust Certificates is [the last
business day of the month preceding the month in which such Payment Date
occurs].
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<PAGE>
PAYMENTS OF INTEREST AND PRINCIPAL
[On each Payment Date while the Trust Certificates are outstanding [, after
payment of certain expenses,] Available Funds will be applied as follows: (i)
first, as interest on the [Senior] Trust Certificates; [and] (ii) second, as
principal of the [Senior] Trust Certificates[; (iii) third, as interest on the
Subordinated Trust Certificates; and (iv) fourth, as principal of the
Subordinated Trust Certificates].]
[Purchasers of Interest-Only Trust Certificates of a Class will receive their
pro rata portions of the related single interest payment on the Underlying
Securities on or after the corresponding interest payment date, subject to
receipt thereof by the Trustee, and will receive no payments prior to such time.
Purchasers of Stripped Principal Trust Certificates will receive their pro rata
portions of the principal payment (including any redemption premium) on the
Underlying Securities, subject to receipt thereof by the Trustee, on or after
the earlier of the maturity date of the Underlying Securities or the date on
which the Underlying Securities are redeemed by the Underlying Issuers or
accelerated upon an event of default with respect thereto. [Purchasers of
Stripped Principal Trust Certificates will receive interest payments on or prior
to the First Call Date, and thereafter to the extent that the Underlying
Securities have not been earlier redeemed, in the manner set forth above, in
each case subject to receipt of the corresponding interest payments by the
Trustee.] No payments representing interest on the Underlying Securities will
be made on any Class of Securities with respect to any payments due after any
redemption date with respect to the Underlying Securities. See "Redemption of
Underlying Securities; Termination of Stripped Principal Trust Certificates"
below.]
[Any funds remaining after the Trust Certificates have been paid in full [and
all expenses have been paid], will be paid to the [Issuer].]
[Describe any alternative terms and conditions of payments of interest and
principal.]
[REDEMPTION OF UNDERLYING SECURITIES; TERMINATION OF STRIPPED PRINCIPAL TRUST
CERTIFICATES
The Underlying Securities may be redeemed by the Underlying Issuers.
[Description of redemption provisions.] The redemption prices for the
Underlying Securities are as set forth below:
[set forth redemption prices]
Subject to [the second following paragraph and to] receipt by the Trustee of
actual notice of such redemption from the Underlying Issuers, if the Underlying
Securities are called for redemption prior to maturity, notice of such call
shall be given by the Trustee to the registered holders of Stripped Principal
Trust Certificates not less than 15 days prior to the redemption date by mail to
each registered holder at such registered holder'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.
If the Underlying Securities are redeemed, an equal principal amount of
Stripped Principal Trust Certificates will be redeemed. If less than all the
Underlying Securities are redeemed, the Trustee shall redeem on a pro rata basis
an equal amount of the outstanding Stripped Principal Trust Certificates. The
Holder of a Stripped Principal Trust Certificate that is redeemed will receive a
payment equal to the face amount of such Stripped Principal Trust Certificate
plus any redemption premium payable thereon on the redemption date and, if such
Stripped Principal Trust Certificate is entitled to the payment of interest [at
such time], accrued interest to such redemption date. Such Holder will have no
right to receive interest payments after the redemption of such Underlying
Securities.
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[Any Stripped Principal Trust Certificates which are not redeemed on the
First Call Date will be terminated and deemed involuntarily surrendered by the
Holders thereof in exchange for a principal amount of the Underlying Securities
underlying such Stripped Principal Trust Certificates equal to the face amount
of such Trust Certificates, whether or not such Holders have requested such
exchange. No action by such Holders will be required to effect such termination,
which will be carried out by the Trustee under the terms of the Trust Agreement.
Such termination and exchange will not affect an investor's federal income tax
treatment with respect to its investment in the Stripped Principal Trust
Certificates. See "Certain Federal Income Tax Consequences" in the Prospectus.]]
[REALIZED LOSSES
Realized losses on the Underlying Assets ("Realized Losses") will be
allocated first to the Subordinated Trust Certificates, in reduction of their
principal balances, until the principal balances of the Subordinated Trust
Certificates have been reduced to zero, and thereafter such Realized Losses will
be allocated to the Senior Trust Certificates, in reduction of their principal
balances.]
BOOK-ENTRY REGISTRATION; DEFINITIVE SECURITIES
The Trust Certificates will be issued in fully registered, certificated form
and will be initially represented by one or more Trust Certificates registered
in the name of Cede & Co., the nominee for the Depository Trust Company. The
Trust Certificates will be issued in denominations of [$1,000] and integral
multiples thereof. The Trust Certificates will constitute Book-Entry Only
Securities within the meaning of the Prospectus. See "The Securities --
Exchange, Registration and Transfer" and "--Book-Entry Registration" in the
accompanying Prospectus for important information concerning the Trust
Certificates' status as Book-Entry Only Securities. No person acquiring an
interest in the Trust Certificates will be entitled to receive a definitive
certificate ("Definitive Security") representing such person's interest, except
in the event that Definitive Securities are issued under the limited
circumstances described in the Prospectus under "The Securities--Book-Entry
Registration-- Issuance of Definitive Securities for Book-Entry Only
Securities".
[Describe any alternative provisions for holding of the Trust Certificates.]
PAYMENTS ON THE TRUST CERTIFICATES; TRANSFER OF TRUST CERTIFICATES
Payments of principal of and interest on the Trust Certificates will be made
on each Payment Date by wire transfer of funds to DTC or, in the event that
Definitive Securities are issued directly to persons other than Cede in the
limited circumstances described in the Prospectus under "The Securities--Book-
Entry Registration--Issuance of Definitive Securities for Book-Entry Only
Securities", by check mailed to the address of holders in whose name Trust
Certificates were registered in the register maintained by the Trustee at the
close of business on the related Record Date. The final distribution in respect
of any Trust Certificate (whether registered in the name of Cede or in the name
of any other person), however, will be made only on presentation and surrender
of such Trust Certificate on the final Payment Date at such office or agency as
is specified in the notice of final payment to Trust Certificateholders. The
Trustee will provide such notice to registered Trust Certificateholders prior to
the final Payment Date.
In the event that Definitive Securities are issued directly to persons other
than Cede in the limited circumstances described in the Prospectus under "The
Securities --Book-Entry Registration -- Issuance of Definitive Securities for
Book-Entry Only Securities", Definitive Securities will be transferable and
exchangeable at the offices of the Trustee, which initially will be
[__________________]. No service charge will be imposed for any registration of
transfer or exchange, other than payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
S-17
<PAGE>
[Describe any alternative provisions for payment on and transfer of the Trust
Certificates.]
REPORTS TO INVESTORS
Each Trust Certificateholder will receive [monthly][quarterly][semi-annual]
reports pertaining to the Trust Certificates and the Underlying Assets.
[Describe information to be included in reports.]
S-18
<PAGE>
THE UNDERLYING ASSETS
The Trust Certificates will represent the entire beneficial ownership
interest in the Underlying Assets and the Collection Account described below.
Additional information is contained under "The Underlying Assets" in the
Prospectus.
UNDERLYING SECURITIES
[Specify, to the extent applicable: (i) the title and characterization of the
Underlying Securities (e.g., bonds, debentures, notes or other debt securities);
----
(ii) the currency denomination of the Underlying Securities; (iii) the aggregate
principal amount of the Underlying Securities; (iv) the stated interest rate, if
any, borne by such Underlying Securities; (v) the weighted average of such
stated interest rates; (vi) the stated maturity of each Underlying Security;
(vii) the weighted average stated maturity date of the Underlying Securities;
(viii) the identity of each Underlying Issuer (including the existence and
extent of any guaranty or credit support with respect to the Underlying
Securities); (ix) the existence and nature of any security for the Underlying
Securities; (x) the senior or subordinated status of the Underlying Securities;
(xi) the approximate percentage that the Underlying Securities represent of the
class of obligations to which the Underlying Securities belong and the vote
requirements relating to such class; (xii) the types of material covenant
protection, if any, provided for the benefit of holders of the Underlying
Securities; (xiii) certain credit characteristics of such Underlying Issuer,
including such Underlying Issuer's rating, if any, and any special risk
factors;(xiv) the major industries and primary geographical locations of the
Underlying Issuers; (xv) the conditions under which, and the terms on which, any
Underlying Security may be redeemed prior to the stated maturity thereof; (xvi)
the percentage of the Underlying Securities that are subject to redemption;
(xvii) the terms, if any, on which the Trustee or its agent may exchange or sell
any Underlying Security; (xviii) the type of information that is made publicly
available by each Underlying Issuer; (xix) defaults and delinquencies by the
Underlying Issuers with respect to the Underlying Securities; and (xx) any other
material general terms with respect to the Underlying Securities.]
The Underlying Securities will have been purchased in the secondary market,
not in a primary distribution.
Schedule I hereto sets forth information with respect to each Underlying
Security, including the Underlying Issuer, the series, the class, the CUSIP
number, the current interest rate, the type of security, the maturity date, the
original principal amount, the percentage of the applicable class to be
deposited as Underlying Assets and the current class principal amount to be
deposited as Underlying Assets. Information on Schedule I is provided as of
________________, 199_.
Each Underlying Issuer is subject to the information requirements of the
Exchange Act and in accordance therewith files reports, proxy and information
statements and other information with the SEC. Such reports, proxy and
information statements and other information filed with the SEC can be inspected
and copied at the public reference facilities maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices at Citicorp Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. [The material described above and other information
will also be available for inspection at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York.]
S-19
<PAGE>
[UNDERLYING ENHANCEMENTS
Specify, to the extent applicable: (i) the types of Underlying Enhancements
(e.g., reserve fund, financial guaranty insurance, letter of credit or
- -----
guaranteed investment contract); (ii) the amount payable under the Underlying
Enhancements and the currency in which such amount is payable; (iii) the terms
and conditions of payment of amounts under the Underlying Enhancements; (iv) the
conditions under which the amount payable under such Underlying enhancement may
be reduced and under which such Underlying Enhancement may be terminated or
replaced; (v) the material provisions of any agreement relating to such
Underlying Enhancement; (vi) the identity of the obligors or trustees with
respect to the Underlying Enhancements; (vii) the effect of inclusion of such
Underlying Enhancements in the Underlying Assets; (viii) the existence and type
of information that is made publicly available by certain obligors, including
where and how purchasers of Trust Certificates may obtain such publicly
available information with respect to such obligors; and (ix) certain financial
information with respect to certain non-public obligors.]
[SWAP AGREEMENT
Specify, to the extent applicable: (i) the type of Swap Agreement included
(e.g., interest rate swap agreement, interest rate cap agreement or interest
- -----
rate floor agreement); (ii) a description of the Swap Agreement; (iii) the
agreement amount, notional or otherwise, of the Swap Agreement; (iv) the
identity of the counterparty and guarantor, if any; (v) the credit
characteristics of any such counterparty or guarantor, including any special
risk factors; (vi) the types of interest rate fluctuations to which the Swap
Agreement is expected to be most sensitive; (vii) the term of the Swap
Agreement; (viii) the means by which each counterparty to the Swap Agreement
receives consideration for its obligations with respect to the Swap Agreement;
(ix) the effect of inclusion of the Swap Agreement in the Underlying Assets; (x)
the existence and type of information that is made publicly available by certain
counterparties or guarantors, including where and how purchasers of Securities
may obtain such publicly available information with respect to such
counterparties or guarantors; (xi) certain financial information with respect to
certain non-public counterparties or guarantors; and (xii) any other material
general terms with respect to the Swap Agreement.]
[MISCELLANEOUS ASSETS
Specify, to the extent applicable: (i) the type of the miscellaneous assets
(e.g., cash); (ii) the amount and currency of each miscellaneous asset; (iii)
----
the uses of such assets and terms and conditions of usage; and (iv) the obligors
or trustees with respect to such assets.]
COLLECTION ACCOUNT
The Trustee, as paying agent or its duly appointed successor thereto (the
"Paying Agent"),] will maintain a separate Collection Account for the Trust
Certificates. The Collection Account will be used for purposes of receipt of
all principal, interest and other payments on the Underlying Assets [and the
amount of cash to be initially deposited therein by the Issuer, reinvestment
income ("Reinvestment Income"), if any, thereon and any amounts withdrawn from
any Reserve Funds]. [Describe terms of investment and reinvestment of funds in
Collection Account.] [Reinvestment Income, if any, or other gain from
investments of moneys in the Collection Account will be credited to the
Collection Account and any loss resulting from such investments will be charged
to such Collection Account.] [Describe alternative arrangements relating to
income and losses.] Funds on deposit in the Collection Account will be
available for application to the payment of principal of and interest on the
Trust Certificates [and for [describe other applications]]. [Describe terms of
distribution of excess funds in Collection Account.]
S-20
<PAGE>
CERTAIN YIELD AND REDEMPTION CONSIDERATIONS
The yield to maturity of the Trust Certificates will be affected by various
factors. Investors should carefully consider the associated risks discussed
hereunder and under "Certain Yield and Redemption Considerations" in the
Prospectus.
GENERAL
General Considerations
The yield to maturity of the Trust Certificates will be affected by the
amount and timing of principal payments on and redemptions of the Underlying
Securities, the payment priorities and other characteristics of the Underlying
Securities [and the level of the Index], the purchase price paid for the Trust
Certificates and the allocations among the [Class ___] Trust Certificates. [If
multiple Classes, describe Class-specific effects of redemptions.] [Describe
any redemption assumptions used to price the Securities or, if applicable, state
that, for the purposes of pricing the Securities, it has been assumed that the
Underlying Securities will not be redeemed.] No representation is made as to
the anticipated rate of redemptions of the Underlying Securities or as to the
anticipated yield to maturity of the Trust Certificates. Prospective investors
are urged to consider their own estimates of the anticipated rate of redemptions
of the Underlying Securities and the suitability of the Trust Certificates to
their investment objectives.
[Describe any mitigating or other effects of Underlying Enhancements or the Swap
Agreement on redemptions of Underlying Securities.]
[Redemptions
If prevailing interest rates fall significantly below the interest rates on
the Underlying Securities the Underlying Securities are likely to be subject to
higher redemption rates than if prevailing rates remain at or above the interest
rates on the Underlying Securities or the assets securing the Underlying
Securities. Other factors affecting redemptions of Underlying Securities
include the term of the Underlying Securities, the availability of credit, the
general economic situation, tax, legal and other factors.]
Timing of Payments
The timing and amount of principal payments on the Underlying Securities may
significantly affect an investor's yield. In general, other things being equal,
the earlier the redemption of an Underlying Security, the greater will be the
effect on an investor's yield to maturity. As a result, the effect on an
investor's yield of redemptions occurring at a rate higher (or lower) than the
rate anticipated by the investor during the period immediately following the
issuance of the Trust Certificates may not be offset by a subsequent like
reduction (or increase) in the rate of redemptions.
[Underlying Securities
The Underlying Securities, which were issued at different times, have
different allocations of principal and interest among various classes, and will
perform differently in various interest and prepayment rate environments. The
performance characteristics of the Trust Certificates will reflect a combination
of the performance characteristics of the various Underlying Securities. As a
result, it may be more difficult to analyze the likely yield and payment
experience of the Trust Certificates.]
S-21
<PAGE>
[The Index
The [Class ___] Trust Certificates will be sensitive to changes in the level
of the Index. If the level of the Index increases, there will be a higher rate
of interest accruing on the Class ___ Trust Certificates, but the amounts of
interest received with respect to certain Underlying Securities will be
reduced.]
[Discounts and Premiums
In the case of any Class ___ Trust Certificate purchased at a discount, a
slower than anticipated rate of principal payments, other things being equal,
could result in an actual yield that is lower than the anticipated yield. In the
case of any Class ___ Trust Certificate purchased at a premium, a faster than
anticipated rate of principal payments, other things being equal, could result
in an actual yield that is lower than the anticipated yield.]
[Reinvestment Risk
Because prevailing interest rates are subject to fluctuation, there can be no
assurance that investors in any Class of Trust Certificates will be able to
reinvest the distributions thereon at yields equaling or exceeding the yields on
the respective Class of Trust Certificates. Yields on any such reinvestments
may be lower, and may even be significantly lower, than yields on the respective
Class of Trust Certificates. Generally, when prevailing interest rates
increase, redemption rates on debt obligations tend to decrease, resulting in a
reduced return of principal to investors at a time when reinvestment at such
higher prevailing rates would be desirable. Conversely, when prevailing
interest rates decline, redemption rates on debt obligations tend to increase,
resulting in a greater return of principal to investors at a time when
reinvestment at comparable yields may not be possible. Prospective investors in
each Class of Trust Certificates should consider the related reinvestment risks
in light of other investments that may be available to such investors.]
FINAL SCHEDULED PAYMENT DATE
The Final Scheduled Payment Date of the [Class ___] Trust Certificates is
__________. The Final Scheduled Payment Date is the Payment Date [[one] [three]
[six] month[s]] after the Payment Date on or immediately following the final
scheduled distribution on the last to mature of the Underlying Assets. As of
__________, 199_, the weighted average final payment date of the Underlying
Securities will be __________. The Trust Certificates may be redeemed prior to
the final distribution on the Underlying Securities under the circumstances
discussed under "The Securities - Redemption" herein.
THE UNDERLYING SECURITIES
[Describe or depict in tabular form, to the extent appropriate: (i)
prepayment experience relating to Underlying Securities, and, if appropriate,
similar obligations of the Underlying Issuers and similar obligations issued in
the same industries (together with modelling information and assumptions); (ii)
effect of certain redemption scenarios with respect to the Underlying Securities
[(taking into account any countervailing effects of Underlying Enhancements and
the Swap Agreement)] on yields of various Classes of Trust Certificates; (iii)
interest rate, exchange rate and prepayment risks relating to particular Classes
of Trust Certificates; and (iv) in the case of a single or limited number of
Underlying Issuers, material facts relating to such Underlying Issuers that may
impact prepayment of the Underlying Securities.] [If there are significant
prepayment risks, tabular information may be included on an earlier page.]
S-22
<PAGE>
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any employee benefit or other retirement arrangement subject
to ERISA or Section 4975 of the Code (each a "Plan") should review carefully
with its legal advisors as to whether the purchase, transfer or holding of the
Trust Certificates could give rise to a transaction prohibited under ERISA or
the Code or could subject the assets of the Issuer to the fiduciary standards of
ERISA. [Describe any particular features of the Trust Certificates or
exemptions relating to the Trust Certificates that may affect the ERISA
analysis.] For additional information on certain circumstances under which the
holding of the Trust Certificates by a Plan may have ramifications under ERISA
or Section 4975 of the Code. See "Certain ERISA Considerations" in the
Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[The Trust Certificates may be issued with original issue discount by federal
income tax purposes.] [The Trust Certificates will be Partnership-Taxed
Securities for federal income tax purposes.] See "Certain Federal Income Tax
Consequences" in the Prospectus.
CERTAIN STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" in the Prospectus, there may also be state and
local income tax consequences which may differ substantially from the
corresponding federal tax consequences. Potential investors should consult
their own tax advisors with respect to the various state and local tax
consequences of acquiring, owning and disposing of Trust Certificates.
UNDERWRITING
The [Issuer] [Company] has entered into an Underwriting Agreement with CS
First Boston Corporation (the "Underwriter"). Subject to the terms and
conditions set forth in the Underwriting Agreement, the [Issuer] [Company] has
agreed to sell to the Underwriter and the Underwriter has agreed to purchase the
Trust Certificates.
[The Underwriter proposes to offer part of each Class of the Trust
Certificates directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at such price less a
concession not in excess of the amount set forth below for each such Class. The
Underwriter may allow and such dealers may reallot a selling concession not in
excess of the amount set forth below for each such Class. After the initial
public offering, such public offering price and such selling concession may be
changed.
Selling
Concession Reallowances
(Percent of (Percent of
Principal Principal
Amount) Amount)
------------ -------------
Class ___ Trust Certificates % %
S-23
<PAGE>
[The [Issuer] [Company] has been advised by the Underwriter that it proposes
to offer the Trust Certificates to the public from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter and any dealers that participate with the Underwriter in
the distribution of the Trust Certificates may be deemed to be underwriters and
any commissions received by them and any profit on the resale of the Trust
Certificates positioned by them may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933, as amended (the "Securities
Act").] [Description of underwriting fees.]
The Underwriting Agreement provides that the [Issuer] [Company] will
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriter may be
required to make in respect thereof.
The Underlying Assets pledged as security for the Trust Certificates will be
purchased from [an affiliate of] the [Underwriter] simultaneously with the
closing of the sale of the Securities.
[Specify if the Issuer or any affiliate is retaining an interest in one or
more Classes.]
LEGAL MATTERS
Certain legal matters relating to the Trust Certificates will be passed on by
Sidley & Austin, New York, New York.
RATING OF THE TRUST CERTIFICATES
As a condition of their issuance, the Trust Certificates will be rated [[___]
by Standard & Poor's Rating Services, Inc. ("S&P")] [[____] by Moody's Investors
Service, Inc. ("Moody's)] [[___] by Duff & Phelps Credit Rating Co. ("D&P")]
[[___] by Fitch Investors Service, Inc. ("Fitch")] ([each, a] [the] "Rating
Agency"). A securities 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 agency.
The rating[s] assigned to the Trust Certificates by the Rating [Agency]
[Agencies] reflects such Rating [Agency's] [Agencies'] assessment solely of the
likelihood of the receipt by Trust Certificateholders of distributions of
scheduled principal [and interest] payments on the Underlying Assets. The
rating[s] take[s] into consideration the characteristics of the Underlying
Assets and the structural legal and tax aspects associated with the Trust
Certificates. [The rating[s] address[es] only the likelihood of the return of
the investor's investment, not the likelihood of full receipt of expected
interest payments on such investment.] The rating[s] on the Trust Certificates
[does] [do] not represent any assessment of the likelihood or rate of
redemptions of the Underlying Assets. The rating[s] [does] [do] not address the
possibility that the Trust Certificateholders might suffer a lower than
anticipated yield due to prepayments [, or that holders of the Class ____ Trust
Certificates may fail to recoup their initial investments]. If the rating[s]
initially assigned to the Trust Certificates [is] [are] subsequently lowered for
any reason, no person or entity is obligated to provide any additional support
or credit enhancement with respect to the Trust Certificates.
S-24
<PAGE>
SCHEDULE 1
Underlying Securities
<TABLE>
<CAPTION>
Class
Class Current
Original Principal Series
Class % Principal Amount Series Series Weighted
Class In Amount in in Principal Weighted Average
Under- Coupon Class Original Under- Under- Under- Balance Average Maturity
lying CUSIP as of Maturity Principal lying lying lying as Coupon as of
Issuer Series Class No. 19 Type Date Amount Assets Assets Assets of 19 as of 19 19
------- ------ ----- ----- ------ ---- -------- --------- ------ --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
LINKED CERTIFICATES/SM/
[Title of Classes]
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
CS FIRST BOSTON
S-26
S-25
<PAGE>
No dealer salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement or the Prospectus in
connection with the offer made by this Prospectus Supplement and the Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Underwriter. Neither the
deliver of this Prospectus Supplement and the Prospectus nor any sale made
hereunder and thereunder shall under any circumstance create an implication that
there has been no change in the affairs of the Company or the facts set forth
in this Prospectus Supplement and the Prospectus since the date hereof. This
Prospectus Supplement and the Prospectus do not constitute an offer or
solicitation by anyone in any state in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
---------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
<TABLE>
<CAPTION>
<S> <C>
Summary........................................................... S-3
Risk Factors...................................................... S-8
The Trust Certificates............................................S-13
The Underlying Assets.............................................S-16
Certain Yield and Redemption Considerations.......................S-17
Certain Erisa Considerations......................................S-18
Certain Federal Income Tax Consequences...........................S-19
Certain State and Local Tax Considerations........................S-19
Underwriting......................................................S-19
Legal Matters.....................................................S-19
Rating of the Trust Certificates..................................S-20
</TABLE>
Prospectus
<TABLE>
<CAPTION>
<S> <C>
Additional Information............................................ 2
Incorporation of Certain Documents by Reference................... 2
Certain Information to be Set Forth in the Prospectus Supplement.. 3
Summary........................................................... 5
Risk Factors...................................................... 20
The Securities.................................................... 30
Certain Yield, Redemption and Prepayment Considerations........... 45
The Underlying Assets............................................. 48
Structural Enhancement............................................ 54
The Indenture..................................................... 56
The Trust Agreement............................................... 64
The Issuer........................................................ 70
Use of Proceeds................................................... 71
Limitations on Issuance of Bearer Securities...................... 72
Certain Federal Income Tax Consequences........................... 72
Global Clearance, Settlement and Tax Documentation Procedures..... 100
Certain ERISA Considerations...................................... 103
Legal Investment.................................................. 108
Plan of Distribution.............................................. 108
Legal Matters..................................................... 110
Glossary.......................................................... 111
</TABLE>
$
CS FIRST BOSTON
STRUCTURED PRODUCTS
TRUST 199_-_
LINKED CERTIFICATES/SM/
[Title of Classes]
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
CS FIRST BOSTON
S-26
