<PAGE>
As filed with the Securities and Exchange Commission on August 19, 1997
Registration No. 33-83818
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
CREDIT SUISSE 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>
11 Madison Avenue
Delaware New York, New York 10010 13-3752880
(State or other jurisdiction of (212) 325-2000 (I.R.S. Employer
incorporation or organization) (Address, including zip code, and telephone number, including area code, Identification No.)
of registrant's principal executive offices)
</TABLE>
Gina Hubbell
President and Chief Executive Officer
Credit Suisse First Boston Structured Products Corporation
11 Madison Avenue
New York, New York 10010
(212) 325-2000
(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
__________________
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. [X]
________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Per Aggregate Registration
Securities to be Registered (1) Registered (2) Unit (2) Offering Price (2) Fee (3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Collateralized Bond Obligations, and
Trust Certificates [ ] 100% [ ] $345
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The securities are also being registered for the purpose of market making.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) $345 previously paid.
================================================================================
<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 _________, 199_
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PROSPECTUS
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CREDIT SUISSE 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 Credit Suisse 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) (a) bonds, debentures,
notes and other debt securities ("Underlying Debt Securities") issued by
corporations, partnerships, trusts, limited liability companies and other
types of domestic entities (each an "Underlying Debt Issuer") that, in
each case, (1) 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 (2) 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, (b)
Government Securities (as such term is defined herein) described under
"The Underlying Assets--Government Securities" and the related Prospectus
Supplement and (c) Private Label Custody Receipt Securities (as such term
is defined herein) described under "The Underlying Assets-- Private Label
Custody Receipt Securities" and the related Prospectus Supplement (such
Government Securities, if any, Private Label Custody Receipt Securities,
if any, and the Underlying Debt Securities are referred to herein,
collectively, as "Underlying Securities"), (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"), (iv)
cash or guaranteed investment contracts ("Guaranteed Investment
Contracts") and/or (v) proceeds of any of the foregoing, 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 UNDER "RISK FACTORS" BEGINNING ON PAGE 22 HEREIN.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED
UNDER "ERISA CONSIDERATIONS" HEREIN.
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.
CREDIT SUISSE FIRST BOSTON
- --------------------------------------------------------------------------------
The date of this Prospectus is _________, 199_.
<PAGE>
AVAILABLE INFORMATION
This Prospectus, together with the Prospectus Supplement for each
Series of Securities contains a summary of the material terms of the
documents referred to herein and therein, but neither contains nor will
contain all of the information set forth in the Registration Statement of
which this Prospectus and the related Prospectus Supplement is a part. For
further information, reference is made to such registration statement (the
"Registration Statement") and the exhibits thereto which the Company has
filed with the Securities and Exchange Commission (the "SEC") 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. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of
such site is (http://www.sec.gov). 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").
Upon receipt of a request by an investor who has received an
electronic Prospectus Supplement and Prospectus from the Underwriter or a
request by such investor's representative within the period during which
there is an obligation to deliver a Prospectus Supplement and Prospectus,
the Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of the Prospectus Supplement and
Prospectus.
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
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<PAGE>
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 Credit
Suisse First Boston Structured Products Corporation, 11 Madison Avenue, New
York, New York 10010. Telephone requests for such copies should be
directed to the Secretary of Credit Suisse First Boston Structured Products
Corporation at (212) 325-2000.
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 or modify 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
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<PAGE>
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 agencies; and (xix) any other
material terms of such Series or material information relating to the
offering thereof.
UNDERLYING ASSETS
The Prospectus Supplement (or, if such information is not
available in advance as of the date of such Prospectus Supplement, a
Current Report on Form 8-K to be filed with the SEC) relating to a Series
will set forth the following aspects of the Underlying Assets, to the
extent applicable: (i) with respect to the Underlying Debt Securities
included therein, (A) the title of each Underlying Debt Security, (B) the
aggregate principal amount and type of such Underlying Debt Securities, (C)
the stated interest rate, if any, borne by each of such Underlying Debt
Securities and the timing of, and manner of determining, any adjustments to
such stated interest rate, (D) the weighted average of such interest rates,
(E) the stated maturity date of each of such Underlying Debt Securities,
(F) the weighted average stated maturity date of such Underlying Debt
Securities, (G) the identity of each Underlying Debt Issuer (including any
guarantor and any provider of credit support), (H) certain credit
characteristics of such Underlying Debt Issuer, including such Underlying
Debt 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 Debt Securities, (J) the conditions under which, and the
terms on which, such Underlying Debt 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 Debt Security and
(L) the type of information that is made publicly available by each
Underlying Debt Issuer, including how purchasers of Securities may obtain
such publicly available information with respect to each Underlying Debt
Issuer; (ii) for each Series the Underlying Assets with respect to which
will include certain Government Securities (as such term is defined
herein), certain information with respect to such Government Securities
described herein under "The Underlying Assets-Government Securities", (iii)
for each Series the Underlying Assets with respect to which contain Private
Label Custody Receipt Securities (as such term is defined herein), certain
information with respect to such Private Label Custody Receipt Securities
described herein under "The Underlying Assets--Private Label Custody
Receipt Securities", (iv) 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; (v)
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<PAGE>
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; (vi) certain characteristics of any other Underlying Assets and
(vii) 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 (the material terms of
which are described in this Prospectus and the Prospectus Supplement),
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
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<PAGE>
ownership interest in the Trust for such
Series. Each Series of Trust
Certificates will consist of one or more
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. Except to the
extent otherwise provided in the
related Prospectus Supplement, no
amount of Available Funds (including
Reinvestment Income, if any,
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<PAGE>
on distributions received by the Issuer
in respect of the Underlying Securities)
will be payable to the Issuer.
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
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<PAGE>
Date, interest payments on such
Securities will be made on the Compound
Value thereof.
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
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<PAGE>
Minimum Variable Interest Rate, if any,
for such Variable Interest Securities;
(v) the Variable Interest Period and
(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 Payment The Final Scheduled Payment Date for
Date each Class of 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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<PAGE>
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. Except to the
extent otherwise provided 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
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Redemption Price(s) specified in the
related Prospectus Supplement.
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 If specified in the related Prospectus
With Respect to Bonds 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 If specified in the related
With Respect to Trust Prospectus Supplement, any Class of
Certificates 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.
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Optional and Special If so specified in the Prospectus
Termination of Trust 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 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.
RISK FACTORS For discussion of risk factors that
should be considered with respect to
an investment in the Securities,
including those relating to the
limited liquidity of an investment in
the Securities, the limited
obligations evidenced by the
Securities, the limited amount and
nature of credit support, if any, and
the credit and other risks with
respect to the Underlying Assets, see
"Risk Factors" herein and in the
related Prospectus Supplement.
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 Debt Securities Underlying Debt Securities for a
Series will consist of any
combination of bonds, debentures,
notes and other debt securities
issued by Underlying Debt Issuers.
Each Underlying Debt 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
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reporting person under Section 12 or
Section 15(d) of the Exchange Act. Each
of the Underlying Debt 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
Debt 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 Debt 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 Debt Security; (ii)
the aggregate principal amount of the
Underlying Debt Securities; (iii) the
stated interest rate, if any, of such
Underlying Debt Securities and the
timing of, and manner of determining,
any adjustments to such stated interest
rate; (iv) the weighted average of such
interest rates; (v) the stated maturity
date of each of the Underlying Debt
Securities; (vi) the weighted average
stated maturity date of such Underlying
Debt Securities; (vii) the identity of
each Underlying Debt Issuer (including
any guarantor or provider of credit
support); (viii) certain credit
characteristics of such Underlying Debt
Issuer, including such Underlying Debt
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 Debt
Securities; (x) the conditions under
which, and the terms on which, any
Underlying Debt 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 Debt Securities; and
(xii) the type of information that is
made publicly available by each
Underlying Debt Issuer, including how
purchasers of Securities may obtain such
publicly available information with
respect to each Underlying Debt Issuer.
Government Securities If so specified in the applicable
Prospectus Supplement, the Underlying
Assets for a Series may include any
combination of (i) receipts or other
instruments created under the
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Department of the Treasury's Separate
Trading of Registered Interest and
Principal of Securities, or STRIPS,
program ("Treasury Strips"), which
interest and/or principal strips
evidence ownership of specific interest
and/or principal payments to be made on
certain United States Treasury Bonds
("Treasury Bonds"), (ii) Treasury Bonds
and (iii) certain other debt securities
("GSE Bonds") of United States
government sponsored enterprises
("GSEs") (GSE Bonds, together with
Treasury Strips and Treasury Bonds,
collectively, "Government Securities")
(the issuer of any Government Securities
is referred to herein as an "Underlying
Government Issuer"). The specific terms
of the Government Securities, if any,
included in a Trust will be set forth in
the applicable Prospectus Supplement.
Private Label Custody If so specified in the applicable
Receipt Securities Prospectus Supplement, the Trust Fund
for a Series may include any combination
of (i) receipts or other instruments
(other than Treasury Strips) evidencing
ownership of specific interest and/or
principal payments to be made on certain
Treasury Bonds held by a custodian
("Private Label Custody Strips") and
(ii) receipts or other instruments
evidencing ownership of specific
interest and/or principal payments to be
made on certain Resolution Funding
Corporation ("REFCO") bonds ("REFCO
Strips"; and together with Private Label
Custody Strips, "Private Label Custody
Receipt Securities") (the issuer of any
Private Label Custody Receipt Securities
is referred to herein as an "Underlying
Private Label Custody Receipt Issuer";
and the Underlying Debt Issuers,
Underlying Government Issuers, if any,
and the Underlying Private Label Custody
Receipt Issuers, if any, are referred
to, collectively, as the "Underlying
Issuers"). The specific terms of the
Private Label Custody Receipt
Securities, if any, included in a Trust
Fund will be set forth in the applicable
Prospectus Supplement.
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
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Underlying Debt 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.
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 If so specified in the related
Insurance 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
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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 Certain terms of any other Underlying
Enhancements Enhancements, which may include
guaranties, credit support or
liquidity facilities, will be set
forth in the related Prospectus
Supplement.
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 The Issuer may obtain and deliver to
Contracts 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
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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 Structural Enhancements for a Series
ENHANCEMENTS 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.
Senior/Subordinated A Series of Securities may include one
Structures 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.
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Groupings of Underlying If the Underlying Assets are divided
Assets 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 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 The Prospectus Supplement will
Enhancements 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,
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insufficient cash flows from the
Underlying Assets or for other reasons.
THE ISSUER; LIMITED It is not expected that the Issuer of
RECOURSE 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 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.
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<PAGE>
The Company's principal executive
office is located at 11 Madison
Avenue, New York, New York 10010, and
its telephone number is (212)
325-2000.
CERTAIN FEDERAL INCOME The federal income tax consequences
TAX CONSIDERATIONS; of an investment in a Security of any
CERTAIN OTHER TAX Series will depend on the
CONSIDERATIONS characterization of that Security
(such as a debt 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
CONSIDERATIONS benefit plans subject 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 and any other
assets constituting the related Trust
Fund, (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.
RATINGS It will be a condition to the
issuance of any Securities offered by
this Prospectus and the related
Prospectus
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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.
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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 Debt Securities and
the related Underlying Issuers, the Government Securities, if any, and the
Private Label Custody Receipt Securities, if any, 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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<PAGE>
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.
LIMITED AVAILABLE INFORMATION REGARDING THE UNDERLYING ISSUERS AND UNDERLYING
SECURITIES
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 (i)
information delivered to the Issuer as holder of the Underlying Securities
and (ii) publicly available documents. Neither the Issuer nor any of the
underwriters of the Securities has participated in the preparation of such
information or 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 or disclosed in information delivered to the Issuer
as holder of the Underlying Securities.
In addition, there can be no assurance that an Underlying Debt
Issuer will not elect to suspend its Exchange Act reporting after the date
hereof if such Underlying Debt 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 Debt 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 Debt Issuer that the Issuer
can include in its Exchange Act reports will be similarly limited.
Notwithstanding the foregoing to the extent specified in the applicable
Prospectus Supplement, the Issuer will make available, or cause to be made
available, certain periodic trustee or similar reports relating to the
Underlying Securities and the Underlying Issuers to the extent such reports
are delivered to holders of the Underlying Securities.
SUBSTANTIAL LEVERAGE
The Underlying Debt Issuers may be highly leveraged. This could
adversely affect Holders of the Securities because under such circumstances
(i) an Underlying Debt 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 Debt 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 Debt Issuer for such
operations; (iii) certain of an Underlying Debt 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 Debt Issuer's ability to make
payments to holders of the
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<PAGE>
Underlying Debt Securities such as the Issuer, thereby having a material
adverse effect on Holders of Securities.
UNSECURED AND SUBORDINATED STATUS OF UNDERLYING DEBT SECURITIES
The Underlying Debt 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 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 Debt 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 Debt 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 Debt Securities,
with a material adverse effect on Holders of Securities.
STRUCTURAL SUBORDINATION OF UNDERLYING DEBT 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 Debt
Securities. Therefore, all existing and future liabilities (if any) of the
Underlying Issuer's subsidiaries will be effectively senior to the Underlying
Debt Securities. To the extent that assets of such an Underlying Issuer,
which would otherwise be available to pay holders of the related Underlying
Debt Securities, are owned by the Underlying Issuer's subsidiary, such
structural subordination may adversely affect the holders of such Underlying
Debt 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
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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.
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
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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 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 Credit
Suisse 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.
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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".
INTEREST AND EXCHANGE RATE RISKS
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.
BASIS RISK; 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.
LIMITED 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, if any, 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
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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
("accreted value"). There is no assurance as to how such accreted value
would be determined if such event occurred.
INTERMEDIATE OWNERSHIP ARRANGEMENTS; RELATED BANKRUPTCY AND INSOLVENCY RISKS
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 AND RELATED RISKS
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
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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 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
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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.
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.
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OVERCOLLATERALIZATION AND SUBORDINATION LIMITATIONS
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, 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.
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Except to the extent 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 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
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Supplement, one or more Classes of a Series may be available in book-entry
form only. See "Registered Securities and Bearer Securities".
Except to the extent 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 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,
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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".
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
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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 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 to the extent 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.
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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.
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".
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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.
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.
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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, 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
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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
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.
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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.
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.
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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.
Except to the extent otherwise provided 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. Except to the extent otherwise provided in the
related Prospectus Supplement, the Discounted Amount at any time of an
Underlying Security included in the Underlying Assets securing a 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
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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. Except to the extent otherwise
provided 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 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
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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
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
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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 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.
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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.
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.
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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.
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.
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WITHDRAWAL OF UNDERLYING ASSETS BY THE COMPANY AND THE TRUSTEE
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 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.
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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.
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.
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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.
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
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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.
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 Debt
Securities and may also include Government Securities, Private Label Custody
Receipt Securities, 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
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Subordinated Securities of a Series), and the Underlying Assets with respect
to each Series will serve as Underlying Assets only for that Series.
UNDERLYING DEBT SECURITIES
Underlying Debt Securities for a Series will consist of any
combination of bonds, debentures, notes and other debt securities issued by
Underlying Debt Issuers. Each Underlying Debt 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 Debt 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 Debt 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 Debt Issuer or any of its affiliates, and not as part of the
initial distribution thereof).
Each Underlying Debt 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 Debt 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 Debt Securities.
Each Underlying Debt Security (i) will be issued by an Underlying
Debt 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 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 Debt
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 Debt Security; (ii) the aggregate principal
amount of the Underlying Debt Securities; (iii) the stated interest rate, if
any, borne by such Underlying Debt Security and the timing of, and manner of
determining, any adjustments to such stated interest rate; (iv) the weighted
average of such interest rates; (v) the stated maturity of each Underlying
Debt Security; (vi) the weighted average stated maturity of such Underlying
Debt Securities; (vii) the identity of each Underlying Debt Issuer, including
any guarantor or provider of credit support; (viii) certain credit
characteristics of such Underlying Debt Issuer, including such Underlying
Debt Issuer's rating,
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if any, and any special risk factors; (ix) the existence and extent of any
guaranty or credit support with respect to the Underlying Debt Securities;
(x) the conditions under which, and the terms on which, any Underlying Debt
Security may be redeemed prior to the stated maturity thereof; (xi) the
percentage of the Underlying Debt 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 Debt Security; (xiii) the existence and type
of information that is made publicly available by each Underlying Debt
Issuer, including where and how purchasers of Securities may obtain such
publicly available information with respect to each Underlying Debt Issuer;
and (xiv) certain financial information with respect to Underlying Debt
Issuers, the Underlying Securities of which comprise a material part of the
related Underlying Assets.
GOVERNMENT SECURITIES
General
If so specified in the applicable Prospectus Supplement, the
Underlying Assets for a Series may include any combination of (i) receipts or
other instruments created under the Department of the Treasury's Separate
Trading of Registered Interest and Principal of Securities, or STRIPS,
program ("Treasury Strips"), which interest and/or principal strips evidence
ownership of specific interest and/or principal payments to be made on
certain United States Treasury Bonds ("Treasury Bonds"), (ii) Treasury Bonds
and (iii) certain other debt securities ("GSE Bonds") of United States
government sponsored enterprises ("GSEs") (GSE Bonds, together with Treasury
Strips and Treasury Bonds, collectively, "Government Securities"). The
Government Securities, if any, included in a Trust Fund are intended to
assure investors that funds are available to make certain specified payments
of principal and/or interest due on the related Certificates. As such, the
Government Securities, if any, included in a Trust Fund are intended both to
(i) support the ratings assigned to such Certificates, and (ii) perform a
function similar to that described herein under "Credit Support". A
description of the respective general features of Treasury Bonds, Treasury
Strips and GSE Bonds is set forth below.
The Prospectus Supplement for each Series of Certificates the
Underlying Assets with respect to which contain Government Securities will
contain information as to: (i) the title and series of each such Government
Security, the aggregate principal amount, denomination and form thereof; (ii)
the limit, if any, upon the aggregate principal amount of such Government
Security; (iii) the dates on which, or the range of dates within which, the
principal of (and premium, if any, on) such Government Security will be
payable; (iv) the rate or rates, or the method of determination thereof, at
which such Government Security will bear interest, if any, the date or dates
from which such interest will accrue; and the dates on which such interest
will be payable; whether such Government Security was issued at a price lower
than the principal amount thereof; (vi) material events of default or
restrictive covenants provided for with respect to such Government Security;
(vii) the rating thereof, if any; and (viii) the issuer of each Government
Security; (ix) the material risks, if any, posed by any such Government
Securities and the issuers thereof (which risks, if appropriate, will be
described
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in the "Risk Factors" section of the related Prospectus Supplement); and (x)
any other material terms of such Government Security. With respect to a Trust
which includes a pool of Government Securities, the related Prospectus
Supplement will, to the extent applicable, describe the composition of the
Government Securities' pool, certain material events of default or
restrictive covenants common to the Government Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (iii),
(iv) and (v) of the preceding sentence and any other material terms regarding
such pool.
The Government Securities included in a Trust Fund will be senior,
unsecured, nonredeemable obligations of the issuer thereof, will be
denominated in United States dollars and, if rated, will be rated at least
investment grade by at least one nationally recognized rating agency. In
addition, the inclusion of Government Securities in a Trust with respect to a
Series of Securities is conditioned upon their characteristics being in form
and substance satisfactory to the Rating Agency rating the related Series of
Securities.
Treasury Bonds
Treasury Bonds are issued by and are the obligations of The United
States of America. As such, the payment of principal and interest on each
Treasury Bond will be guaranteed by the full faith and credit of the United
States of America. Interest is typically payable on the Bonds semiannually.
Treasury Bonds are issued in registered form in denominations of $1,000,
$5,000, $10,000, $100,000 and $1,000,000 and in book-entry form in integral
multiples thereof.
Treasury Strips
In general, Treasury Strips are created by separating, or
"stripping", the principal and interest components of Treasury Bonds that
have an original maturity of 10 or more years from the date of issue. A
particular Treasury Strip evidences ownership of the principal payment or one
of the periodic interest payments (generally semiannual) due on the Treasury
Bond to which such Treasury Strip relates.
In 1985 the Department of the Treasury announced that all new
issues of Treasury Bonds with maturities of 10 years or more would be
transferable in their component pieces on the Federal Reserve wire system.
In so doing, the Treasury created a generic, book-entry Treasury Strip named
STRIPS (Separate Trading of Registered Interest and Principal of Securities)
which, unlike private label Treasury Strips, can be issued without the need
for a custodial arrangement. The STRIPS program has eclipsed the private
sector programs (which are described below under "Private Label Custody
Receipt Securities"), and investment banks no longer sponsor new issues of
custodial receipts.
Treasury Strips may be either "serial" or "callable". A serial
Treasury Strip evidences ownership of one of the periodic interest payments
to be made on a Treasury Bond. No
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payments are made on such Treasury Strip, nor is it redeemable, prior to its
maturity, at which time the holder becomes entitled to receive a single
payment of the face amount thereof. Callable Treasury Strips relate to
payments scheduled to be made after the related Treasury Bonds have become
subject to redemption. Such Treasury Strips evidence ownership of both
principal of the related Treasury Bonds and each of the related interest
payments commencing, typically, on the first interest payment date following
the first optional redemption date. If the underlying Treasury Bonds are
actually redeemed, holders of callable Treasury Strips generally receive a
payment equal to the principal portion of the total face amount of such
Treasury Strips plus the interest payment represented by the Treasury Strips
maturing on the redemption date. No callable Treasury Strip will be included
in a Trust Fund. The face amount of any Treasury Strip is the aggregate of
all payments scheduled to be received thereon. Treasury Strips are available
in registered form and generally may be transferred and exchanged by the
holders thereof in accordance with procedures applicable to the particular
issue of such Treasury Strips.
GSE Bonds
As specified in the applicable Prospectus Supplement, the
obligations of one or more of the following GSEs may be included as
Underlying Assets of a Trust. The Federal National Mortgage Association
("Fannie Mae"), The Federal Home Loan Mortgage Association ("Freddie Mac"),
The Student Loan Marketing Association ("Sallie Mae"), REFCO, Tennessee
Valley Authority ("TVA"), The Federal Home Loan Banks ("FHLB") (to the extent
such obligations represent the joint and several obligations of the twelve
Federal Home Loan Banks), and The Federal Farm Credit Banks ("FFCB"). GSE
debt securities are exempt from registration under the Securities Act
pursuant to Section 3(a)(2) of the Securities Act (or are deemed by statute
to be so exempt) and are not required to be registered under the Exchange
Act. The securities of any GSE will be included in the Underlying Assets
with respect to a Series of Securities only to the extent that (i) its
obligations are supported by the full faith and credit of the United States
government or (ii) such organization makes publicly available its annual
report which shall include financial statements or similar financial
information with respect to such organization. Unless otherwise specified in
the related Prospectus Supplement, the GSE Bonds will not be guaranteed by
the United States and do not constitute a debt or obligation of the United
States or of any agency or instrumentality thereof other than the related
GSE.
Unless otherwise specified in the related Prospectus Supplement,
none of the GSE Bonds will have been issued pursuant to an indenture, and no
trustee is provided for with respect to any GSE Bonds. There will generally
be a fiscal agent ("Fiscal Agent") for an issuer of GSE Bonds whose actions
will be governed by a fiscal agency agreement. A Fiscal Agent is not a
trustee for the holders of the GSE Bonds and does not have the same
responsibilities or duties to act for the holders as would a trustee.
GSE Bonds may be subject to certain contractual and statutory
restrictions which may provide some protection to securityholders against the
occurrence or effects of certain specified events. Unless otherwise
specified in the related Prospectus Supplement, each GSE is
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limited to such activities as will promote its statutory purposes as set
forth in the publicly available information with respect to such issuer. A
GSEs promotion of its statutory purposes, as well as its statutory,
structural and regulatory relationships with the federal government, may
cause or require such GSE to conduct its business in a manner that differs
from what an enterprise which is not a GSE might employ.
The Federal National Mortgage Association
Fannie Mae is a federally chartered and stockholder owned
corporation organized and exiting under the Federal National Mortgage
Association Charter Act. It is the largest investor in home mortgage loans
in the United States. Fannie Mae originally was established in 1938 as a
corporation wholly owned by the United States government to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder owned and privately managed corporation by legislation enacted in
1968 and 1970. Fannie Mae provided funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing their funds for
additional lending. Fannie Mae acquires funds to purchase loans from many
capital market investors that ordinarily may not invest in mortgage loans,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-
surplus to capital-short areas. Fannie Mae also issues mortgage-backed
securities ("MBS"). Fannie Mae receives guaranty fees for its guaranty of
timely payment of principal of and interest on MBS. Fannie Mae issues MBS
primarily in exchange for pools of mortgage loans from lenders. The issuance
of MBS enables Fannie Mae to further its statutory purpose of increasing the
liquidity of residential mortgage loans.
Fannie Mae prepares an Information Statement annually which
describes Fannie Mae, its business and operations and contains Fannie Mae's
audited financial statements. From time to time Fannie Mae prepares
supplements to its Information Statement which include certain unaudited
financial data and other information concerning the business and operations
of Fannie Mae. Unless otherwise specified in the applicable Prospectus
Supplement, these documents can be obtained without charge from the Office of
Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016; telephone (202) 752-7115. Fannie Mae is not subject to the periodic
reporting requirements of the Exchange Act.
The Federal Home Loan Mortgage Corporation
Freddie Mac is a publicly held government-sponsored enterprise
created on July 24, 1970 pursuant to the Federal Home Loan Mortgage
Corporation Act, Title III of the Emergency Home Finance Act of 1970, as
amended. Freddie Mac's statutory mission is to provide stability in the
secondary market for home mortgages, to respond appropriately to the private
capital market and to provide ongoing assistance to the secondary market for
home mortgages (including mortgages secured by housing for low- and moderate-
income families involving a reasonable economic return to Freddie Mac) by
increasing the liquidity of mortgage investments and improving the
distribution of investment capital available for home mortgage financing.
The principal activity of Freddie Mac consists of the purchase of
conventional
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residential mortgages and participation interests in such mortgages from
mortgage lending institutions and the sale of guaranteed mortgage securities
backed by the mortgages so purchased. Freddie Mac generally matches and
finances its purchases of mortgages with sales of guaranteed securities.
Mortgages retained by Freddie Mac are financed with short-term and long-term
debt, cash temporarily held pending disbursement to security holders, and
equity capital.
Freddie Mac prepares an Information Statement annually which
describes Freddie Mac, its business and operations and contains Freddie Mac's
audited financial statements. From time to time Freddie Mac prepares
supplements to its Information Statement which include certain unaudited
financial data and other information concerning the business and operations
of Freddie Mac. Unless otherwise specified in the applicable Prospectus
Supplement, these documents can be obtained from Freddie Mac by writing or
calling Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive,
McLean, Virginia, 22102, outside Washington, D.C. metropolitan area,
telephone (800) 336-3672; within Washington, D.C. metropolitan area,
telephone (703) 759-8160. Freddie Mac is not subject to the periodic
reporting requirements of the Exchange Act.
The Student Loan Marketing Association
Sallie Mae is a stockholder-owned corporation established by the
1972 amendments to the Higher Education Act of 1965, as amended, to provide
liquidity, primarily thorough secondary market and warehousing activities,
for lenders participating in federally sponsored student loan programs,
primarily the Federal Family Education Loan ("FFEL") program and the Health
Education Assistance Loan Program. Under the Higher Education Act, Sallie
Mae is authorized to purchase, warehouse, sell and offer participations or
pooled interests in, or otherwise deal in, student loans, including, but not
limited to, loans insured under the FFEL program, and to make commitments of
any of the foregoing. Sallie Mae is also authorized to buy, sell, hold,
underwrite and otherwise deal in obligations of eligible lenders, if such
obligations are issued by such eligible lenders for the purpose of making or
purchasing federally guaranteed student loans under the Higher Education Act.
As a federally chartered corporation, Sallie Mae's structure and operational
authorities are subject to revision by amendments to the Higher Education Act
or other federal enactments.
Sallie Mae prepares an Information Statement annually which
describes Sallie Mae, its business and operations and contains Sallie Mae's
audited financial statements. From time to time Sallie Mae prepares
supplements to its Information Statement which include certain unaudited
financial data and other information concerning the business and operations
of Sallie Mae. Unless otherwise specified in the applicable Prospectus
Supplement, these documents can be obtained without charge upon written
request to the Corporate and Investor Relations Division of Sallie Mae at
1050 Thomas Jefferson Street, N.W., Washington, D.C. 20007; telephone (202)
298-3010. Sallie Mae is not subject to the periodic reporting requirements
of the Exchange Act.
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The Resolution Funding Corporation
REFCO is a mixed-ownership government corporation established by
Title V of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"). The sole purpose of REFCO is to provide financing for
the Resolution Trust Corporation (the "RTC"). REFCO is to be dissolved, as
soon as practicable, after the maturity and full payment of all obligations
issued by it. REFCO is subject to the general oversight and direction of the
Oversight Board, which is comprised of the Secretary of the Treasury, the
Chairman of the Board of Governors of the Federal Reserve System, the
Secretary of Housing and Urban Development and two independent members to be
appointed by the President with the advice and consent of the Senate. The
day-to-day operations of REFCO are under the management of a three-member
Directorate comprised of the Director of the Office of Finance of the FHLB
and two members selected by the Oversight Board from among the presidents of
the twelve FHLB.
The RTC was established by FIRREA to manage and resolve cases
involving failed savings and loan institutions pursuant to policies
established by the Oversight Board. The RTC was granted authority to issue
nonvoting capital certificates to REFCO in exchange for the funds transferred
from REFCO to the RTC. Pursuant to FIRREA, the net proceeds of these
obligations are used to purchase nonvoting capital certificates issued by the
RTC or to retire previously issued REFCO obligations.
Information concerning REFCO may be obtained from the
Secretary/Treasurer, Resolution Funding Corporation, Suite 1000, 11921
Freedom Drive, Reston, Virginia 22090; telephone (703) 487-9517. REFCO is
not subject to the periodic reporting requirements of the Exchange Act.
The Federal Home Loan Banks
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations (collectively, the "FHLB"), each wholly owned by its
member institutions. The mission of the FHLB is to enhance the availability
of residential mortgage credit by providing a readily available, low-cost
source of funds to their member institutions. A primary source of funds for
the FHLB is the proceeds from the sale to the public of debt instruments
issued as consolidated obligations, which are the joint and several
obligations of all the FHLB. The FHLB are supervised and regulated by the
Federal Housing Finance Board, which is an independent federal agency in the
executive branch of the United States government, but obligations of the FHLB
are not obligations of the United States government.
The Federal Home Loan Bank System produces annual and quarterly
financial reports in connection with the original offering and issuance by
the Federal Housing Finance Board of consolidated bonds and consolidated
notes of the FHLB. Unless otherwise specified in the applicable Prospectus
Supplement, questions regarding such financial reports should be directed to
the Deputy Director, Financial Reporting and Operations Division, Federal
Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 20006; telephone
(202) 408-2901.
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Unless otherwise specified in the applicable Prospectus Supplement, copies of
such reports may be obtained by written request to Capital Markets Division,
Office of Finance, Federal Home Loan Banks, Suite 1000, 11921 Freedom Drive,
Reston, Virginia 22090, telephone (703) 487-9500. The FHLB are not subject
to the periodic reporting requirements of the Exchange Act.
Tennessee Valley Authority
TVA is a wholly owned corporate agency and instrumentality of the
United States of America established pursuant to the Tennessee Valley
Authority Act of 1933, as amended (the "TVA Act"). TVA's objective is to
develop the resources of the Tennessee Valley region in order to strengthen
the regional and national economy and the national defense. The programs of
TVA consist of power and nonpower programs. For the fiscal year ending
September 30, 1995, TVA received $139 million in congressional appropriations
from the federal government for the nonpower programs. The power program is
required to be self-supporting from revenues it produces. The TVA Act
authorizes TVA to issue evidences of indebtedness that may be serviced only
from proceeds of its power program. TVA bonds are not obligations of or
guaranteed by the United States government.
TVA prepares an Information Statement annually which describes TVA,
its business and operations and contains TVA's audited financial statements.
From time to time TVA prepares supplements to its Information Statement which
include certain unaudited financial data and other information concerning the
business and operations of TVA. Unless otherwise specified in the applicable
Prospectus Supplement, these documents can be obtained by writing or calling
Tennessee Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee
37902-1499, Attention: Vice President and Treasurer, telephone (423) 632-
3366. TVA is not subject to the periodic reporting requirements of the
Exchange Act.
Federal Farm Credit Banks
The Farm Credit System is a nationwide system of lending
institutions and affiliated service and other entities (the "System").
Through its Banks ("FCBs") and related associations, the System provides
credit and related services to farmers, ranchers, producers and harvesters of
aquatic products, rural homeowners, certain farm-related businesses,
agricultural and aquatic cooperatives and rural utilities. System
institutions are federally chartered under the Farm Credit Act of 1971, as
amended (the "Farm Credit Act"), and are subject to regulation by a Federal
agency, the Farm Credit Administration (the "FCA"). The FCBs and
associations are not commonly owned or controlled. They are cooperatively
owned, directly or indirectly, by their respective borrowers. Unlike
commercial banks and other financial institutions that lend to the
agricultural sector in addition to other sectors of the economy, under the
Farm Credit Act the System institutions are restricted solely to making loans
to qualified borrowers in the agricultural sector, to certain related
businesses and to rural homeowners. Moreover, the System is required to make
credit and other services available in all areas of the nation. In order to
fulfill its broad statutory mandate, the System maintains lending units in
all 50 states and the Commonwealth of Puerto Rico.
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The System obtains funds for its lending operations primarily from
the sale of debt securities issued under Section 4.2(d) of the Farm Credit
Act ("Systemwide Debt Securities"). The FCBs are jointly and severally liable
on all Systemwide Debt Securities. Systemwide Debt Securities are issued by
the FCBs through the Federal Farm Credit Banks Funding Corporation, as agent
for the FCBs (the "Funding Corporation").
Information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure
information made available by the Funding Corporation. This information
consists of the most recent Farm Credit System Annual Information Statement
and any Quarterly Information Statements issued subsequent thereto and
certain press releases issued from time to time by the Funding Corporation.
Unless otherwise specified in the applicable Prospectus Supplement, such
information and the Farm Credit System Annual Report to Investors for the
current and two preceding fiscal years are available for inspection at the
Federal Farm Credit Banks Funding Corporation, Investment Banking Services
Department, 10 Exchange Place, Suite 1401, Jersey City, New Jersey 07302;
telephone (201) 200-8000. Upon request, the Funding Corporation will
furnish, without charge, copies of the above information. The FCBs are not
subject to the periodic reporting requirements of the Exchange Act.
PRIVATE LABEL CUSTODY RECEIPT SECURITIES
General
If so specified in the applicable Prospectus Supplement, the Trust
Fund for a Series may include any combination of (i) receipts or other
instruments (other than Treasury Strips) evidencing ownership of specific
interest and/or principal payments to be made on certain Treasury Bonds held
by a custodian ("Private Label Custody Strips") and (ii) receipts or other
instruments evidencing ownership of specific interest and/or principal
payments to be made on certain Resolution Funding Corporation ("REFCO") bonds
("REFCO Strips"; and, together with Private Label Custody Strips, "Private
Label Custody Receipt Securities") (such Private Label Custody Receipt
Securities, if any, Government Securities, if any, and the Underlying Debt
Securities are referred to herein, collectively, as the "Underlying
Securities"). The Private Label Custody Receipt Securities, if any, included
in a Trust Fund are intended to assure investors that funds are available to
make certain specified payments of principal and/or interest due on the
related Certificates. As such, the Private Label Custody Receipt Securities,
if any, included in a Trust Fund are intended both to (i) support the ratings
assigned to such Certificates, and (ii) perform a function similar to that
described herein under "Credit Support". A description of the respective
general features of Private Label Custody Receipt Securities is set forth
below.
The Prospectus Supplement for each Series of Certificates the Trust
Fund with respect to which contains Private Label Custody Receipt Securities
will contain information as to: (i) the title and series of each such Private
Label Custody Receipt Security, the aggregate principal amount, denomination
and form thereof; (ii) the limit, if any, upon the aggregate
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principal amount of such Private Label Custody Receipt Security; (iii) the
dates on which, or the range of dates within which, the principal of (and
premium, if any, on) such Private Label Custody Receipt Security will be
payable; (iv) the rate or rates, or the method of determination thereof, at
which such Private Label Custody Receipt Security will bear interest, if any,
the date or dates from which such interest will accrue; and the dates on
which such interest will be payable; (v) whether such Private Label Custody
Receipt Security was issued at a price lower than the principal amount
thereof, (vi) material events of default or restrictive covenants provided
for with respect to such Private Label Custody Receipt Security; (vii) the
rating thereof, if any: (viii) the issuer of such Private Label Custody
Receipt Security; (ix) the material risks, if any, posed by any such Private
Label Custody Receipt Security and the issuer thereof (which risks, if
appropriate, will be described in the "Risk Factors" section of the
Prospectus Supplement); and (x) any other material terms of such Private
Label Custody Receipt Security. With respect to a Trust Fund which includes a
pool of Private Label Custody Receipt Securities, the related Prospectus
Supplement will, to the extent applicable, describe the composition of the
Private Label Custody Receipt Securities' pool, certain material events of
default or restrictive covenants common to the Private Label Custody Receipt
Securities, and, on an aggregate, percentage or weighted average basis, as
applicable, the characteristics of the pool with respect to the terms set
forth in (iii), (iv) and (v) of the preceding sentence and any other material
terms regarding such pool.
The Private Label Custody Receipt Securities included in a Trust
Fund will be senior, unsecured, nonredeemable obligations of the issuer
thereof, will be denominated in United States dollars and, if rated, will be
rated at least investment grade by at least one nationally recognized rating
agency. In addition, the inclusion of Private Label Custody Receipt
Securities in a Trust Fund with respect to a Series of Certificates is
conditioned upon their characteristics being in form and substance
satisfactory to the Rating Agency rating the related Series of Certificates.
Private Label Custody Strips
The first "stripping" of Treasury Bonds occurred in the 1970s when
government securities dealers physically separated coupons from definitive
certificates and offered them to investors as tax-deferred investments.
Investors were able to purchase the "strip" at a deep discount and pay no
federal income tax until resale or maturity. This tax treatment was limited
in 1982 by the Tax Equity and Fiscal Responsibility Act ("TEFRA") which
required holders of such strips to accrue a portion of the discount toward
par annually and report such accrual, even though unrealized, as taxable
income. TEFRA also required that all new Treasury issues be made available
only in book-entry form.
The shift to "book-entry only" Treasury Bonds created a shortage of
the physical certificates needed for stripping. In response, various dealers
created custodial receipt programs in which Treasury Bonds in book-entry form
were deposited with custodians who would thereupon issue certificates
evidencing rights in principal and interest payments. Some of the better
known programs first came to market in 1982 and 1983.
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Although available eventually in denominations as small as $1,000, these
custodial receipts lacked the liquidity of the physical strips. While
physical strips had multiple market-makers, custodial receipts were
proprietary and, as such, the sole market-maker would usually be an affiliate
of the program's sponsor. As a result, the market that developed for such
receipts was segmented.
In early 1984, a group of dealers sought to enhance the liquidity
of custodial receipts by developing a generic, multiple market-maker security
known as a TR (Treasury Receipt). A large secondary market quickly developed
in these generic Treasury Strips.
Treasury Receipts, physical strips and the proprietary receipts
trade at varying discounts from STRIPS which reflect, among other things,
lower levels of liquidity and the structuring difference discussed above.
A holder of a Private Label Custody Strip (as opposed to a STRIP)
cannot enforce payment on such Treasury Strip against the Treasury; instead,
such holder must look to the custodian for payment. Such custodian (and such
holder of a Private Label Custody Strip that obtains ownership of the
underlying Treasury Bond) can enforce payment of the underlying Treasury Bond
against the Treasury. In the event any Private Label Custody Strips are
included in a Trust Fund with respect to any Series of Certificates, the
Prospectus Supplement for such Series will include the identity and a brief
description of each custodian that issued such Private Label Custody Strips.
In the event the Depositor knows that the depositor of the Treasury Bonds
underlying such Private Label Custody Strips is the Depositor or any of its
affiliates, the Depositor will disclose such fact in such Prospectus
Supplement.
REFCO Strips
A REFCO Bond may be divided into its separate components,
consisting of: (i) each future semi-annual interest distribution (an
"Interest Component"); and (ii) the principal payment (the "Principal
Component") (each component individually hereinafter referred to as a "REFCO
Strip"). REFCO Strips are not created by REFCO; instead, third parties such
as investment banking firms create them. Each REFCO Strip has an identifying
designation and CUSIP number. REFCO Strips generally trade in the market for
Treasury Strips at yields of a few basis points over Treasury Strips of
similar maturities. REFCO Strips are viewed generally by the market as
liquid investments.
For a REFCO Bond to be separated into its components, the par
amount of the REFCO Bond must be in an amount which, based on the stated
interest rate of the REFCO Bond, will produce a semi-annual interest payment
of $1,000 or an integral multiple thereof. REFCO Bonds may be separated into
their components at any time from the issue date until maturity. Once
created, REFCO Strips are maintained and transferred in integral multiples of
$1,000.
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A holder of a REFCO Strip cannot enforce payment on such REFCO
Strip against REFCO; instead, such holder must look to the custodian for
payment . Such custodian (and such holder of a REFCO Strip that obtains
ownership of the underlying REFCO Bond) can enforce payment of the underlying
REFCO Bond against REFCO. The identity and a brief description of each
custodian that has issued any REFCO Strip included in the Trust will be set
forth in the related Prospectus Supplement. In the event the Company knows
that the depositor of the REFCO Bonds underlying the REFCO Strips included in
the Trust is the Company or any of its affiliates, the Company will disclose
such fact in such Prospectus Supplement.
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
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.
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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.
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
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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 one or more 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.
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.
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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.
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
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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 one
or more 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 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.
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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 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
Except to the extent otherwise provided 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)
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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.
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.
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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 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.
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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 various material 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 2/3% 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 2/3% 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 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.
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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 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
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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
any 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 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
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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 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 2/3% of the Voting Rights of such Series
or (b) the Trustee obtains the consent of 100% of the Voting Rights of such
Series.
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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
Except to the extent otherwise provided 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;
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(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
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
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and (ii) when the Issuer shall have paid all other amounts payable under the
Indenture with respect to such Series.
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.
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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 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 various material 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
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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.
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
Except to the extent otherwise provided 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;
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(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;
(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
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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.
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.
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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 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,
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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 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.
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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.
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".
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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 Securities. The principal office of
the Company is located at 11 Madison Avenue, New York, New York 10010. Its
telephone number is (212) 325-2000.
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
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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.
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.
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)
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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 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
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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 subject to the requirement
that a taxpayer obtain the consent of the IRS before changing a method of
accounting. 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, 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.
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.
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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. 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 which are set out regulations issued in final form on June 11, 1996
(the "1996 Contingent Debt Regulations"). 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.
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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, generally, a debt instrument that provides for
payment of any 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 and a fixed multiple that is greater than
0.65 but not more than 1.35 or (ii) an otherwise qualified floating rate (or
the product described in clause (i)) plus or
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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 or less
than or equal to 0.65, 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. Stated interest qualifies as
payable at an "objective rate" if the rate is determined using a single fixed
formula and is based on objective financial information or economic
information. However, an objective rate does not include a rate based on
information that is in the control of the issuer or that is unique to the
circumstances of the issuer or a related party. Notwithstanding the first
two sentences 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
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.
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
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with the constant yield method described below, before the receipt of the
related 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.
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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 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),
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the assumed fixed rate is a fixed rate that reflects the yield that is
reasonably expected for the debt instrument.
The rules described in the preceding paragraph apply to the accrual
of qualified stated interest on a VRDI that provides for interest at a single
variable rate. Thus, 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
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exceeds (or is less than) the interest assumed to be accrued or paid during
the accrual period under the equivalent fixed rate debt instrument.
Bonds that are not VRDIs. Set forth below are the rules that would
apply to Variable Interest Bonds that are not VRDIs ("contingent debt
instruments") under the 1996 Contingent Debt Regulations.
In the case of a contingent debt instrument issued for cash, the
issuer is required to project a yield, and, based on that yield, 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 1996 Contingent 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 1996 Contingent Debt 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 yield and the projected payment schedule will be respected unless
they are 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
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
1996 Contingent Debt 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).
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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 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.
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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.
On June 27, 1996, the IRS published in the Federal Register
proposed regulations (the "Proposed Premium Regulations") on the amortization
of bond premium. The Proposed Premium Regulations describe the constant
yield method under which such premium is amortized and provide that the
resulting offset to interest income can be taken into account only as a
Bondholder takes the corresponding interest income into account under such
holder's regular accounting method. In the case of instruments that may be
called or repaid prior to maturity, the Proposed Premium Regulations provide
that the premium is calculated by assuming that the issuer will exercise or
not exercise its redemption rights in the manner that maximizes the
Bondholder's yield and the Bondholders will exercise or not exercise its
option in a manner that maximizes the Bondholder's Yield. The Proposed
Premium Regulations are proposed to be effective for debt instruments
acquired on or after the date 60 days after the date final regulations are
published in the Federal Register. However, if a Bondholder elects to
amortize bond premium for the taxable year containing such effective date,
the Proposed Premium Regulations would apply to all the Bondholder's debt
instruments held on or after the first day of that taxable year. It cannot
be predicted at this time whether the Proposed Premium Regulations will
become effective or what, if any, modifications will be made to them prior to
their becoming effective.
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
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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.
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.
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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 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.
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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 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 nonresident
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,
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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 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
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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 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
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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
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
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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.
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
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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 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
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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 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
generally will be treated as an original issuance of such Certificateholder's
share of 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").
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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. In the case of Underlying Securities issued on
or after August 13, 1996, the rules set forth above in "Taxation of Income
From Bonds" will apply. In the case of Underlying Securities issued before
August 13, 1996, those same rules will apply with the following
modifications.
First, a variable rate will be considered to be a "qualified
floating rate" if the variable rate equals (i) the product of an otherwise
qualified floating rate and 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 a rate will generally constitute
an objective rate. The second modification is that a rate will be considered
to be an "objective rate" if it is a rate (other than a qualified floating
rate) that is determined using a single fixed formula and 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 the rates
described in the three forgoing clauses.
The third modification is that different rules apply to Underlying
Securities that are contingent debt instruments. In general, for contingent
debt instruments issued before August 13, 1996, the preamble to the 1996
Contingent Debt Regulations states that a taxpayer may use any reasonable
method to account for contingent payments. Holders of certificates that
represent an interest in Underlying Securities that are contingent debt
instruments issued before August 13, 1996 should consult their tax advisors
as to the methods that may be available to them.
In the case of Underlying Securities that constitute short-term
Government Securities or short-term Private Label Custody Receipt Securities,
the rules set out above dealing with short-term obligations (see "Taxation of
Income from Bonds -- Short-Term Bonds" above) are applied with reference to
acquisition discount rather than OID, if such obligations constitute "short-
term Government obligations" within the meaning of Section 1271(a)(3)(B) of
the Code.
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
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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.
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.
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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 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
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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 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
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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 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.
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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 Notional Principal
Contracts for federal income tax purposes include interest rate swaps,
interest rate caps, interest rate floors and basis swaps.
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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
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with respect to such Notional Principal Contracts generally would be required
to be taken into account under the rules in the preceding paragraph.
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
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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.
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
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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.
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
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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 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.
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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 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.
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On May 10, 1996, proposed Treasury Regulations were issued that
would change the rules relating to terminations. Those regulations are
effective for terminations occurring on or after the date those regulations
are finalized.
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.
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
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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".
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
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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 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.
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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 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
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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 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
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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;
(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
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(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.
On April 15, 1996, proposed Treasury Regulations (the "1996
Proposed Regulations") were issued which, if adopted in final form, could
affect the documentation required from non-U.S. persons holding global
securities. The 1996 Proposed Regulations are generally proposed to be
effective for payments after December 31, 1997, regardless of the issue date
of the global security with respect to which such payments are made, subject
to certain transition rules. The 1996 Proposed Regulations would, if
adopted, replace a number of current tax certification forms (including IRS
Form W-8, IRS Form 1001 and IRS Form 4224, discussed above) with a single,
restated form and standardize the period of time for which withholding agents
could rely on such certifications. It cannot be predicted at this time
whether the 1996 Proposed Regulations will become effective as proposed, or
what, if any, modifications may be made to them. Prospective investors are
urged to consult their tax advisors with respect to the effect the 1996
Proposed Regulations may have.
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
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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.
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
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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.
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.
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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.
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
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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 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
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(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.
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.
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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.
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
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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 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.
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If and to the extent required by applicable law or regulation, this
Prospectus and the Prospectus Supplement will also be used by CSFB after the
completion of the offering in connection with offers and sales related to
market-making transactions in the Securities offered hereby in which CSFB
acts as principal. CSFB may also act as agent in such transactions. Sales
will be made at negotiated prices determined at the time of sale.
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.
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"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.
"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.
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"Available Funds" means, except to the extent 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 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.
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"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.
"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 Credit Suisse First Boston Structured Products
Corporation, or its successor in interest.
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"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.
"Covered Series" means a form of Underlying Enhancement that covers
more than one Series of Securities.
"CSFB" means Credit Suisse 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, (i) 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 (ii) 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
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(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.
"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 by S&P and Moody's, respectively, AAA by Fitch, if such
deposits and obligations are rated by Fitch, 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, F-1 by Fitch, if such commercial paper is rated by Fitch, 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.
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"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".
"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.
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"Government 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).
"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 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.
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"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.
"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.
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"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 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.
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"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.
"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.
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"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.
"Private Label Custody Receipt 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).
"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.
"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".
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"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, 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.
"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
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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.
"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.
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"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 preceding such Payment Date.
"Undelivered Assets" means Underlying Assets that are not pledged
and delivered to the Trustee on the related Closing Date.
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"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 Debt Issuer" means a corporation, partnership, trust,
limited liability company or other type of domestic entity that issues an
Underlying Debt Security.
"Underlying Debt 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).
"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
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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.
"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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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.................... $ [ ]
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.
Credit Suisse 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.**
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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 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
Credit Suisse 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 Form 8-K.
** Previously filed.
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
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post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and
(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
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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.
(d) As to the Qualification of Trust Indentures under the Trust
Indenture Act of 1939:
The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
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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 19th day of August, 1997.
Credit Suisse 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 August 19, 1997
- -------------------- Executive
Gina Hubbell Officer
(Principal Executive
Officer) and Director
II-5
<PAGE>
* Treasurer (Principal August 19, 1997
- -------------------- Financial Officer) and
Lewis Wirshba Director
* Controller (Principal August 19, 1997
- -------------------- Accounting Officer)
Carlos Onis
* Director August 19, 1997
- --------------------
Mark Patterson
* /s/ Gina Hubbell
- --------------------
By: Gina Hubbell
Attorney-in-fact
II-6
<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 Credit Suisse
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 Form 8-K.
** Previously filed.
<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)
------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON STRUCTURED PRODUCTS TRUST 199__
$_________________
AGGREGATE ORIGINAL PRINCIPAL AMOUNT OF
LINKED CERTIFICATES/(SM)/
SERIES 199__ - _____
Credit Suisse 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 [Debt] Securities") [specify currency denomination]
of [identify obligors or describe types of obligors] [and [Treasury Bonds]
[Treasury Strips] [REFCO Strips] [FCC Bonds] [GSE BONDS] [GSE GUARANTEED BONDS]
(the "Government Securities"; and the Government Securities and the Underlying
Debt Securities, collectively, the "Underlying Securities")] [specify currency
denomination] of [identify obligors] (the "Underlying Government Issuers"; and
the Underlying Government Issuers and the Underlying Debt Issuers, collectively,
the "Underlying Issuers")]; [(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]; [(iv)
cash or guaranteed investment contracts ("Guaranteed Investment Contracts")];
and [(v) proceeds of any of the foregoing]. 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]
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH
UNDER "RISK FACTORS" BEGINNING ON PAGE S-9 HEREIN.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED UNDER
"ERISA CONSIDERATIONS" HEREIN.
THE TRUST CERTIFICATES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF
CREDIT SUISSE FIRST BOSTON STRUCTURED PRODUCTS CORPORATION, CREDIT SUISSE FIRST
BOSTON CORPORATION, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THE
CERTIFICATES NOR THE UNDERLYING [DEBT] SECURITIES ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PARTY.
------------------------------
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.
------------------------------
AS MORE FULLY DESCRIBED UNDER "RISK FACTORS" BEGINNING ON PAGE 5-9 HEREIN
AND ON PAGE 28 OF 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.]
<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 $__________.
_____________________________
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 [Credit Suisse 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_.
CREDIT SUISSE 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
_______, 1996, and prospective investors should purchase LINCs only after
carefully reading this Prospectus Supplement and the accompanying Prospectus.
------------------------------
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET-MAKING TRANSACTIONS IN THE SECURITIES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
UNTIL _________________________________________, 19_____, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND A
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.
AVAILABLE INFORMATION
The Trust will be 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 Securities and
Exchange Commission (the "Commission"). Such reports and other information
filed by the Trust can be inspected and copied at the Public Reference Room of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statement and
other information regarding registrants that file electronically with the
Commission. The address of such site is (http;//www.sec.gov).
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 (the
material terms of which are described in the accompanying Prospectus and this
Prospectus Supplement), 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 Credit Suisse
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 [Debt] Securities
consisting of [bonds] [debentures]
[notes] [describe other debt
securities] [specify currency
denomination] of [identify Underlying
[Debt] Issuers] [and [Treasury Bonds]
[Treasury Strips] [REFCO Strips] [FFC
BONDS] [GSE BONDS] [GSE Guaranteed
Bonds] [specify currency
denomination] of [identify Underlying
Government 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];] [(iv) or [guaranteed
investment contracts] and (v)
proceeds of the foregoing.].
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
S-3
<PAGE>
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 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
S-4
<PAGE>
[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 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.]
RISK FACTORS For a discussion of certain risks
involved in an investment in LINCs,
S-5
<PAGE>
see "Risk Factors" herein and in the
accompanying Prospectus.
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 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
the anticipated 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 [Debt] Securities are likely
to be subject to higher redemption rates
than if prevailing rates remain at or
above the interest rates on the
Underlying [Debt] Securities. Other
factors affecting redemptions of
Underlying [Debt] Securities include the
term of the Underlying [Debt]
Securities, the availability of credit,
the general economic situation, tax,
legal and other factors.[Describe
redemption risk, if any, related to
Government Securities.]]
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.]
S-6
<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 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.
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<PAGE>
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 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 will receive
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.
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
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
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<PAGE>
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 yield concerns and redemption risks, if any, relating to
the Government 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.]
BASIS RISK; 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 the Underlying Securities on the immediately preceding
Underlying Securities interest payment date (the "Available
S-10
<PAGE>
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 AND UNDERLYING ISSUERS; DESCRIPTIONS
BASED ON CERTAIN LIMITED 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 [or, in the case of
Underlying Government Issuers, made available to the general public] and such
information 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 [Debt] 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
[Debt] Securities would likely occur, and the Underlying [Debt] Issuer might
have insufficient funds to make all required payments on such Underlying [Debt]
Securities. Such events would also delay foreclosure on assets securing the
Underlying [Debt] 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.] [Describe concentration and insolvency risks, if any, related to
Government Securities.]
S-11
<PAGE>
[Describe concentration of credit risk attributable to industries or
geographical locations of Underlying Issuers.]
[SUBSTANTIAL LEVERAGE
The Underlying [Debt] Issuers are highly leveraged. This could adversely
affect holders of the Trust Certificates because under such circumstances: (i)
an Underlying [Debt] 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 [Debt] 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 [Debt] Issuer for its operations;
(iii) certain of an Underlying [Debt] 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 [Debt] Issuer's
ability to make payments to holders of the Underlying [Debt] 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 [DEBT] SECURITIES
The Underlying [Debt] Securities are general unsecured obligations of the
Underlying [Debt] Issuers [and, in addition, are subordinate in right of payment
to the respective Underlying [Debt] Issuer's existing and future senior
indebtedness]. In the event of a Bankruptcy Case involving an Underlying [Debt]
Issuer or any default in the payment of any secured indebtedness of the
Underlying [Debt] Issuer, holders of such secured indebtedness will be entitled
to payment in full from all assets (and proceeds thereof) of the Underlying
[Debt] Issuer, pledged to secure such indebtedness prior to any payment of such
assets (or proceeds) to holders of the Underlying [Debt] Securities. [In
addition, in the event of a Bankruptcy Case involving an Underlying [Debt]
Issuer or any default of any indebtedness of the Underlying Issuer to which the
Underlying [Debt] Securities are subordinated, holders of such senior
indebtedness may be entitled to payment in full prior to any payments to holders
of the Underlying [Debt] Securities.] [Describe comparable risks, if any,
relating to Governmental Securities.]]
[STRUCTURAL SUBORDINATION OF UNDERLYING [DEBT] SECURITIES
Direct creditors or preferred stockholders of any subsidiary of an Underlying
[Debt] Issuer, although not holders of senior indebtedness of the Underlying
[Debt] Issuer, will have a direct claim on the assets and cash flows of such
subsidiary, prior to the claims of holders of the Underlying [Debt] Securities.
Therefore, all existing and future liabilities (if any) of the Underlying [Debt]
Issuer's subsidiaries will be effectively senior to the Underlying Securities.
To the extent that assets of an Underlying [Debt] Issuer, which would otherwise
be available to pay holders of the related Underlying [Debt] Securities, are
owned by the Underlying [Debt] Issuer's subsidiary, such structural
subordination may adversely affect the holders of such Underlying [Debt]
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 [Debt] Issuer or restrictions on changes of control of
the Underlying [Debt] 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
[Debt] Securities, against additional subordination] of the Underlying [Debt]
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 [Debt] Securities. Such
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<PAGE>
actions or events could include significant changes in the debt-to-equity ratio
or capitalization of the Underlying [Debt] 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 [Debt] Issuer or
structural or other subordination of the Underlying [Debt] Securities.
In addition, any contractual protection provided with respect to the
Underlying [Debt] Securities may not effectively provide significant protection
for such Underlying [Debt] 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 [Debt] Securities
represent __% of such outstanding obligations, the Trustee's or Securityholders'
ability to influence any such vote is correspondingly limited.] [Describe
comparable risks, if any, for Government Securities.]
[SEASONALITY AND CYCLICALITY RISKS
Traditionally, the industries of the following Underlying [Debt] 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 [Debt] Issuers to make payments on the Underlying [Debt] Securities,
thus increasing the likelihood of a default on such Underlying [Debt]
Securities.] [Modify as appropriate to reflect particular characteristics of
Underlying [Debt] 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 RISKS
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
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<PAGE>
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. 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.]]
LIMITED 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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<PAGE>
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 Security with the latest maturity date]. 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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<PAGE>
[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.
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<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.] [Describe information
(periodic trustee reports or similar reports) with respect to the Underlying
Securities which will be made available, or caused to be made available upon
request to holders of Trust Certificates.]
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, either herein or in Schedule I hereto:
(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 and the timing of, and manner of determining, any
adjustments to such stated interest rate; (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 date of issuance, 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_.
General
[Description of the general characteristics of the Underlying Securities to
be included.]
Distribution on the Underlying Securities
[Description of the interest and principal distributions on the Underlying
Securities to be included.]
Subordination
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<PAGE>
[Description of the material subordination provisions affecting (or available
to) the Underlying Securities to be included.]
Redemption of the Underlying Securities
[Description of the material redemption provisions of the Underlying
Securities to be included.]
Representations, Warranties and Covenants of the Underlying Issuers
[Description of the material representations, warranties and covenants of the
Underlying Issuers to be included.]
Events of Default
[Description of the material events of default with respect to the Underlying
Securities to be included. Also, if the Trust holds enough of a class of
Underlying Securities to entitle the Trust to take certain actions upon an event
of default this fact will be disclosed and the basis for excising this
discretion will be described.]
Underlying Issuers
[Description of the Underlying Issuers, to be included.]
Each Underlying [Debt] 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 Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is (http://www.sec.gov). [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.] [Describe information
that will be made available with respect to the Underlying Issuers that no
longer file periodic reports under the Exchange Act.] [Describe information
with respect to the Underlying Governmental Issuers which is available.]
[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.]
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<PAGE>
[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.]
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.]
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<PAGE>
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 [Debt] Securities the Underlying [Debt] Securities are likely to
be subject to higher redemption rates than if prevailing rates remain at or
above the interest rates on the Underlying [Debt] Securities or the assets
securing the Underlying [Debt] Securities. Other factors affecting redemptions
of Underlying [Debt] Securities include the term of the Underlying [Debt]
Securities, the availability of credit, the general economic situation, tax,
legal and other factors.] [Describe risk, if any, of redemption of Government
Securities.]
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.]
[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.]
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<PAGE>
[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 modeling 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.]
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.
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<PAGE>
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 Credit
Suisse 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 % %
[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.
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<PAGE>
[Specify if the Issuer or any affiliate is retaining an interest in one or
more Classes.]
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Securities offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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.
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<PAGE>
SCHEDULE I
Underlying Security Information
-------------------------------
Certain characteristics of the Underlying Securities are described below.
Certain of the information with respect to the Underlying Securities has been
derived from the original offering documents relating to such Underlying
Securities and from publicly available data and other data available to the
Depositor with respect thereto. IT SHOULD BE NOTED THAT THERE MAY HAVE BEEN
MATERIAL CHANGES IN FACTS AND CIRCUMSTANCES SINCE THE DATES SUCH DOCUMENTS WERE
PREPARED, INCLUDING, BUT NOT LIMITED TO, PARTIAL REDEMPTIONS AND CHANGES IN
PREVAILING INTEREST RATES AND OTHER ECONOMIC FACTORS, WHICH MAY LIMIT THE
USEFULNESS OF, AND BE DIRECTLY CONTRARY TO THE ASSUMPTIONS USED IN PREPARING,
THE INFORMATION SET FORTH IN SUCH DOCUMENTS.
Underlying Security Date of Issuance
- ------------------- ----------------
[Table to be added.]
Underlying Security Moody's S&P Fitch D&P
- ------------------- ------- --- ----- ---
[Table to be added.]
The following table sets forth expected approximate characteristics of the
Underlying Securities based on remittance reports received with respect to the
Underlying Securities distribution dates in [insert dates].
S-26
<PAGE>
<TABLE>
<CAPTION>
Percentage
Interest
Represented
Underlying Original by Current
Underlying Security Type of Principal Underlying Principal Current Applicable
Issuer Class Security CUSIP# Balance Security Balance Interest Rate Index
- ---------- ---------- -------- ------ ------- ---------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[Table to be added.]
</TABLE>
Underlying Security Reserve Funds
(Based on [date] Remittance Reports)
-----------------------------------
<TABLE>
<CAPTION>
Principal Balance of all Current Reserve Fund
Original Reserve Current Reserve Securities Covered by Balance as a % of All
Underlying Security Fund Balance Fund Balance Reserve Fund Covered Securities
- ------------------- ---------------- --------------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
[Table to be added.]
</TABLE>
S-27
<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
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<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
<CAPTION>
Prospectus
<S> <C>
Available 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>
$
CREDIT SUISSE FIRST BOSTON
STRUCTURED PRODUCTS
TRUST 199_-_
LINKED CERTIFICATES/(SM)/
[Title of Classes]
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
CREDIT SUISSE FIRST BOSTON
================================================================================
S-28
