Prospectus Supplement
(To Prospectus Dated March 10, 1995)
AMERICAN CORPORATE ACCRUALS, INC.
("ACARS")
AMERICAN CORPORATE ACCRUAL RECEIPTS, SERIES 1
RELATING TO
GENERAL MOTORS CORPORATION
8.10% DEBENTURES DUE JUNE 15, 2024
COUPON RECEIPTS AND
CALLABLE PRINCIPAL RECEIPTS
DUE JUNE 15, 2024
American Corporate Accrual Receipts, Series 1 (the "Receipts"), evidence
ownership of future interest and principal payments due on the 8.10% Debentures
Due June 15, 2024 (the "Debentures"), issued by General Motors Corporation (the
"Obligor"). The Receipts consist of Coupon Receipts and Callable Principal
Receipts relating initially to $24,000,000 aggregate principal amount (out of
$400,000,000 aggregate principal amount originally issued in December, 1995) of
the Debentures, as purchased by American Corporate Accruals, Inc. (the
"Depositor") from Rickel Securities, Inc. ("Rickel"), an affiliate of the
Depositor, which acquired the Debentures in the secondary market. The Debentures
provide for semiannual interest payments due on June 15 and December 15 of each
year ("Interest Payments") and for a single payment of principal due on June 15,
2024 (the "Principal Payment"). The Debentures may be redeemed by the Obligor,
in whole at any time or in part from time to time, on or after June 15, 2008
(the "Call Date") at an initial redemption price of 103.090% of the principal
amount, and thereafter at prices declining annually to par at June 15, 2016. No
payment will be made on any Receipt prior to the due date of the corresponding
Interest Payment or the due date of the Principal Payment at maturity. The
Debentures will be held on behalf of the purchasers of the related Receipts, as
the beneficial owners thereof (each, a Holder), by Marine Midland Bank, as
trustee (the "Trustee"), pursuant to a Trust Agreement between the Depositor and
the Trustee (the "Trust Agreement").
THE RECEIPTS ARE ZERO COUPON OBLIGATIONS AND DO NOT ENTITLE THE HOLDERS
THEREOF TO ANY PERIODIC PAYMENT OF INTEREST.
The Receipts are being offered initially in book entry form only through
The Depository Trust Company, New York, New York ("DTC"), and purchasers will
not receive Certificates representing their ownership of the Receipts. See
"CERTAIN INFORMATION REGARDING THE RECEIPTS - Book-Entry Registration" in the
Prospectus. The Receipts will be delivered in face amounts of $1,000 and
multiples thereof.
THE RECEIPTS WILL BE OFFERED AT SUBSTANTIAL DISCOUNTS FROM THEIR NOTIONAL
OR FACE AMOUNTS. SEE "CERTAIN RISK FACTORS" HEREIN FOR A DISCUSSION OF PRICE
VOLATILITY OF THE RECEIPTS AND "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" IN
THE PROSPECTUS FOR A DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS,
INCLUDING IMPLICATIONS OF ORIGINAL ISSUE DISCOUNT AND POSSIBLE TAX WITHHOLDING.
The Receipts offered hereby have been approved for listing on the American
Stock Exchange upon official notice of issuance, under the symbols "GMB" for the
Callable Principal Receipts and "GMC" for the Coupon Receipts, respectively.
This Prospectus Supplement does not provide detailed information with
respect to the Obligor. In the event of a default on a Debenture, the risk of
loss lies entirely with the Holders of the related Receipts. The Obligor is not
affiliated with the Depositor nor is the Obligor involved in this Offering of
receipts. See "Certain Risk Factors" herein and "Available Information Regarding
the Obligors" in the Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Receipts will be offered from time to time by Rickel Securities, Inc.
(in such capacity, the "Underwriter") in negotiated transactions or otherwise at
fixed or varying prices to be determined at the time of sale.
The Prospectus Supplement should be retained for future reference.
RICKEL SECURITIES, INC.
The date of this Prospectus Supplement is September 8, 1997.
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This Prospectus Supplement does not contain complete information about the
Receipts offered hereby. Additional information is contained in the Prospectus,
and purchasers are urged to read both this Prospectus Supplement and the
Prospectus in full. Sales of the Receipts may not be consummated unless the
purchaser has received both this Prospectus Supplement and the Prospectus.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE RECEIPTS AT
LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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CERTAIN RISK FACTORS
A prospective purchaser of the Receipts should be aware of the following
factors in evaluating the merits and risks of an investment therein.
1. PRICE VOLATILITY OF ZERO COUPON OBLIGATIONS AND POSSIBILITY OF
LOSS. The purchase at a discount of a Receipt will likely result in greater
price volatility than the purchase of an obligation of a similar maturity
which pays interest periodically. The Receipts are zero coupon obligations.
The market prices of zero coupon obligations, such as those represented by
Receipts, are particularly sensitive to fluctuations in market interest
rates. Thus, when market interest rates rise, absent other factors such as
changes in the perceived creditworthiness of the Obligor on the underlying
Debentures, there will be a sharp percentage fall in the market price of
Coupon Receipts relative to coupon bearing instruments of a similar
maturity. The market prices of Callable Principal Receipts, which contain
both an interest payment component and a principal payment component, will
be subject to similar volatility. Investors should consider whether such
potential secondary market price volatility is in accordance with their
investment needs.
2. NO DETAILED INFORMATION ABOUT OBLIGOR. This Prospectus Supplement
does not provide detailed information with respect to the Obligor. See
"AVAILABLE INFORMATION REGARDING THE OBLIGORS" in the Prospectus.
3. OBLIGOR IS ONLY PAYMENT SOURCE. Proceeds of the Debentures held by
the Trust are the sole source of payment for the Receipts. The Debentures
may be subject to laws permitting bankruptcy, moratorium, reorganization or
other actions which, in the event of financial difficulties of the Obligor,
could result in delays in payment or in non-payment of the Debentures and
consequently late payment or non-payment of Receipts.
4. ALLOCATION OF PAYMENTS UPON DEFAULT. Pursuant to the terms of the
Trust Agreement, payments received by the Trustee after a default by the
Obligor upon the Debentures will be allocated between the holders of Coupon
Receipts and Callable Principal Receipts in proportion to the Accreted
Value of each outstanding class of Receipts, and within each class pro rata
by face amount. For purposes of such allocation, the term "Accreted Value"
means for any class of Receipts, (a) the original issue price for such
class, plus (b) an investment return accrued to the date of determination
calculated based upon a semi-annual compounding rate equal to the original
yield to maturity for
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such class. This allocation may result, in the event of a payment default
on the underlying Debenture, in the holder of a Callable Principal Receipt
receiving a smaller payment than they might otherwise receive if the Trust
Agreement did not include this allocation provision and payments received
by the Trustee after a default were distributed based solely upon the
character of the payment by the Obligor.
5. LACK OF AFFILIATION BETWEEN THE OBLIGOR AND THE DEPOSITOR. The
Depositor is not affiliated with the Obligor and, although the Depositor
has no knowledge of any event that would have a material adverse effect on
the Obligor, any such event is beyond the Depositor's ability to control
and may be difficult to predict.
The Obligor is not involved in the offering of the Receipts and has no
obligation with respect to the Receipts, including any obligation to take
the needs of the Depositor or of holders of the Receipts into consideration
for any reason. The Obligor will not receive any of the proceeds of this
Offering and is not responsible for, and has not participated in, the
determination of the timing of, prices for, or quantities of, the Receipts
to be issued in this Offering or in the determination or calculation of the
principal amount to be paid at maturity. The Obligor is not involved with
the administration, marketing or trading of the Receipts and has no
obligations with respect to the principal amount to be paid to holders of
Receipts at maturity.
6. CERTAIN TAX CONSIDERATIONS. Under Section 1286 of the Code, the
separation of the right to receive principal payments on a bond from the
right to receive interest payments on a bond results in the creation of a
"stripped bond" (with respect to the principal payments) and "stripped
coupons" (with respect to the interest payments). As a result of the
separation of the interest component of a bond from the principal
component, the resulting Receipts will be treated for tax purposes as being
issued on the purchase date with original issue discount ("OID"). Under the
relevant tax rules, OID accrues for tax purposes on a daily basis over the
term of the Receipt. It is essential that each potential purchaser of
Receipts understand that OID accrues (and taxable income results) in any
year REGARDLESS OF WHETHER ANY CASH PAYMENT IS MADE to the Holder with
respect to the Receipt or Receipts that he, she or it holds. Consequently,
Holders of Receipts who are subject to income taxation are likely to
recognize taxable income in the form of accrued OID in tax years when they
receive NO CASH distributions with respect to the Receipts. Any purchaser
of Receipts must consider whether he, she or it has the cash resources to
meet the tax obligations resulting from the
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accrual of OID with respect to the Receipts in taxable years when no cash
will be distributed with respect to the Receipts.
THE OBLIGOR
According to publicly available documents, the Obligor, a Delaware
corporation, is engaged primarily in the business of the design, manufacture,
assembly and sale of automobiles, trucks, and related parts and accessories. The
Obligor is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, the Obligor files reports, proxy
statements and other information with the Securities and Exchange Commission.
Copies of such reports, proxy statements and other information may be inspected
and copied at certain offices of the Commission and at the offices of the
Exchange at the addresses listed under "Available Information" in the
Prospectus.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE RECEIPTS OFFERED HEREBY AND
DOES NOT RELATE TO ANY SECURITIES OF THE OBLIGOR. ALL DISCLOSURES CONTAINED IN
THIS PROSPECTUS SUPPLEMENT REGARDING THE OBLIGOR ARE DERIVED FROM THE PUBLICLY
AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER THE DEPOSITOR
NOR THE UNDERWRITER HAVE PARTICIPATED IN THE PREPARATION OF THOSE DOCUMENTS, OR
MADE ANY DUE DILIGENCE INQUIRY WITH RESPECT TO THE INFORMATION PROVIDED THEREIN.
THERE CAN BE NO ASSURANCE THAT ALL EVENTS PRIOR TO THE DATE HEREOF THAT WOULD
EFFECT THE OBLIGOR (INCLUDING EVENTS THAT WOULD EFFECT THE ACCURACY OR
COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING
PARAGRAPH) HAVE BEEN PUBLICLY DISCLOSED.
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THE RECEIPTS
GENERAL
The Receipts consist of Coupon Receipts evidencing ownership of future
interest payments ("Interest Payments") and Callable Principal Receipts
evidencing ownership of future interest payments from the Call Date plus
payments of principal and any redemption premium ("Principal Payments").
Payments of interest, principal and any redemption premium will come solely from
payments on the Debentures made by the Obligor. An investor purchasing Receipts
should avail itself of the same information concerning the Obligor as it would
if it were purchasing Debentures. See "AVAILABLE INFORMATION REGARDING THE
OBLIGORS" in the Prospectus.
Each Coupon Receipt is payable on or after the due date of the
corresponding Interest Payment on the Debentures, subject to receipt thereof by
the Trustee. With respect to each Callable Principal Receipt, interest will be
paid on or after the applicable due date of the corresponding Interest Payment
after the Call Date on the Debentures, subject to receipt thereof by the
Trustee. Unless earlier redeemed, the principal portion of each Callable
Principal Receipt is payable on or after the due date of the corresponding
Principal Payment, which is the maturity date of the Debentures, subject to
receipt of such principal by the Trustee. On or after the Call Date, the
Debentures may be redeemed by the Obligor. In the event of such redemption,
subject to its receipt by the Trustee, the Trustee shall pay to the holder of
each Callable Principal Receipt, all or any part of the principal amount so
received by the Trustee upon redemption, in whole or in part, of the Debenture
along with any redemption premium paid by the Obligor. The face amount of each
Receipt will be equal to the payment or payments to be received thereon.
The Receipts are being offered at substantial discounts from their face
amounts. See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" in the Prospectus for a
discussion of certain income tax consequences.
Pursuant to the Trust Agreement, the Debentures underlying the Receipts
will be held by the Trustee for the benefit of the Holders in the form of
physical Receipts or as book-entry credits to an account of the Trustee at DTC.
The Obligor is not a party to the Trust Agreement. Each Holder of a Receipt, by
its acceptance thereof, agrees to be bound by the terms and conditions of the
Trust Agreement.
THE RECEIPTS OFFERED HEREBY ARE DIFFERENT FROM, AND NOT EXCHANGEABLE FOR,
ANY OTHER SERIES OF RECEIPTS OR ANY OTHER RECEIPT OR CERTIFICATE EVIDENCING
OWNERSHIP OF FUTURE INTEREST,
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PRINCIPAL AND PREMIUM, IF ANY, PAYMENTS DUE ON OBLIGOR OBLIGATIONS, AND ARE
SUBJECT TO THE TERMS AND CONDITIONS OF THE TRUST AGREEMENT.
The Receipts are being offered initially in book entry form only through
DTC, in face amounts of $1,000 and multiples thereof, and purchasers will not
receive physical Receipts representing their ownership of Receipts.
DEFAULT ON DEBENTURE
If the Obligor defaults on the payment of interest or principal of any
Debenture which is evidenced by a Receipt, the Trustee shall promptly give
notice to DTC or, for any Receipts which are not then held by DTC or any other
depository, directly to the Holders thereof. Such notice shall set forth (a) the
identity of the issue of Debenture, (b) the date and nature of such default, (c)
the face amount of the interest or principal in default, (d) the identifying
numbers of the Coupon Receipts or Callable Principal Receipts or any
combination, as the case may be, affected by the default, and (e) any other
information which the Trustee may deem appropriate.
In the event that, prior to the stated maturity of the Debenture, the
Trustee receives money or other property in respect of the Debenture (other than
a scheduled Interest Payment on or with respect to an Interest Payment Date) as
a result of a payment default on the Debenture, or actual notice that such
moneys or other property will be received, the Trustee will promptly give notice
as provided in the Trust Agreement to DTC, or for any Receipts which are not
then held by DTC or any other depository, directly to the Holders of the
Receipts then outstanding and unpaid. Such notice will state that, not later
than 30 days after the receipt of such moneys or other property, the Trustee
will allocate and distribute such moneys or other property to the holders of
Coupon Receipts and Callable Principal Receipts then outstanding and unpaid, in
proportion to the Accreted Value of each outstanding class of Receipts, and
within each class pro rata by face amount. Property other than cash will be
liquidated by the Trustee, and the proceeds thereof distributed in cash, only to
the extent necessary to avoid distribution of fractional securities to
Receiptholders. For purposes of the foregoing, the term "Accreted Value" means,
for any class of Receipts, (a) the original issue price for such class, plus (b)
an investment return accrued to the date of determination calculated based upon
a semi-annual compounding rate equal to the original yield to maturity for such
class. The original issue prices and original yields to maturity referred to
above will be set forth in the Trust Agreement.
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THE OFFERING
The Receipts will be transferred by the Depositor to Rickel Securities,
Inc. in exchange for the Debentures, and there will be no cash proceeds received
by the Depositor from the sale of the Receipts. Rickel Securities, Inc. has
purchased each Debenture in the secondary market at a price that is lower than
the aggregate price expected to be realized by Rickel Securities, Inc. from its
sale of the Coupon Receipts and Callable Principal Receipts related to such
Debenture. The difference between the price paid by Rickel Securities, Inc. to
purchase each Debenture in the secondary market and the aggregate proceeds to be
realized by Rickel Securities, Inc. from the sale of the Receipts related to
such Debenture, less costs and expenses, represents underwriting compensation to
Rickel Securities, Inc. No other remuneration will be received by Rickel
Securities, Inc. or the Depositor in connection with the offering.
The Receipts are being offered and sold by Rickel Securities, Inc. pursuant
to this Prospectus Supplement in negotiated transactions with dealers and other
investors. The actual price of the Receipts will be determined at the times of
such sales and are expected to vary for different Receipts.
The obligation of Rickel Securities, Inc. to deliver the Receipts is
subject to certain conditions, including, among others, the receipt of certain
legal opinions described in the Prospectus.
THE DEBENTURES
The following description has been obtained from the Obligor's Registration
Statement on Form S-3 dated November 14, 1995 as supplemented by the Obligor's
Prospectus Supplement dated June 5, 1995 pursuant to which the Debentures were
originally offered and sold to the public. The following summary of certain
provisions of the Indenture (as defined below) and the Debentures does not
purport to be complete, and such descriptions are qualified in their entirety by
reference to all of the provisions of the Indenture and the Debentures, as the
case may be (including in each case the definitions therein of certain terms).
Although the Depositor believes that the descriptions contained herein are
accurate, the Depositor has not independently confirmed the accuracy of each of
the statements made herein.
DESCRIPTION OF DEBENTURES
The Debentures are limited to $400,000,000 aggregate principal amount and
were issued under an Indenture dated as of
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December 7, 1995 between the Obligor and Citibank, N.A. as Trustee (the
"Debenture Trustee"), as amended by all indentures supplemental thereto
(hereinafter referred to as the "Indenture").
The Debentures will mature on June 15, 2024, unless the Debentures are
redeemed prior thereto. The Debentures will pay interest semi-annually on each
June 15 and December 15 beginning December 15, 1997, to the persons in whose
names the Debentures are registered at the close of business on the last day of
the calendar month next preceding such June 15 and December 15.
The Obligor may redeem the Debentures, in whole at any time, or in part
from time to time, on or after June 15, 2008, at the following redemption prices
(expressed as a percentage of the principal amount of the Debentures to be
redeemed), together with unpaid interest accrued to the date fixed for
redemption, if redeemed during the twelve month period beginning on June 15,
YEAR REDEMPTION PRICE YEAR REDEMPTION PRICE
- ---- ---------------- ---- ----------------
2008 103.090% 2013 101.159%
2009 102.704% 2014 100.773%
2010 102.318% 2015 100.386%
2011 101.931% 2016 and
2012 101.545% thereafter 100.000%
Notice of redemption shall be given to the registered holders of the Debentures
not less than 30 days nor more than 60 days prior to the date fixed for
redemption. If less tan all of the Debentures are to be redeemed, the Debenture
Trustee shall select, in such manner as in its sole discretion it shall deem
appropriate and fair, the Debentures thereof to be redeemed.
The Debentures have been issued in book-entry form.
All payments of principal and interest will be made by the Obligor in
immediately available funds.
The Debentures will trade in the Depository's Same-Day Funds Settlement
System until maturity, and secondary market trading activity in the Debentures
will therefore be required by the Depository to settle in immediately available
funds.
Numerical references in parentheses below are to sections in the
Indenture. The following summaries of certain provisions of the Indenture and
the Debentures do not purport to be complete and such summaries are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture, including the definition therein of certain terms.
GENERAL
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The Debentures are unsecured and rank pari passu with all other unsecured
and unsubordinated indebtedness of the Obligor.
CERTAIN COVENANTS
The only financial covenant applicable to the Debentures is that described
under "Limitation on Liens" below. That covenant requires that the Debentures be
equally and ratably secured in the circumstances described therein but has no
special application merely by virtue of the occurrence of any transaction or
series of transactions resulting in material changes in the Obligor's
debt-to-equity ratio.
Definitions Applicable to Covenants. The following definitions shall be
applicable to the covenants specified below:
(i) "Attributable Debt" means, at the time of determination as to any
lease, the present value (discounted at the actual rate, if stated, or, if no
rate is stated, the implicit rate of interest of such lease transaction as
determined by the chairman, president, any vice chairman, any vice president,
the treasurer or any assistant treasurer of the Obligor), calculated using the
interval of scheduled rental payments under such lease, of the obligation of the
lessee for net rental payments during the remaining term of such lease
(excluding any subsequent renewal or other extension options held by the
lessee). The term "net rental payments" means, with respect to any lease for any
period, the sum of the rental and other payments required to be paid in such
period by the lessee thereunder, but not including, however, any amounts
required to be paid by such lessee (whether or not designated as rental or
additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates, indemnities or similar charges required to be paid by
such lessee thereunder or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, earnings or profits or of
maintenance and repairs, insurance, taxes, assessments, water rates, indemnities
or similar charges; provided, however, that, in the case of any lease which is
terminable by the lessee upon the payment of a penalty in an amount which is
less than the total discounted net rental payments required to be paid from the
later of the first date upon which such lease may be so terminated and the date
of the determination of net rental payments, "net rental payments" shall include
the then-current amount of such penalty from the later of such two dates, and
shall exclude the rental payments relating to the remaining period of the lease,
commencing with the later of such two dates.
(ii) "Debt" means notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed.
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(iii) "Manufacturing Subsidiary" means any Subsidiary (A) substantially all
the property of which is located within the continental United States of
America, (B) which owns a Principal Domestic Manufacturing Property and (C) in
which the Obligor's investment, direct or indirect and whether in the form of
equity, debt, advances or otherwise, is in excess of $2,500,000,000 as shown on
the books of the Obligor as of the end of the fiscal year immediately preceding
the date of determination; provided, however, that "Manufacturing Subsidiary"
shall not include Electronic Data Systems Corporation and its Subsidiaries,
Hughes Electronics Corporation and its Subsidiaries, General Motors Acceptance
Corporation and its Subsidiaries, (or any corporate successor of any of them) or
any other Subsidiary, which is principally engaged in leasing or in financing
installment receivables or otherwise providing financial or insurance services
to the Obligor or others or which is principally engaged in financing the
Obligor's operations outside the continental United States of America.
(iv) "Mortgage" means any mortgage, pledge, lien, security interest,
conditional sale or other title retention agreement or other similar
encumbrance.
(v) "Principal Domestic Manufacturing Property" means any manufacturing
plant or facility owned by the Obligor or any Manufacturing Subsidiary which is
located within the continental United States of America and, in the opinion of
the Board of Directors, is of material importance to the total business
conducted by the Obligor and its consolidated affiliates as an entity.
(vi) "Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time owned by the Obligor, or by one or more Subsidiaries, or by the
Obligor and one or more Subsidiaries (Section 4.08 of the Indenture).
LIMITATION ON LIENS. For the benefit of the Debentures, the Obligor will
not, nor will it permit any Manufacturing Subsidiary to, issue or assume any
Debt secured by a Mortgage upon any Principal Domestic Manufacturing Property of
the Obligor or any Manufacturing Subsidiary or upon any shares of stock or
indebtedness of any Manufacturing Subsidiary (whether such Principal Domestic
Manufacturing Property, shares of stock or indebtedness are now owned or
hereafter acquired) without in any such case effectively providing concurrently
with the issuance or assumption of any such Debt that the Debentures (together
with, if the Obligor shall so determine, any other indebtedness of the
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Obligor or such Manufacturing Subsidiary ranking equally with the Debentures and
then existing or thereafter created) shall be secured equally and ratably with
such Debt, unless the aggregate amount of Debt issued or assumed and so secured
by Mortgages, together with all other Debt of the Obligor and its Manufacturing
Subsidiaries which (if originally issued or assumed at such time) would
otherwise be subject to the foregoing restrictions, but not including Debt
permitted to be secured under clauses (i) through (vi) of the immediately
following paragraph, does not at the time exceed 20% of the stockholders' equity
of the Obligor and its consolidated Subsidiaries, as determined in accordance
with generally accepted accounting principles and shown on the audited
consolidated balance sheet contained in the last published annual report to the
stockholders of the Obligor.
The above restrictions shall not apply to Debt secured by:
(i) Mortgages on property, shares of stock or indebtedness of any
corporation existing at the time such corporation becomes a Manufacturing
Subsidiary;
(ii) Mortgages on property existing at the time of acquisition of such
property by the Obligor or a Manufacturing Subsidiary, or Mortgages to secure
the payment of all or any part of the purchase price of such property upon the
acquisition of such property by the Obligor or a Manufacturing Subsidiary or to
secure any Debt incurred prior to, at the time of, or within 180 days after, the
later of the date of acquisition of such property and the date such property is
placed in service, for the purpose of financing all or any part of the purchase
price thereof, or Mortgages to secure any Debt incurred for the purpose of
financing the cost to the Obligor or a Manufacturing Subsidiary of improvements
to such acquired property;
(iii) Mortgages securing Debt of a Manufacturing Subsidiary owing to the
Obligor or to another Subsidiary;
(iv) Mortgages on property of a corporation existing at the time such
corporation is merged or consolidated with the Obligor or a Manufacturing
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially as an entirety to
the Obligor or a Manufacturing Subsidiary;
(v) Mortgages on property of the Obligor or a Manufacturing Subsidiary in
favor of the United States of America or any State thereof, or any department,
agency or instrumentality or political subdivision of the United States of
America or any State thereof, or in favor of any other country, or any political
subdivision thereof, to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or any
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part of the purchase price or the cost of construction of the property subject
to such Mortgages; or
(vi) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Mortgage referred to in the
foregoing clauses (i) to (v), inclusively; provided, however, that the principal
amount of Debt secured thereby shall not exceed by more than 115% the principal
amount of Debt so secured at the time of such extension, renewal or replacement
and that such extension, renewal or replacement shall be limited to all or a
part of the property which secured the Mortgage so extended, renewed or replaced
(plus improvements on such property). (Section 4.06 of the Indenture).
LIMITATION ON SALE AND LEASE-BACK. For the benefit of the Debentures, the
Obligor will not, nor will it permit any Manufacturing Subsidiary to enter into
any arrangement with any person providing for the leasing by the Obligor or any
Manufacturing Subsidiary of any Principal Domestic Manufacturing Property owned
by the Obligor or any Manufacturing Subsidiary on the date that the Debentures
are originally issued (except for temporary leases for a term of not more than
five years and except for leases between the Obligor and a Manufacturing
Subsidiary or between Manufacturing Subsidiaries), which property has been or is
to be sold or transferred by the Obligor or such Manufacturing Subsidiary to
such person, unless either:
(i) the Obligor or such Manufacturing Subsidiary would be entitled,
pursuant to the provisions of the covenant on limitation on liens described
above, to issue, assume, extend, renew or replace Debt secured by a Mortgage
upon such property equal in amount to the Attributable Debt in respect of such
arrangement without equally and ratably securing the Debentures provided,
however, that from and after the date on which such arrangement becomes
effective the Attributable Debt in respect of such arrangement shall be deemed
for all purposes under the covenant on limitation on liens described above and
this covenant on limitation on sale and lease-back to be Debt subject to the
provisions of the covenant on limitation on liens described above (which
provisions include the exceptions set forth in clauses (i) through (vi) of such
covenants), or
(ii) the Obligor shall apply an amount in cash equal to the Attributable
Debt in respect of such arrangement to the retirement (other than any mandatory)
retirement or by way of payment at maturity), within 180 days of the effective
date of any such arrangement, of Debt of the Obligor or any Manufacturing
Subsidiary (other than Debt owned by the Obligor or any Manufacturing
Subsidiary) which by its terms matures at or is extendible or renewable at the
option of the obligor to a date more than twelve months after the date of the
creation of such Debt. (Section 4.07 of the Indenture).
S-13
<PAGE>
MODIFICATION OF THE INDENTURE
The Indenture provides that the Obligor and the Debenture Trustee may enter
into supplemental indentures without the consent of the holders of the
Debentures to (a) evidence the assumption by a successor corporation of the
obligations of the Obligor, (b) add covenants for the protection of the holders
of the Debentures, (c) add or change any of the provisions of the Indenture to
permit or facilitate the issuance of Debentures of any series in bearer form,
(d) cure any ambiguity or correct any inconsistency in such Indenture, (e)
establish the form or terms of Debentures of any series as permitted by the
terms of the Indenture and (f) evidence the acceptance of appointment by a
successor trustee. (Section 10.01 of the Indenture).
The Indenture also contains provisions permitting the Obligor and the
Debenture Trustee to modify or amend the Indenture or any supplemental indenture
or the rights of the holders of the Debentures issued thereunder, with the
consent of the holders of not less than a majority in principal amount of the
Debentures of all series at the time outstanding under such Indenture which are
affected by such modification or amendment (voting as one class), provided that
no such modification shall (i) extend the fixed maturity of any Debentures, or
reduce the principal amount thereof, or premium, if any, or reduce the rate or
extend the time of payment of interest or Additional Amounts thereon, or reduce
the amount due and payable upon acceleration of the maturity thereof or the
amount provable in bankruptcy, or make the principal of, or interest, premium or
Additional Amounts on, any Debenture payable in any coin or currency other than
that provided in such Debenture, (ii) impair the right to initiate suit for the
enforcement of any such payment on or after the stated maturity thereof, or
(iii) reduce the aforesaid percentage of Debentures, the consent of the holders
of which is required for any such modification, or the percentage required for
the consent of the holders to waive defaults, without the consent of the holder
of each Debenture so affected. (Section 10.02 of the Indenture.
EVENTS OF DEFAULT
An Event of Default with respect to any series of Debentures is defined in
the Indenture as being:
(i) default in payment of any principal or premium, if any on such series;
(ii) default for 30 days in payment of any interest or Additional Amounts
on such series;
(iii) default for 90 days after notice in performance of any other covenant
applicable to the Debentures; or
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<PAGE>
(iv) certain events of bankruptcy, insolvency or reorganization. (Section
6.01 of the Indenture).
In case an Event of Default under clause (i), (ii) or (iii) shall occur and
be continuing with respect to any series, the Debenture Trustee or the holders
of not less than 25% in aggregate principal amount of Debentures of each such
series then outstanding may declare the principal (or, in the case of discounted
Debentures, the amount specified in the terms thereof) of such series to be due
and payable. In case an Event of Default under clause (iv) shall occur and be
continuing, the Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of all the Debentures then outstanding (voting as one
class) may declare the principal (or, in the case of discounted Debentures, the
amount specified in the terms thereof) of all outstanding Debentures to be due
and payable. Any Event of Default with respect to a particular series of
Debentures may be waived by the holders of a majority in aggregate principal
amount of the outstanding Debentures of such series (or of all the outstanding
Debentures, as the case may be), except in a case of failure to pay principal or
premium, if any, or interest or Additional Amounts in respect of such Debenture
for which payment had not been subsequently made. (Section 6.01 of the
Indenture). The Indenture provides that the Debenture Trustee may withhold
notice to the securityholders of any default (except in payment of principal,
premium, if any, interest or Additional Amounts) if it considers it in the
interests of the securityholders to do so. (Section 6.07 of the Indenture).
Subject to the provisions of the Indenture relating to the duties of
the Debenture Trustee in case an Event of Default shall occur and be continuing,
the Debenture Trustee shall be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
securityholders, unless such securityholders shall have offered to the Debenture
Trustee reasonable indemnity. (Section 7.01 and 7.02 of the Indenture). Subject
to such provisions for the indemnification of the Debenture Trustee and to
certain other limitations, the holders of a majority in aggregate principal
amount of the Debentures of all series affected (voting as one class) at the
time outstanding shall have the right to direct the time, method and place of
conducting any proceeding of any remedy available to the Debenture Trustee, or
exercising any trust or power conferred on the Debenture Trustee. (Section 6.06
of the Indenture).
THE TRUSTEE
Marine Midland Bank will act as Trustee under the Trust Agreement. The
designated office of the Trustee for the transfer, exchange or withdrawal of
Receipts is Marine Midland Bank, New
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<PAGE>
York, New York. Notwithstanding the foregoing, under the DTC Book Entry Only
System, transfers and exchange of Receipts will be accomplished as described
under "Certain Information Regarding the Receipts - Book-Entry Registration" in
the Prospectus.
Any Holder presenting Receipts for surrender or registration of transfer or
exchange may be required to file such proof of residence, or other matters or
information, to execute such certificates and to make such representations and
warranties and such assurances, including a signature guaranty, as the Trustee
may reasonably deem necessary or proper. The Trustee may withhold the delivery
or delay the surrender of a registration of transfer or exchange of any Receipts
until such proof or other information is filed, such receipts are executed or
such representations and warranties are made.
S-16
<PAGE>
COUPON CERTIFICATES
AGGREGATE FACE
ITEM NUMBER DUE DATE CUSIP NUMBER AMOUNT OFFERED
- ----------- -------- ------------ --------------
SER. 1 CPN RECP. 12/15/1997 025270 AA 7 $972,000
SER. 1 CPN RECP. 06/15/1998 025270 AB 5 972,000
SER. 1 CPN RECP. 12/15/1998 025270 AC 3 972,000
SER. 1 CPN RECP. 06/15/1999 025270 AD 1 972,000
SER. 1 CPN RECP. 12/15/1999 025270 AE 9 972,000
SER. 1 CPN RECP. 06/15/2000 025270 AF 6 972,000
SER. 1 CPN RECP. 12/15/2000 025270 AG 4 972,000
SER. 1 CPN RECP. 06/15/2001 025270 AH 2 972,000
SER. 1 CPN RECP. 12/15/2001 025270 AJ 8 972,000
SER. 1 CPN RECP. 06/15/2002 025270 AK 5 972,000
ER. 1 CPN RECP. 12/15/2002 025270 AL 3 972,000
SER. 1 CPN RECP. 06/15/2003 025270 AM 1 972,000
SER. 1 CPN RECP. 12/15/2003 025270 AN 9 972,000
SER. 1 CPN RECP. 06/15/2004 025270 AP 4 972,000
SER. 1 CPN RECP. 12/15/2004 025270 AQ 2 972,000
SER. 1 CPN RECP. 06/15/2005 025270 AR 0 972,000
SER. 1 CPN RECP. 12/15/2005 025270 AS 8 972,000
SER. 1 CPN RECP. 06/15/2006 025270 AT 6 972,000
SER. 1 CPN RECP. 12/15/2006 025270 AU 3 972,000
SER. 1 CPN RECP. 06/15/2007 025270 AV 1 972,000
SER. 1 CPN RECP. 12/15/2007 025270 AW 9 972,000
SER. 1 CPN RECP. 06/15/2008 025270 AX 7 972,000
S-17
<PAGE>
PRINCIPAL CERTIFICATES
Aggregate Face
Item Number Due Date Cusip Number Amount Offered
- ----------- -------- ------------ --------------
1-CALL PRIN RCPT 06/15/2024 025270 AY 5 $24,000,000
SER. 1 CPN RECP.
06/15/2024
025270 AY 5
S-18
<PAGE>
PROSPECTUS
AMERICAN CORPORATE ACCRUAL RECEIPTS
-------------
AMERICAN CORPORATE ACCRUALS, INC.
DEPOSITOR
-------------
The American Corporate Accrual Receipts (the "Receipts") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (each a "Prospectus Supplement"). Each series of
Receipts will include two classes of Receipts.
The Receipts of each series will be issued by a newly formed, limited
purpose trust to be formed with respect to such series (each, a "Trust"). The
property of each Trust will be limited to a portion of one discrete issue of
taxable debt securities (the "Bonds") issued by a corporation or other issuer
that is eligible to offer and sell securities pursuant to a registration
statement on Form S-3 promulgated under the Securities Act of 1933, and which
issuer has a class of equity securities registered under Section 12 of the
Securities Exchange Act of 1934 and is therefore subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
will be obligated to file reports and other information with the Securities and
Exchange Commission. The Bonds will have been previously publicly issued
pursuant to an offering registered under the Securities Act. The identity of and
material terms of the Bonds held by a particular Trust will be described in the
related Prospectus Supplement.
Each Trust will be formed pursuant to a Trust Agreement (the "Trust
Agreement") to be entered into between American Corporate Accruals, Inc. as
Depositor (the "Depositor") and the Trustee specified in the related Prospectus
Supplement (the "Trustee").
Each series of Receipts will represent fractional undivided interests in
all of the interest and principal payments on the Bonds in the related Trust.
Each class of Receipts of any series will represent the right to receive a
specified payment of principal and/or interest on the related Bonds in the
manner described herein and in the related Prospectus Supplement, to the extent
that such payment has been actually received by the Trustee. The amounts, rates
and dates of such payments will be set forth in the related Prospectus
Supplement, and will correspond to the payments on the related Bonds. In the
event of a payment default on the underlying Bonds which is not cured within ten
days, Receiptholders will obtain the right to proceed directly against the
issuer of the Bonds.
There will be no secondary market for the Receipts prior to the offering
thereof. While Rickel Securities, Inc., an affiliate of the Depositor, intends
to make a secondary market in the Receipts, it is not obligated to do so. There
can be no assurance that a secondary market for the Receipts will develop or, if
it does develop, that it will continue. The Receipts may or may not be listed on
a securities exchange. If the Receipts are listed on a securities exchange, the
name of such exchange will be disclosed in the related Prospectus Supplement.
Receipts will be issued in book-entry form. Each class of Receipts
initially issued in book-entry form will be represented by a single physical
certificate registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of owners of such Receipts will be
represented by book entries on the records of DTC and participating members
thereof. Certificated Receipts will be available only under limited
circumstances.
-------------
PROCEEDS OF THE BONDS HELD BY THE TRUST FOR ANY SERIES ARE THE SOLE SOURCE
OF PAYMENTS ON THE RECEIPTS FOR SUCH SERIES. THE RECEIPTS WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY, THE
DEPOSITOR OR RICKEL SECURITIES, INC., ANY OTHER TRUST OR ANY OF THEIR RESPECTIVE
AFFILIATES. THE RECEIPTS ARE DIFFERENT FROM, AND SHOULD NOT BE DEEMED TO BE A
SUBSTITUTE FOR, DIRECT OWNERSHIP OF THE BONDS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Receipts may be sold by the Depositor through agents designated from time
to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone, as more fully
described under "Plan of Distribution" and in the related Prospectus Supplement.
If underwriters or agents are involved in the offering of the Receipts of any
series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities offered
hereby unless accompanied by a Prospectus Supplement.
RICKEL SECURITES, INC.
The date of this Prospectus is March 6, 1995.
<PAGE>
AVAILABLE INFORMATION
American Corporate Accruals, Inc., as depositor of each Trust, has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto,
referred to herein as the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Receipts offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, omits certain information contained in such Registration
Statement pursuant to the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement which may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and 75 Park Place, New York, New York 10007. Copies of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information concerning
the related Bonds, including an annual independent accountant's statement of
review regarding the payment of all income on the Bonds to the holders of
Receipts ("Receiptholders," or "Holders"), will be prepared by the related
Trustee and sent on behalf of each Trust only to Cede & Co. ("Cede"), as nominee
of DTC and registered holder of the Receipts. See "Certain Information Regarding
The Receipts -- Book-Entry Registration;" and "--Reports to Receiptholders."
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. Each Trust will file with the
Commission such other reports as may be required under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder.
<PAGE>
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Receipts contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of such
Receipts. Certain capitalized terms used in this Prospectus Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement. A listing
of the pages on which some of such terms are defined is found in the "Index of
Terms."
Issuer............ With respect to each series of Receipts, the Trust to be
formed by the Depositor and the Trustee pursuant to the
Trust Agreement. Each Trust will be established for the
primary purpose of issuing Receipts of a single series
representing fractional ownership interests in the Bonds to
be described in the related Prospectus Supplement for such
series. The Bonds will be deposited into the Trust by the
Depositor in exchange for Receipts, the aggregate face
amount of which will correspond exactly to the aggregate
amount of principal and interest payable on the Bonds from
the date of deposit to the date of maturity (or, in the case
of Callable Principal Receipts, the first date upon which
the Bonds are redeemable).
Depositor.......... American Corporate Accruals, Inc.
Trustee............ The Trustee specified in the related Prospectus Supplement.
The Receipts....... Each series of Receipts will include two classes of Receipts
issued pursuant to a Trust Agreement between the Depositor
and the Trustee: (i) Coupon Receipts, which represent the
right to receive a single payment of interest on the Bonds,
and (ii) either (x) Principal Receipts, which represent the
right to receive a single payment of principal on the Bonds
upon maturity, or (y) in any case where the Bonds are
subject to early
-3-
<PAGE>
redemption, Callable Principal Receipts, which represent the
right to receive all interest payments from the first date
upon which the Bonds are redeemable and principal upon
redemption or maturity, plus any redemption premium. The
Receipts will be available initially only in book-entry
form. Receiptholders will be able to receive Certificated
Receipts only in the limited circumstances described herein.
See "Certain Information Regarding the Receipts --
Certificated Receipts."
The Bonds ......... The property of each Trust will be limited to taxable debt
securities (the "Bonds") acquired by the Depositor from
Rickel Securities, Inc., an affiliate of the Depositor, in
exchange for the Receipts. The Bonds will be described in
the related Prospectus Supplement and will have been issued
by a corporation or other issuer eligible to offer and sell
securities registered on a registration statement on Form
S-3 promulgated under the Securities Act, and which also has
a class of equity securities registered under Section 12 of
the Exchange Act and therefore is subject to the periodic
reporting requirements of the Exchange Act. Each of the
Bonds will have been previously publicly issued in an
offering registered pursuant to the Securities Act. Rickel
Securities, Inc. will have previously purchased, or will
contemporaneously purchase the Bonds in the secondary
market. Rickel Securities, Inc. will not purchase the Bonds
from the issuer thereof or any of its affiliates, and the
Bonds will not be purchased by Rickel Securities, Inc. as a
part of the initial distribution thereof. After the date of
issuance by each Trust of the related Receipts (the
"Issuance Date"), such Trust will not purchase or otherwise
acquire any additional securities and will
-4-
<PAGE>
not dispose of or create any lien on its assets, other than
upon termination of such Trust.
Payments........... Subject to timely receipt of payments on the Bonds, payments
in respect of each class of any series of Receipts will be
paid or distributed at such times and in such manner as
described in the related Prospectus Supplement.
Certain Federal
Income Tax
Considerations..... Receipts will constitute "stripped coupons" or "stripped
bonds" for purposes of Section 1286 of the Internal Revenue
Code of 1986, as amended (the "Code"). As such, the Receipts
will be treated as if issued with original issue discount.
Consequently, purchasers of Receipts should understand that
if they are subject to income taxation, it is likely that
they will be allocated taxable income with respect to their
Receipts each year prior to maturity of the Receipts,
although they will not receive any cash distributions with
respect to the Receipts they hold prior to Maturity. In any
such event, a Holder would have to use other cash resources
to pay the tax on the taxable income allocated as a result
of his, her or its ownership of the Receipts. Upon the
issuance of each series of Receipts, McCarter & English,
special tax counsel to the Depositor, will deliver an
opinion with respect to certain federal income tax
consequences. See "Certain Federal Income Tax
Considerations" herein for additional information concerning
the application of federal, state, local and other laws.
ERISA
Considerations..... Under a regulation issued by the Department of Labor, the
Trust assets represented by a series of Receipts will not be
deemed "plan assets" of an employee benefit plan holding the
Receipts if certain
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<PAGE>
conditions are met, including that such class of Receipts
must be held, upon completion of the initial public offering
of the Receipts, by at least 100 investors who are
independent of the Depositor and of one another. For certain
series of Receipts the Depositor expects that (i) one or
more classes of Receipts of each series will be held by at
least 100 independent investors at the conclusion of the
initial public offering thereof (although no assurance can
be given, and no monitoring or other measures will be taken
to ensure, that such condition will be met), and (ii) the
other conditions of the regulation will be met. If the Trust
assets represented by a series of Receipts were deemed to be
"plan assets" of an employee benefit plan investor (e.g. if
the 100 independent investor criterion is not satisfied),
violation of the "prohibited transaction" rules of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax and other
liabilities under ERISA and Section 4975 of the Code, unless
a statutory, regulatory or administrative exemption is
available. It is uncertain whether existing exemptions from
the "prohibited transaction" rules of ERISA would apply to
all transactions involving the Trust assets represented by
the related Receipts. Accordingly, fiduciaries considering a
purchase of the Receipts on behalfof employee benefit plans
should consult their counsel before making the purchase. See
"ERISA Considerations" herein.
THE TRUSTS
GENERAL
With respect to each series of Receipts, the Depositor will establish a
Trust by depositing the Bonds in the Trust without recourse. After the Issuance
Date with respect to each Trust, such
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<PAGE>
Trust will not purchase or otherwise acquire any additional securities and will
not dispose of or create any lien on its assets, other than upon termination of
the Trust, and will not issue any additional Receipts or other securities. The
Receipts of each series will evidence fractional ownership interests in the
related Bonds.
THE TRUSTEE
The Trustee for each Trust and the principal offices of the Trustee will be
as specified in the related Prospectus Supplement. The Trustee's liability in
connection with the issuance and sale of the Receipts is limited solely to the
express obligations of such Trustee set forth in the related Trust Agreement. A
Trustee may resign at any time, in which event the Depositor will be obligated
to appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
THE BONDS
GENERAL
The Bonds to be purchased by each Trust will be taxable debt securities
issued by a corporation or other entity (each such entity, an "Obligor")
eligible to offer and sell securities registered on a registration statement on
Form S-3 promulgated under the Securities Act, and which also has a class of
equity security registered under Section 12 of the Exchange Act and therefore is
subject to the periodic reporting requirements of the Exchange Act. Each of the
Bonds will have been previously publicly issued in an offering registered
pursuant to the Securities Act. The Bonds will have been acquired by the
Depositor from Rickel Securities, Inc. in exchange for the Receipts. Rickel
Securities, Inc. will have previously purchased the Bonds in the secondary
market. Rickel Securities, Inc. will not have purchased the Bonds from the
issuer thereof or any of its affiliates, and the Bonds will not have been
purchased by Rickel Securities, Inc. as part of the initial distribution
thereof. The specific terms and conditions of the Bonds to be purchased by each
Trust will be set forth in the related Prospectus Supplement.
THE OBLIGORS
In order to be eligible to offer and sell securities registered on a
registration statement on Form S-3, and thus fulfill that portion of the
criteria for Bond Obligors set forth above, an Obligor must:
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<PAGE>
1. Be incorporated or otherwise organized under the laws of the United
States or any State or territory or the District of Columbia and have its
principal business operations in the United States or its territories;
2. Have a class of securities registered under the Exchange Act and be
required to file reports pursuant to that Act;
3. Have been subject to the periodic reporting requirements of the Exchange
Act for a period of at least 12 calendar months, and have filed in a timely
manner all reports required to be filed during the 12 calendar months and any
portion of a month preceding the relevant date; and
4. Have at least $75,000,000 in aggregate market value of voting stock held
by non-affiliates of the Obligor.
The Depositor will base its determination of whether a specific Obligor
meets this criteria on the basis of available public information. See "Available
Information Regarding the Obligors - Public Information." The Depositor will not
confirm any such determination with the Obligor. In making such determination,
the Depositor will necessarily assume that all of the information which an
Obligor has filed with the Commission is true, accurate and complete.
AVAILABLE INFORMATION REGARDING THE OBLIGORS
PUBLIC INFORMATION
The Obligors will be corporations or other entities that are subject to the
informational requirements of the Exchange Act and in accordance therewith file
reports and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Obligors with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007. Copies of
such material can be obtained from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. If the
Bonds are listed on the New York Stock Exchange, 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. If the Bonds
are listed on the American Stock Exchange, the material described above and
other information will also be available for inspection at the offices of the
American Stock Exchange at 86 Trinity Place, New York, New York.
-8-
<PAGE>
POSSIBLE UNAVAILABILITY OF PUBLIC INFORMATION AND RESULTING TRANSFER
RESTRICTIONS
An Obligor whose common stock (or similar equity security) ceases to be
held of record by 300 or more holders, which has no class of security listed on
a national securities exchange, and which has no class of debt security held of
record by 300 or more holders, could elect to suspend its Exchange Act reporting
requirements. Such suspension could occur at any time after the deposit of its
Bonds in a Trust. In such event, the public information referred to in the
preceding paragraph would no longer be available. If such reports are not
available to the Trust, the Receipts of such series will, by their terms,
generally be required to be removed from the DTC book entry system, and
definitive physical certificates representing the Receipts of such series will
be issued to the Holders of the Receipts of such series. Such actions could
hinder a Holder's ability to transfer their Receipts.
In the event an Obligor suspends its Exchange Act reporting and the
Receipts are removed from the DTC book entry system, the Depositor will notify
the Obligor that the Bonds are held pursuant to the Trust Agreement and that the
holders of the Receipts constitute record holders of the Bonds. The issuance of
such definitive physical certificates representing the Receipts may increase the
likelihood that there will then be more than 300 holders of record of the Bonds,
requiring the Obligor to resume filing Exchange Act reports, in light of Rule
12g5-1(b)(1) under the Exchange Act, which appears to require an obligor with
actual knowledge that its bonds are held pursuant to a Trust Agreement to treat
holders of record of certificates or other evidences of interest issued by the
Trust as holders of record of the underlying Bonds. However, no assurances can
be given that this procedure will result in the Obligor resuming its Exchange
Act filings, due to, among other reasons, the fact that to the Depositor's
knowledge, no court of competent jurisdiction has interpreted and enforced Rule
12g5-1(b)(1) in the circumstances described above. In addition, the Depositor is
unable to predict whether, even if the holders of Receipts are treated as
holders of the Bonds, the issuance of definitive physical certificates will
cause there to be more than 300 holders of record of the Bonds.
BONDHOLDER COMMUNICATIONS
Upon the receipt by the Trust of any Bondholder communications from an
Obligor, the Trustee, on behalf of the Trust, will transmit such communications
to the beneficial owners of the Receipts upon receipt from the Obligor of
assurances that the Trust's reasonable expenses will be reimbursed by the
Obligor. In addition, upon receipt by the Trust of Bondholder communications
from a third party (other than the Obligor), the Trustee, on behalf of the
Trust, will transmit such Bondholder communications to the beneficial owners of
the Receipts upon receipt from such third party of assurances that the Trustee's
reasonable expenses will be
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<PAGE>
reimbursed by such third party. In either case, if the Trustee does not receive
such assurances, then the Trustee, at the sole discretion of the Depositor and
at the expense of the Depositor and/or the Trust, will transmit or cause to be
transmitted any such Bondholder communications to such beneficial owners.
USE OF PROCEEDS
There will be no cash proceeds received by the Depositor or the Trust from
the sale of the Receipts. The issuance of each series of Receipts will involve
the following steps, some or all of which may take place simultaneously:
- Rickel Securities, Inc. will purchase the Bonds in the secondary market
for cash at the price(s) prevailing in the market.
- The Trust will issue the Receipts to the Depositor. The aggregate face
amount of Receipts will correspond exactly to the aggregate amount of principal
and interest payable on the Bonds from the date of deposit to the date of
maturity (or, in the case of Callable Principal Receipts, the first date upon
which the Bonds are redeemable).
- The Depositor will retransfer the Receipts to Rickel Securities, Inc. in
exchange for the Bonds.
- The Depositor will retransfer the Bonds to the Trust in consideration for
the Trust's issuance of the Receipts to the Depositor.
- Rickel Securities, Inc., acting as the Underwriter, will commence the
offering of the Receipts.
The Receipts will be offered from time to time through the Underwriter in
negotiated transactions, at various prices to be determined at the time of sale.
Any spread between the price at which the Receipts are sold and the purchase
price of the Bonds (less costs and expenses) will represent underwriting
compensation to Rickel Securities, Inc. Depending on the timing of the various
steps outlined above, Rickel Securities, Inc. may utilize a portion of the net
proceeds of the sale of the Receipts to finance or refinance the purchase of the
underlying Bonds.
The aggregate face amount of any series of Receipts will correspond exactly
to the aggregate amount of principal and interest payable on the underlying
Bonds from the date of deposit to the date of maturity (or, in the case of
Callable Principal Receipts, the first date upon which the Bonds are
redeemable). Therefore, the aggregate face amount of any particular series of
Receipts will not necessarily bear a direct relationship to the fair market
value of the underlying Bonds on the date that the Receipts are issued.
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THE DEPOSITOR
The Depositor, a wholly owned subsidiary of Rickel Securities, Inc., was
incorporated in the state of New Jersey in June, 1994. The Depositor was
organized for the limited purpose of acquiring Bonds from Rickel Securities,
Inc., forming Trusts, transferring Bonds to the Trusts, and engaging in related
activities. The principal executive offices of the Depositor are located at 45
Essex Street, Millburn, New Jersey 07041, and its phone number is 201-379-0300.
THE RECEIPTS
GENERAL
With respect to each Trust, the Receipts will be issued pursuant to the
terms of a Trust Agreement, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Receipts and the Trust
Agreement. Where particular provisions or terms used in the Trust Agreement are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of this summary.
Each class of a series of Receipts issued in book-entry form will initially
be represented by a single Receipt registered in the name of DTC. The Depositor
has been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of the Receipts issued in book-entry form.
Unless and until Certificated Receipts are issued under the limited
circumstances described herein, no Receiptholder will be entitled to receive a
physical certificate representing a Receipt. All references herein to actions by
Receiptholders refer to actions taken by DTC upon instructions from the
Participants and all references herein to distributions, notices, reports and
statements to Receiptholders refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Receipts, as the case
may be, for distribution to Receiptholders in accordance with DTC's procedures
with respect thereto. See "Certain Information Regarding the Receipts -- Book
Entry Registration" and "-- Certificated Receipts."
DISTRIBUTIONS OF INTEREST AND PRINCIPAL AMOUNT
There will not be any periodic interest payments on Coupon Receipts or
Principal Receipts. Each of such Receipts represents the right to receive a
single payment at its maturity.
With respect to Coupon Receipts, on and after the date of the interest
payment evidenced thereby, if the Obligor shall have paid in full and the
Trustee shall have confirmed receipt of the
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interest due on such interest payment date on the underlying Bonds, the Trustee
shall, upon surrender of such Coupon Receipts at the office of the Trustee
specified in the related Prospectus Supplement, pay to the Holder thereof in
lawful money of the United States of America, by check for immediately available
funds in accordance with such regulations as the Trustee may reasonably
establish consistent with the provisions of the Trust Agreement, the entire
amount of such interest payment evidenced thereby, less any taxes or
governmental charges required to be withheld from such payment by the Trustee.
With respect to any Principal Receipts, if the Obligor shall have paid in
full and the Trustee shall have confirmed receipt of the amount of such
principal upon maturity of the underlying Bonds, the Trustee shall, upon
surrender of such Principal Receipts at the office of the Trustee specified in
the related Prospectus Supplement, pay to the Holder thereof in lawful money of
the United States of America, by check for immediately available funds, in
accordance with such regulations as the Trustee may reasonably establish
consistent with the provisions of the Trust Agreement, the entire amount of such
principal evidenced thereby, less any taxes or governmental charges required to
be withheld from such payment by the Trustee.
With respect to any Callable Principal Receipts: (i) on or after each
interest payment date, if the Obligor shall have paid in full and the Trustee
shall have confirmed receipt of the interest due on such interest payment date
on the underlying Bonds, the Trustee shall pay to the Holder of record on the
applicable record date in lawful money of the United States of America by check
for immediately available funds, in accordance with such regulations as the
Trustee may reasonably establish consistent with the provisions of the Trust
Agreement, the entire amount of such interest, less any taxes or governmental
charges required to be withheld for such payment by the Trustee, provided that
no such payment shall be made if the interest payment date occurs after
redemption of the principal evidenced by such Receipts, and (ii) if the Obligor
shall have paid in full and the Trustee shall have confirmed receipt of (a) the
principal amount upon stated maturity of the underlying Bonds, the Trustee
shall, upon surrender of such Callable Principal Receipts at the office of the
Trustee specified therein, pay to the Holder thereof, in lawful money of the
United States of America, by check for immediately available funds, the entire
amount of such principal evidenced thereby, or (b) all or any part of the
principal amount upon redemption of the underlying Bonds, the Trustee shall upon
surrender of any series of Callable Principal Receipts called for redemption at
the office of the Trustee, pay to the Holder thereof in lawful money of the
United States of America, by check for immediately available funds, in
accordance with regulations as the Trustee may reasonably establish consistent
with the provisions of the Trust Agreement, the entire amount of such principal
evidenced thereby, or in the case of a partial redemption, the amount of such
principal so redeemed (and any
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redemption premium); in each case less any taxes or governmental charges
required to be withheld from such payment by the Trustee.
The Trust Agreement provides that all moneys received from Obligors by the
Trustee which represent payments of interest, principal or redemption premium on
the underlying Bonds shall be held by the Trustee without interest in a special
account until required to be disbursed. Therefore, to the extent that the
Trustee holds in trust any payments of interest or principal for any period
prior to disbursement of the same to the Receiptholders, these amounts will not
be invested, and there will be no income generated. However, because the payment
dates of the Receipts will correspond to the payment dates of the underlying
Bonds, and because the Trustee is under a duty to transfer payments received on
the Bonds to the Receiptholders following receipt (including, in the case of
Callable Principal Receipts, following the receipt of redemption proceeds prior
to the maturity date of the Bonds), it is anticipated that any such payments
will be held by the Trustee for only that period of time as may be necessary to
arrange re-transfer to the Receiptholders. To the extent DTC is the only
Receiptholder of record, as is presently contemplated, DTC will follow its own
internal procedures in crediting the accounts of its participants following the
receipt of any such payments.)
REDEMPTION OF CALLABLE PRINCIPAL RECEIPTS
Any class of Callable Principal Receipts of any series is subject to
redemption on the optional redemption dates and any mandatory redemption dates,
if applicable, of the related Bonds as set forth in the related Prospectus
Supplement. The Bonds related to each series of Callable Principal Receipts will
be subject to redemption prior to maturity on and after the dates and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
If the Bonds underlying any series of Callable Principal Receipts are
redeemed in whole or in part, the Trustee shall redeem a principal amount of
Callable Principal Receipts of such series equal to the principal amount of the
Bonds held in custody so redeemed. Upon redemption of any series of Callable
Principal Receipts the Holder will have no right to receive applicable interest
payments after the redemption date thereof.
In the event of a partial redemption of the Bonds underlying any series of
Callable Principal Receipts, the particular Callable Principal Receipts to be
redeemed shall be selected by the Trustee from the outstanding Callable
Principal Receipts of such series by lot or such other method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (in amounts equal to the minimum authorized denomination
of such series and integral multiples thereof) of the
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principal amount represented by such Callable Principal Receipts. To the extent
practicable the Trustee shall, in the case of partial redemption, redeem
Callable Principal Receipts so that no more than one Callable Principal Receipt
is thereby rendered other than in an authorized denomination.
Notice of redemption shall be given by the Trustee to each Holder of any
Callable Principal Receipts to be redeemed within thirty (30) days after notice
of redemption of the underlying Bonds has been given by the Obligor, trustee or
paying agent of or for the Bonds, as the case may be. All notices of redemption
shall state the redemption date, the amount payable on such date, the place at
which such Callable Principal Receipts are to be surrendered for payment, that
interest on amounts redeemed will cease to accrue and, if less than all of a
Holder's Callable Principal Receipt is to be redeemed, the principal amount of
such Callable Principal Receipt to be redeemed.
DEFAULT ON BONDS
If the Obligor defaults on the payment of any interest or principal which
is evidenced by the Receipts, the Trustee shall promptly give notice to Holders
thereof as provided in the Trust Agreement. Such notice shall set forth (a) the
identity of the issue of Bonds, (b) the date and nature of such default, (c) the
amount of the interest, principal or callable principal to which such default
relates, (d) the identifying numbers or the class of Receipts, or any
combination, evidencing the interest, Principal or Callable Principal (or
portions thereof) described above in clause "(c)", and (e) any other information
which the Trustee may deem appropriate.
Upon any default by the issuer of any Bond on the payment of any Interest,
Principal or Callable Principal which is evidenced by a Receipt, the Trustee
shall take all such steps as the Trustee shall deem necessary to protect the
rights of the Holders of Receipts. In order to protect such rights, the Trustee
may, in its own name and as trustee of an express trust, institute any action or
proceedings at law or in equity for the collection of the sums due and unpaid
upon any Bond, and may prosecute any such action or proceeding to judgment or
final decree. In addition, the Trustee shall be entitled and empowered, either
in its own name or as trustee of an express trust or as attorney-in-fact for the
Holders of Receipts or in any one or more of such capacities to file such proofs
of claim, claims, petitions, amendments thereto or any other document as may be
necessary or advisable in order to have the claims of the Holders allowed in any
judicial proceedings involving the obligor under the Bonds or the trustee under
the indenture governing the Bonds.
The Bonds may be subject to United States or state laws permitting
bankruptcy, moratorium, reorganization or other actions which, in the event of
extreme financial difficulties of the
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Obligor, could result in delays in payment or in non-payment of the Receipts
relating to Bonds. In certain cases the bankruptcy, reorganization or moratorium
could result in non-payment of one or more Coupon Receipts while the related
Principal Receipts and Callable Principal Receipts were paid in part or in full.
CERTAIN INFORMATION REGARDING THE RECEIPTS
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates (such electronic book-entry system, the "DTC Book Entry Only
System"). Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Receiptholders of book-entry Receipts that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, such Receipts may do so only through Participants and
Indirect Participants. In addition, such Receiptholders will receive all
distributions of principal and interest through DTC Participants. DTC will
forward such payments to its Participants, which thereafter will forward them to
Indirect Participants or such Receiptholders. Except for the Depositor, it is
anticipated that the only "Receiptholder" will be Cede, as nominee of DTC.
Receiptholders will not be recognized by the Trustee as Receiptholders as such
term is used in the Trust Agreement, and Receiptholders will be permitted to
exercise the rights of Receiptholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Receipts among Participants on whose behalf it acts with respect to the Receipts
and to receive and transmit distributions of principal of and interest on
Receipts. Participants and Indirect Participants with which Receiptholders have
accounts with respect to the Receipts similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Receiptholders. Accordingly, although Receiptholders will not possess Receipts,
the Rules
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provide a mechanism by which beneficial owners will receive payments and will be
able to transfer their Receipt interests.
The Certificated Receipts delivered to the Trustee will be registered in
the name of Cede, as nominee for DTC. The Holders, as purchasers of Receipts,
will not receive physical certificates representing their Receipts. Instead, the
ownership interests of the Holders will be recorded, directly or indirectly,
through the records of the respective Participants and Indirect Participants.
Transfers among Holders will be accomplished through and reflected on the
records of DTC and the Participants or Indirect Participants of which those
Holders are customers. DTC will maintain records for the payment, transfer and
exchange of Receipts held by DTC Participants on behalf of Holders, but will not
make payments directly to Holders or record specific transfers of Receipts from
one Owner to another.
Payments on the Bonds that are received by the Trustee from the Obligor,
including payments upon redemption of the Bonds, will be paid to DTC as the
registered holder of the related Receipts. DTC, under its current practices,
would credit those payments to the accounts of the Participants in accordance
with their respective holdings of Receipts as shown on DTC's records. Payment by
Participants and Indirect Participants to Holders will be governed by standing
instructions and customary practices, and will be the responsibility of each
such Participant or Indirect Participant and not of DTC or the Trustee, subject
to any statutory and regulatory requirements as may be in effect from time to
time.
DTC may determine to discontinue the DTC Book Entry Only System with
respect to the Receipts at any time by giving notice to the Trustee and the
Depositor and discharging its responsibilities with respect thereto. In
addition, the Depositor may cause the removal of DTC (or a successor or
substitute depository) if the Depositor determines such removal is in the best
interest of the Holders or is in the best interests of the Depositor as long as
the removal will not adversely affect the Holders. If DTC (or a successor or
substitute depository) is removed and the Depositor, after a good faith effort,
is unable to procure the services of a successor depository, the Trustee will
serve as depository of the Bonds.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Receiptholder to pledge Receipts to persons or entities that do not participate
in the DTC system, or to otherwise act with respect to such Receipts, may be
limited due to the lack of a physical certificate for such Receipts.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Receiptholder under the related Trust Agreement only at the direction
of one or more Participants to whose accounts with DTC the Receipts are
credited. DTC may take
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conflicting actions with respect to other fractional interests to the extent
that such actions are taken on behalf of Participants whose holdings include
such fractional interest.
Except as required by law, the Trustee will not have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interest of the Receipts of any series held by Cede, as nominee for
DTC, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
CERTIFICATED RECEIPTS
Receipts will initially be issued in book-entry form. Receipts initially
issued in book-entry form will be issued in fully registered, certificated form
("Certificated Receipts") to Receiptholders or respective nominees, rather than
to DTC or its nominee, only if (i) the Depositor advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as depository with respect to such Receipts and the Depositor is unable to
locate a qualified successor, or (ii) the Depositor, at its option, elects to
terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify DTC of its intent to make
Certificated Receipts available. Upon surrender by the Trustee to DTC of the
Certificated Receipts representing the securities and receipt of instructions
for re-registration, the Trustee will reissue such securities as Certificated
Receipts to Holders thereof.
Distributions of principal of, and interest on, the Certificated Receipts
will thereafter be made in accordance with the procedures set forth in the
related Trust Agreement directly to holders of Certificated Receipts in whose
names the Certificated Receipts were registered at the close of business on the
day before the related Payment Date. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Trustee. The final payment on any Certificated Receipt, however, will be
made only upon presentation and surrender of such Certificated Receipt at the
office or agency specified in the notice of final distribution to the holders of
such class.
REPORTS TO RECEIPTHOLDERS
Quarterly and annual unaudited reports containing information concerning
the related Bonds, including an annual independent accountant's statement of
review regarding the payment of all income on the Bonds to the Receiptholders,
will be prepared by the related Trustee and sent on behalf of each Trust only to
Cede as nominee of DTC and registered holder of the Receipts. See "Reports to
Receiptholders." Such reports will not constitute financial
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statements prepared in accordance with generally accepted accounting principles.
Each Trust will file with the Commission such other reports as may be required
under the Exchange Act, and the rules and regulations of the Commission
thereunder.
In addition to the foregoing, within the prescribed period of time for tax
reporting purposes after the end of each calendar year during the term of each
Trust, the Trustee will mail to each person who at any time during such calendar
year has been a Receiptholder with respect to such Trust and received any
payment thereon a statement containing certain information for the purposes of
such Receiptholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Matters."
THE TRUST AGREEMENT
Pursuant to the Trust Agreement, the Bonds underlying any series of
Receipts will be held for the Holders of that series of Receipts by the Trustee
in physical certificate form or as book-entry credits to an account of the
Trustee at DTC. Under the DTC Book Entry Only System, DTC will be the sole
registered holder of the Receipts. For each series of Receipts, the Trustee will
establish a separate trust account of the Bonds relating to such Receipts and
two subaccounts within such separate account, the first for interest payments
underlying Coupon Receipts and the second for principal payments underlying
Principal Receipts or principal payments and interest payments underlying
Callable Principal Receipts. Unless otherwise set forth in the related
Prospectus Supplement, it is the intent of the Depositor that all of the Bonds
will be held by the Trustee by book-entry credit to its account at DTC. If, for
any reason, the Bonds may no longer be held by book-entry credit at DTC, the
Bonds will thereafter be held by the Trustee in a separate trust account.
Prior to a payment default by the Obligor, the only responsibility of the
Trustee with respect to payments on Receipts will be to apply all payments
received in respect of the Bonds to the registered holders of the related
Receipts without making any deductions other than for any taxes and governmental
charges.
Trust accounts established for Receipts will be special accounts separate
from the general assets of the Trustee and the interest payments and principal
payments therein will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the Trustee or any person claiming through
it. The Trustee will not have the power or authority to assign, transfer, pledge
or otherwise dispose of any of the assets of the trust accounts to any person
except as otherwise permitted by the Trust Agreement.
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The Trust Agreement provides that the Trustee shall keep at its designated
office in New York, New York a register (the "Receipt Register") in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of, and for the registration of transfers or
exchanges of, Receipts, which will be accomplished as described herein under
"Certain Information Regarding the Receipts -- Book-Entry Registration."
The Trust Agreement provides that, in the event of any action requiring a
vote of the registered holders of any Bonds, the Trustee (as the owner of record
of the Bonds), upon receipt of the Bond proxy, will notify DTC (in its capacity
as the owner of record of the Principal Receipts or Callable Principal Receipts)
of such action. Pursuant to currently existing procedures, it is expected that
DTC, in turn, will notify its Participants who, in turn, will notify the
beneficial owners of Principal Receipts or Callable Principal Receipts of such
event. Thereafter, the Trustee shall vote solely in accordance with such proxies
and shall apportion its voting power on the basis of the face amount of such
Principal Receipts or Callable Principal Receipts. For any Receipts which are
not then held by DTC or any other depository, the Trustee, upon receipt of the
Bond proxy, will notify the registered holders directly of such action and shall
vote in the same manner as noted above. In no event shall the Depositor be
allowed or entitled (other than in its capacity as a safekeeper for a registered
holder) to vote, directly or indirectly through the Trustee, any Principal
Receipts, Callable Principal Receipts or the Bonds. Holders of Coupon Receipts
will NOT have the right to vote on any action requiring a vote of the registered
holders of any Bonds.
The Trustee will maintain a fidelity bond for the protection of registered
holders of Receipts in customary amounts against losses resulting from the trust
arrangement due to dishonest or fraudulent action by its employees.
The Trust Agreement provides that neither the Trustee nor the Depositor
shall be subject to any liabilities to registered holders of Receipts other than
by reason of willful misconduct, bad faith or negligence in the performance of
duties set forth in the Trust Agreement and that neither of them shall be liable
to such registered holders if any law, government regulation or other
circumstance prevents or delays performance of duties set forth in the Trust
Agreement.
DTC will not be deemed an agent of the Trustee. The Trustee may own and
deal in bonds of the same issue and maturity as the Bonds and in Receipts.
The Trustee and the Depositor may amend the Trust Agreement, provided that
no amendment may be made which defers or alters the maturity of a Receipt or in
any manner adversely affects the
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rights of a Holder of a receipt to the interest or principal payments evidenced
thereby or otherwise materially prejudices any substantial existing right of a
Holder.
The Trustee may at any time resign as Trustee by written notice to the
Depositor, such resignation to take effect upon the appointment of a successor
Trustee, subject to the terms and conditions of the Trust Agreement.
The Depositor may at any time remove the Trustee as Trustee under the Trust
Agreement by written notice of its election to do so, delivered to the Trustee,
and such removal shall take effect upon the appointment of a successor Trustee
and its acceptance of such appointment, subject to the terms and conditions of
the Trust Agreement.
In the event that the Trustee becomes incapable of action, is adjudged to
be bankrupt or insolvent, or a receiver of the Trustee or of its property is
appointed, or any public officer takes charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trustee may be removed by court action instituted by any
registered holder of a Receipt who has been a registered holder for six months
or by registered holders of 10% of the face amount of Receipts outstanding at
such time.
CERTAIN FEDERAL INCOME TAX MATTERS
The following is a general summary of certain federal income tax
consequences that may result from the purchase, ownership and disposition of
Receipts. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), as well as final, temporary and proposed Treasury regulations and
administrative and judicial decisions in effect as of the date hereof.
Legislative, judicial and administrative changes may occur, possibly with
retroactive effect, affecting the accuracy of the statements set forth herein.
In particular, purchasers of the Receipts should be aware that changes in, or
clarifications of, the tax law applicable to Receipts, including the regulations
that address the federal income tax consequences relating to obligations issued
with original discount (the "OID Regulations") and adoption of regulations under
section 1286 of the Code, may occur after issuance of Receipts and may be
applied retroactively to owners of Receipts. Additional United States federal
income tax considerations applicable to particular series and/or classes of
Receipts may be set forth in the applicable Prospectus Supplement.
This summary does not purport to address all federal income tax matters
that may be relevant to purchasers of Receipts or to address the tax
consequences of a purchase of Receipts by any particular investor. For example,
it deals only with Receipts
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held as capital assets within the meaning of Section 1221 of the Code. It does
not address tax consequences that may be relevant to particular holders subject
to special treatment under federal income tax law (e.g., banks and other
financial institutions, life insurance companies, dealers in securities or
currencies, tax-exempt entities, taxpayers holding Receipts as a hedge, or whose
"functional currency" is not the United States dollar). Except as indicated,
this summary is directed to prospective purchasers in the initial offering
described herein, and not to subsequent purchasers of Receipts. Consequently,
purchasers of Receipts (in particular dealers in securities and purchasers of
the Callable Principal Receipts) should consult their own tax advisors
concerning the tax consequences to them under federal income tax law, as well as
the tax law of any state, local or foreign jurisdiction, of the purchase,
ownership and disposition of Receipts.
Upon the issuance of each series of Receipts, McCarter & English will
render an opinion to the effect that, for federal income tax purposes: (1) the
Trust will be a grantor trust and not a partnership or an association taxable as
a corporation; (2) each Receipt will be considered a "stripped bond" or a
"stripped coupon," as appropriate, under section 1286 of the Code, for purposes
of applying the original issue discount rules of the Code to a purchaser; (3) a
Receipt purchased in an original sale or subsequent purchase will be treated,
for purposes of applying the original issue discount rules of the Code to such
purchaser, as if the Receipt held by such purchaser was issued on the purchase
date with original issue discount; (4) the original issue discount with respect
to a Receipt, other than certain Callable Principal Receipts, will equal the
excess of the amount payable at maturity of the Receipt over the purchase price
of such Receipt; (5) each of the Callable Principal Receipts should be treated
under Section 1286 of the Code as a single stripped bond for purposes of
calculating original issue discount and gain or loss on disposition; (6) in the
case of a Callable Principal Receipt with respect to which the related Bond is
required to be redeemed prior to its stated maturity date, original issue
discount and yield to maturity will likely be required to be calculated by
taking into account events that have occurred prior to the purchase date of such
Callable Principal Receipt and therefore, as if the date on which the redemption
is to take place and the redemption price were the maturity date and amount
payable at maturity, respectively; (7) in the case of a Callable Principal
Receipt not required to be redeemed prior to its stated maturity date, the final
regulations under sections 1272 through 1275 of the Code provide that, if based
on all the facts and circumstances as of the issue date it is more likely than
not that a debt instrument's stated payment schedule will not occur, then the
yield and maturity of the debt instrument are computed based on the payment
schedule most likely to occur.
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CLASSIFICATION OF THE TRUST
In the opinion of McCarter & English, the Trust will be classified as a
grantor trust under subpart E, Part I of subchapter J of the Code and not as a
partnership or an association taxable as a corporation. As a grantor trust, the
Trust will not be subject to federal income tax, although holders of Receipts
will be subject to the tax treatment discussed below.
FEDERAL TAX TREATMENT OF STRIPPED BONDS AND STRIPPED COUPONS
Under section 1286 of the Code, the separation of ownership of the right to
receive some or all of the principal payments on a bond from the ownership of
the right to receive some or all of the interest payments on that bond which
have not become payable results in the creation of "stripped bonds" with respect
to the principal payments and "stripped coupons" with respect to the interest
payments. Receipts will be considered "stripped bonds" or "stripped coupons," as
appropriate, and a Receipt (whether purchased by a purchaser in an original sale
or in a subsequent transaction) will be treated, under section 1286 of the Code,
solely for purposes of applying the original issue discount rules of the Code to
such purchaser, as if the Receipt held by such purchaser was issued on the
purchase date with original issue discount ("OID"). Purchasers of the Receipts
will be required to include the accrued portion of the OID (as described below)
in gross income for the taxable year even though the corresponding payment may
not be received during the taxable year.
PRINCIPAL RECEIPTS AND COUPON RECEIPTS
In the opinion of McCarter & English, the Coupon Receipts will be treated
as "stripped coupons" and Principal Receipts will be treated as "stripped
bonds," within the meaning of section 1286 of the Code. The total amount of OID
with respect to a Principal Receipt or Coupon Receipt will equal the excess of
the amount payable at maturity of the particular Principal Receipt or Coupon
Receipt over the purchase price of the respective Receipt.
CALLABLE PRINCIPAL RECEIPTS
It is believed by the Depositor that purchasers of the Callable Principal
Receipts will be treated, for purposes of calculating original issue discount
and gain or loss on disposition, as having purchased a single "stripped bond"
(rather than multiple debt components representing separate rights to receive
principal and to receive interest on each interest payment date subsequent to
the first optional call date thereof, for which tax basis must be separately
allocated and original issue discount separately calculated). In the event that
the scheduled maturity date of a particular Callable Principal
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Receipt is properly treated as the maturity date of such Receipt for purposes of
the original issue discount rules, it is believed by the Depositor that such
Callable Principal Receipt will be regarded as evidencing a single "installment
obligation", within the meaning of the regulations promulgated by the U.S.
Treasury with respect to original issue discount. This treatment is based on an
interpretation of the interrelationship between section 1286 of the Code and
certain Treasury regulations promulgated under sections 1272, 1273, and 1275 of
the Code, and there can be no assurance that the Internal Revenue Service would
agree with such interpretation. Certain of the Bonds related to Callable
Principal Receipts may be required to be redeemed prior to their stated maturity
date at a price equal to their principal amount plus, in some cases, a fixed
call premium. Under section 1286 the U.S. Treasury is given specific authority
to adopt regulations modifying treatment under such section where necessary to
accurately reflect the income of the holder of a stripped right by reason of
applicable call options or other circumstances. Because section 1286 of the Code
treats a "stripped bond" as being issued on the date of purchase for purposes of
applying the original issue discount rules of the Code, the original issue
discount and yield to maturity of the Principal Receipts will likely be required
by the Internal Revenue Service to be calculated by taking into account events
that have occurred prior to such purchase date and therefore as if the date on
which the redemption is to take place and the redemption price were the maturity
date and amount payable at maturity, respectively, of such Callable Principal
Receipts. Under regulations promulgated pursuant to sections 1271 through 1275
of the Code, if based on all the facts and circumstances as of the issue date it
is more likely than not that a debt instrument's stated payment schedule will
not occur, then the yield and maturity of the debt instrument are computed based
on the payment schedule most likely to occur. It is otherwise uncertain whether
the scheduled maturity date of a particular Callable Principal Receipt will be
viewed as the maturity date of such Callable Principal Receipt for purposes of
the original issue discount rules (e.g., determination of yield to maturity and
amount payable at maturity), particularly where on the date of purchase of such
Callable Principal Receipt objective market factors suggest that in the absence
of any market change, it can be expected to be in the economic interest of the
issuer of the related Bond to call such Bond on a date prior to scheduled
maturity. As described above, the OID Regulations provide that if, based on all
the facts and circumstances as of the issue date, it is more likely than not
that a debt instrument's stated payment schedule will not occur, then the yield
and maturity of the debt instrument are computed based on the payment schedule
most likely to occur. It is likely that future Treasury regulations promulgated
pursuant to a specific grant of regulatory authority under section 1286 of the
Code with respect to stripped rights with call options will address this
question.
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ACCRUAL OF ORIGINAL ISSUE DISCOUNT
In general, OID on a Receipt accrues on a daily basis, based on the
constant yield to maturity of the Receipt over the term of the Receipt and is to
be allocated ratably to each day in an accrual period. The constant yield to
maturity means that interest rate which when used in computing the present value
of all of the principal and coupon payments to be made on the Receipts produces
an amount equal to the purchase price of such Receipts, calculated based on
compounding at the end of each accrual period.
In the case of any Receipt that matures more than one year after its date
of purchase, the OID will be allocated to accrual periods which may be of any
length and may vary over the term of the Receipt, provided that no period is
longer than one year and the principal payment and each coupon payment with
respect to the Receipt occurs on the first or last day of an accrual period. The
portion of the OID that is allocated to an accrual period will equal the product
of (i) the purchase price of such Receipts increased by the portion of the OID
allocated to prior accrual periods during which the purchaser held such Receipts
(and, in the case of a Callable Principal Receipts, if properly treated as an
installment obligation maturing on the scheduled maturity date, reduced by any
payments on such Receipts received in prior accrual periods during which the
purchaser held such Receipts), and (ii) the yield to maturity of the Receipts
appropriately taking into account the length of the accrual period. The
resulting portion of OID allocated to an accrual period will be divided by the
number of days in the accrual period to determine the daily portions of OID for
that accrual period.
In the case of an Receipt maturing within one year of the date on which it
is purchased, OID accrues on a straight-line basis and is apportioned equally to
each of the days subsequent to the date of purchase of such Receipts through the
date of maturity, provided that, at the owner's election, OID may be accrued
under a constant yield method based on the yield to maturity calculated as
described above but with daily compounding (rather than compounding at the end
of each accrual period).
GAIN OR LOSS
A purchaser's tax basis in a Receipt will equal the purchase price for such
Receipt increased by the portion of the original issue discount accrued on such
Receipt during the period such purchaser owns the Receipt and, in the case of a
Callable Principal Receipt, if properly treated as an installment obligation
maturing on the scheduled maturity date, reduced by any payments actually
received prior to maturity. Gain or loss on sale or at maturity of a Receipt
will be equal to the difference between the amount realized in such sale or at
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maturity and the owner's tax basis at the time of sale or at maturity and will
be taxable capital gain or loss.
ADDITIONAL TAX CONSIDERATIONS
BACKUP WITHHOLDING
Payments of interest (including OID) and principal, as well as proceeds
from the disposition or retirement of Receipts, may be subject to a "backup"
withholding tax of 31 percent if a recipient fails to furnish to the payor (in
the case of Receipts, the Trustee) certain identifying information. Certain
penalties also may be imposed by the IRS on a recipient of payments who is
required to supply information, but fails to do so in the proper manner.
Backup withholding will not apply with respect to payments made to certain
exempt recipients, such as corporations and financial institutions. Holders
should consult their own tax advisers with respect to qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption. Any amounts deducted and withheld would be allowed as a credit
against such recipient's federal income tax.
TAX INFORMATION REPORTING
Within a reasonable time after the end of each calendar year, the Trustee
will furnish each Receiptholder (DTC or other holders of Certificated Receipts)
such customary information as the Trustee deems necessary or desirable to enable
Receiptholders to prepare their tax returns. The Trustee will furnish comparable
information to the IRS as and when required by law to do so. Because the rules
for accruing discount and amortizing premium with respect to Receipts are
uncertain in various respects, there is no assurance that the IRS will agree
with the information reports. Moreover, even if otherwise accepted as accurate
by the IRS, such information reports will be based on the original issue price
of the Receipt and will, therefore, in the case of Receiptholders who purchased
their Receipt after their initial issuance or at a price different from the
original issue price, require adjustments to account for such Receiptholders'
holding periods and purchase prices. Receiptholders who hold their Receipt
through DTC participants should consult the party from whom they receive tax
reports concerning the Receipts to determine whether such reports reflect such
adjustments. Receiptholders who hold Certificated Receipts should consult their
tax advisors concerning the method for making any such required adjustments.
NON-UNITED STATES HOLDERS
A Non-United States Holder is a beneficial owner of a Receipt other than a
United States citizen or resident, a
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domestic partnership or corporation, or a trust subject to U.S. income tax on
income regardless of its source. Under present federal income and estate tax
law:
(a) No withholding of federal income tax will be required with respect to
the payment of interest or OID attributable to a Receipt owned by a
Non-United States Holder, provided that such Holder (i) does not
actually or constructively own 10 percent or more of any issuer of
Bonds, and (ii) in accordance with specified procedures, supplies the
person otherwise required to withhold with a certification to the
effect that the beneficial owner is not a United States person,
citizen or resident. In certain circumstances, the requisite
certification may be provided by or through a bank or other financial
institution.
(b) No withholding of federal income tax will be required with respect to
any gain realized by a Non-United States Holder upon the sale,
exchange or retirement of a Receipt, except gains realized by certain
nonresident alien individuals present in the United States for 183
days or more during the taxable year.
(c) A Receipt beneficially owned by an individual who at the time of such
individual's death is a Non-United States Holder will not be subject
to federal estate tax as a result of such individual's death, provided
that the payments with respect to such Receipt are not effectively
connected with a United States trade or business of such individual
and the Receipts constitute portfolio debt obligations, interest on
which is exempt from withholding under the Code.
Notwithstanding the foregoing, Non-United States Holders may be subject to
income tax withholding and estate taxation with respect to any Bonds that were
issued before July 18, 1984. Further, a Non-United States Holder engaged in a
trade or business within the United States whose income from a Receipt is
effectively connected with that trade or business generally will be subject to
regular United States federal income tax on such income and gain as if it were a
United States Holder. In addition, if a Non-United States Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30 percent of
its effectively connected earnings and profits for the taxable year, subject to
adjustments.
Backup withholding will not apply to payments to a Non-United States Holder
on a Receipt if the holder has certified as to its foreign status under penalty
of perjury (or has otherwise established an exemption) and certain other
requirements are met, provided that the payor does not know that the payee is a
United States person. Payments on the sale,
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exchange or other disposition of a Receipt to or through a foreign office of a
broker will not be subject to backup withholding provided certain requirements
are met; payments to or through the United States office of a broker will be
subject to backup withholding unless the Non-United States Holder makes the
certification or otherwise establishes an exemption under the conditions
previously described.
NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAW TO THEIR
PARTICULAR SITUATIONS.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of Receipts. State,
local and foreign tax law may differ substantially from federal tax law, and
this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction. Therefore, prospective purchasers should consult
their own tax advisors with respect to such matters.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and section 4975 of the Code, prohibit "plan assets" of a
pension, profit sharing and other employee benefit plans, as well as individual
retirement accounts and Keogh plans (each a "Plan"), from being involved in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified person" under the Code with respect to
the Plan. A violation of these "prohibited transaction" rules may result in an
excise tax and other liabilities under ERISA and Section 4975 of the Code for
such persons, unless a statutory, regulatory or administrative exemption is
available.
A violation of the prohibited transaction rules could occur if Receipts of
any series were purchased with assets of a Plan, and if the Depositor, the
Trustee, or any of their affiliates were a "party in interest" or a
"disqualified person" with respect to such Plan, unless a statutory, regulatory
or administrative exemption is available or an exception applies under a
regulation (the "Plan Asset Regulation") issued by the Department of Labor (the
"DoL"). The Depositor, the Trustee, or their affiliates may be "parties in
interest" and "disqualified persons" with respect to certain Plans; in
particular, it is likely that the Trustee will have such relationships with many
Plans. Before purchasing Receipts of any particular series, a Plan fiduciary (as
defined in ERISA section 3(2) and the regulations issued thereunder) or other
Plan investor should consider whether a prohibited transaction might arise by
reason
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of the relationship between the Plan and the Depositor, the relevant Trustee or
any of their affiliates, and should consult its counsel regarding the purchase
in light of the considerations described below.
The DoL has issued three class exemptions that may apply to otherwise
prohibited transactions arising from the purchase or holding of the Receipts:
DoL Prohibited Transaction Exemption 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class Exemption
for Certain Transactions Involving Insurance Company Pooled Separate Accounts),
and 84-14 (Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the
underlying assets of an entity in which a Plan holds an equity interest as "plan
assets" of such Plan. Because the Receipts will represent beneficial interests
in a Trust, the Receipts will be considered equity interests for purposes of the
Plan Asset Regulation, with the result that the assets of the Trust will be
treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
The first exception applies to a "publicly offered security". A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who are independent of the issuer and
of one another ("Independent Investors"), and (c) either is (i) part of a class
of securities registered under section 12(b) or 12(g) of the Exchange Act, or
(ii) sold to a Plan as part of an offering of securities to the public pursuant
to an effective registration statement under the Act and the class of securities
of which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred. For purposes of the 100 Independent Investor criterion,
each class of Receipts should be deemed to be a "class" of securities that would
be tested separately from any other securities that may be issued by the Trust.
It is anticipated that each class of Receipts will meet the foregoing criteria
for treatment as "publicly-offered securities," although no assurance can be
given that each class of each Series will meet this criteria.
The second exception applies if equity participation in the entity by
"benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in an entity is not significant on any date on
which an equity interest in the entity is issued and
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outstanding if, immediately after the most recent acquisition or any equity
interest in the entity, less than 25% of the value of each class of equity
interests in the entity (excluding interests held by any person who has
discretionary authority or control with respect to such assets of the entity,
received direct or indirect compensation for providing investment advice with
respect to such assets, or is an affiliate of such person) is held by benefit
plan investors. No assurance can be given by the Depositor as to whether or not
the value of each class of Receipts in any Trust held by benefit plan investors
will be "significant" upon completion of the offering of any series of Receipts
or thereafter, and no monitoring or other measures will be taken with respect to
the satisfaction of the conditions to this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to a Trust and the Trust were considered to hold "plan
assets," transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to Receipts held by the Plan might be
prohibited under section 406 of ERISA and/or section 4975 of the Code, and might
result in excise tax and other liabilities under ERISA or Section 4975 of the
Code unless an exemption were available. The three DoL class exemptions
mentioned above may not provide relief for all transactions involving the assets
of a Trust, even if they would otherwise apply to the purchase of a Receipt by a
Plan.
Receipts of any series may not be purchased with the assets of a Plan if
the Depositor, the Trustee, or any of their affiliates is deemed a Plan
fiduciary under the definition set forth above and, among other things, (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets, and (ii) will be based on the
particular investment needs of such Plan; or (c) is an employer maintaining or
contributing to such Plan.
In light of the foregoing, fiduciaries and other investors considering the
purchase of Receipts with "plan assets" (as defined in ERISA) of any Plan should
consult their tax and/or legal counsel regarding whether the assets of the Trust
would be considered "plan assets" of the Plan of such investors and fiduciaries,
and the availability of an exemption from the prohibited transaction rules.
PLAN OF DISTRIBUTION
The Receipts offered hereby and by the related Prospectus Supplement will
be offered in series through one or more of the methods described below. The
Prospectus Supplement prepared for
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each series will describe the method of offering being utilized for that series.
The Receipts will be transferred to Rickel Securities, Inc. in exchange for the
Bonds, and there will be no cash proceeds received by the Depositor from the
sale of the Receipts.
Any Receipts acquired by Rickel Securities, Inc. in exchange for Bonds as
described above will be acquired by Rickel Securities, Inc. for its own account
and may be resold from time to time in one or more transactions, including
negotiated transactions at fixed public offering prices or a varying prices to
be determined at the time of sale or at the time of commitment therefor. If any
underwriters other than Rickel Securities, Inc. participate as co-managers in
the distribution of the Receipts of a particular series, their names and Rickel
Securities, Inc.'s will be set forth on the cover of the Prospectus Supplement
relating to such series and the members of the underwriting syndicate, if any,
will be named in such Prospectus Supplement.
In connection with any sale of the Receipts in which Rickel Securities,
Inc. is not the sole underwriter, the other underwriters may receive
compensation from Rickel Securities, Inc. or from purchasers of the Receipts in
the form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the Receipts may be deemed to be
underwriters in connection with such Receipts, and any discounts or commissions
received by them from Rickel Securities, Inc. and any profit on the resale of
Receipts by them may be deemed to be underwriting discounts and commissions
under the Securities Act.
It is anticipated that the underwriting agreement pertaining to the sale of
any series of Receipts in which Rickel Securities, Inc. is not the sole
underwriter will provide that the obligations of the underwriters will be
subject to certain conditions precedent, that the underwriters will be obligated
to purchase all such Receipts if any are purchased (other than in connection
with an underwriting on a best efforts basis), and that the Depositor will
indemnify the several underwriters and the underwriters will indemnify the
Depositor against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments required to be made in respect
thereof.
LEGAL OPINIONS
Certain legal and federal income tax matters relating to the Receipts will
be passed upon for the Depositor and Rickel Securities, Inc. by McCarter &
English, counsel to the Depositor and Rickel Securities, Inc.
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INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein.
TERMS PAGE
- ----- ----
Bonds ..................................................................... 2
Cede ...................................................................... 4
Certificated Receipts ..................................................... 19
Code ...................................................................... 7
Commission ................................................................ 4
Depositor ................................................................. 2
DoL ....................................................................... 29
DTC ....................................................................... 3
DTC Book Entry Only System ................................................ 17
ERISA ..................................................................... 8
Exchange Act .............................................................. 4
Holders ................................................................... 4
Independent Investors ..................................................... 30
Indirect Participants ..................................................... 17
Issuance Date ............................................................. 6
Obligor ................................................................... 9
OID ....................................................................... 24
OID Regulations ........................................................... 22
Plan ...................................................................... 29
Plan Asset Regulation ..................................................... 29
Prospectus Supplement ..................................................... 2
Receiptholders ............................................................ 4
Receipts .................................................................. 2
Registration Statement .................................................... 4
Rules ..................................................................... 17
Securities Act ............................................................ 4
Trust ..................................................................... 2
Trust Agreement ........................................................... 2
Trustee ................................................................... 2
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