As filed with the Securities and Exchange Commission on November 5, 1999
Registration No. 333-70233
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
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Amendment No.3
To
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 31-0944462
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One New York Plaza
14th Floor
New York, New York 10292
(212) 809-6631
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Felicia Smith, Esq.
Prudential Securities Incorporated
One Seaport Plaza
New York, New York 10292
(212) 214-6324
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
Al B. Sawyers, Esq.
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
(212) 506-5000
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective as determined by market
conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box./_/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box./x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering./_/
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering./_/
If delivery of the prospectus is executed to be made pursuant toRule 434,
please check the following box./_/
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------
TITLE OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES REGISTERED MAXIMUM MAXIMUM REGISTRATION
BEING (2)(3) OFFERING AGGREGATE FEE(5)
REGISTERED(1) PRICE PER OFFERING PRICE(4)
UNIT(4)
Trust $500,000,000 100% $500,000,000 $139,000
Certificates
- -------------------------------------------------------------------------
(1)This registration statement also registers an indeterminate amount of Trust
Certificates to be sold by Prudential Securities Incorporated in connection
with market-making activity.
(2)In United States dollars or the equivalent thereof in one or more foreign or
composite currencies.
(3)Plus such additional principal amount as may be necessary such that, if one
or more classes of Trust Certificates are issued with original issue
discount, the aggregate initial offering price of all Trust Certificates will
equal $500,000,000.
(4) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(5) Of which $278.00 was paid on January 7, 1999.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement includes a base prospectus and a form of prospectus
supplement for offering series of trust certificates representing the entire
beneficial interest in various trusts to be created from time to time, the
assets of which will consist primarily of securities within one of the following
categories: (1) a publicly issued debt security or asset backed security or a
pool of such debt securities or asset backed securities issued by one or more
corporations, banking organizations, insurance companies or special purpose
vehicles (including trusts, limited liability companies, partnerships or other
special purpose entities); (2) a publicly issued obligation or obligations of
one or more foreign private issuers; or (3) a publicly issued debt security or
pool of such debt securities which represent obligations of the United States of
America, any agency thereof for the payment of which the full faith and credit
of the United States of America is pledged, or a United States governmental
sponsored organization created pursuant to a federal statute. The trust may also
hold cash pending disbursement by the trustee and may have rights under credit
support, swap or derivative instruments which rights will be described in the
prospectus supplement. The base prospectus and form of prospectus supplement
contain bracketed provisions appropriate for the various categories of trust
assets; each set of alternate language, when combined with the base prospectus
and form of prospectus supplement, constitutes a separate prospectus. Following
such prospectus and prospectus supplement is an alternate cover page, page 2 and
method of distribution section to be used when required by the Securities Act of
1933, as amended, in connection with market-making transactions in the
securities by affiliates of Prudential Securities Structured Assets, Inc., where
the issuer of the applicable trust assets is also an affiliate of the depositor.
<PAGE>
Prospectus Supplement
(To Prospectus dated [ ], [ ])
[$][ ]
RECEIPTS ON CORPORATE SECURITIES, SERIES [ ]-[ ]
Issued By
RECEIPTS ON CORPORATE SECURITIES TRUST [ ]-[ ]
Evidencing
FRACTIONAL INTERESTS IN [[TITLE(S) OF UNDERLYING SECURITIES] DUE
[ ], [ ]]
[POOL OF [SPECIFY TYPE OF SECURITIES]]
PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.,
Depositor
- ---------------------------------------- ---------------------------
The trust [IDENTIFY [IDENTIFY
will issue: CLASS OF CLASS OF YOU SHOULD CAREFULLY
TRUST TRUST CONSIDER THE RISK FACTORS
CERTIFICATES]CERTIFICATES] DESCRIBED ON PAGES S-7
THROUGH S-10 IN THIS
PROSPECTUS SUPPLEMENT AND
ON PAGES 5 THROUGH 7 IN
THE PROSPECTUS.
The trust certificates represent
interests in the trust only and do
not represent an obligation of the
depositor or any of its affiliates.
The trust certificates do not
represent a direct obligation of [the
issuer[s] of the underlying
securities] or any of [its] [their]
affiliates. [The issuer[s] of the
underlying securities [is][are] not
[an] affiliate[s] of the trust or the
depositor and will not receive any
proceeds from the sale of the trust
certificates.]
- ---------------------------------------- ---------------------------
Initial certificate principal balance/
notional amount
- ----------------------------------------
Trust certificate rate
- ----------------------------------------
Distribution dates
- ----------------------------------------
Final scheduled distribution date
This prospectus supplement may not be used to offer trust certificates unless it
is accompanied by the related prospectus.
The trust certificates offered by this prospectus supplement will be rated [ ]
by [SPECIFY RATING AGENCY].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE TRUST CERTIFICATES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The underwriter[s] named below ha[s][ve] agreed to [purchase the trust
certificates from the depositor at a price equal to [ ]% of their certificate
principal balance pursuant to a firm commitment underwriting] [offer the trust
certificates for sale on behalf of the depositor on a best efforts basis
[INCLUDE OTHER INFORMATION REQUIRED BY ITEM 501 FOR A BEST EFFORTS OFFERING, AS
APPLICABLE].] See "Method of Distribution" on page S-26.
[PRUDENTIAL SECURITIES INCORPORATED]
The date of this prospectus supplement is [ ], [ ].
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................................S-4
RISK FACTORS....................................................S-7
THE TRUST......................................................S-11
DESCRIPTION OF THE UNDERLYING SECURITIES.......................S-11
Terms of Underlying Securities...........................S-12
Publicly Available Information...........................S-13
[DESCRIPTION OF THE CREDIT SUPPORT]............................S-13
[Reserve Account]........................................S-13
[Letter of Credit].......................................S-14
[Surety Bond]............................................S-14
[Other Forms of Credit Enhancement]......................S-14
DESCRIPTION OF THE OTHER TRUST ASSETS..........................S-15
YIELD ON THE TRUST CERTIFICATES................................S-15
DESCRIPTION OF THE TRUST CERTIFICATES..........................S-15
General.............................................S-15
Definitive Certificates..................................S-16
Collections and Distributions............................S-16
[Advances]...............................................S-18
Allocation of Losses; Subordination......................S-19
Exchange of Trust Certificates for Underlying Securities.S-19
Distributions on Payment Default or Acceleration of the
Underlying Securities...............................S-20
Distributions on Redemption or Advancement of Maturity
of the Underlying Securities........................S-20
Distributions on Termination of Exchange Act Reporting...S-21
[Restriction on Transfer of the [ ] Class
Certificates].......................................S-21
DESCRIPTION OF THE TRUST AGREEMENT.............................S-21
General.............................................S-21
The Trustee..............................................S-21
Actions by Trust Certificateholders......................S-22
Voting Rights............................................S-22
Voting of Underlying Securities; Modification of
Underlying Securities Agreements....................S-22
Termination of the Trust.................................S-23
LEGAL ASPECTS OF THE TRUST ASSETS..............................S-23
THE DEPOSITOR..................................................S-23
YEAR 2000......................................................S-24
FEDERAL INCOME TAX CONSEQUENCES................................S-25
ERISA CONSIDERATIONS...........................................S-25
S-2
<PAGE>
METHOD OF DISTRIBUTION.........................................S-26
LEGAL OPINIONS.................................................S-28
RATINGS........................................................S-28
INDEX OF TERMS.................................................S-29
ANNEX A--TERMS OF THE UNDERLYING SECURITIES....................S-30
Interest Payments........................................S-31
Principal Payments.......................................S-32
[Redemption or Conversion Features]......................S-32
[Security for Underlying Securities].....................S-32
[Allocation of Collections or Revenues]..................S-32
[Underlying Securities Events of Default][Early
Amortization Events]................................S-32
S-3
<PAGE>
SUMMARY OF TERMS
The following summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to consider
in making an investment decision. To understand all of the terms of the trust
certificates, you should carefully read this entire prospectus supplement and
the accompanying prospectus.
THE TRUST CERTIFICATES
CLASSES OF TRUST CERTIFICATES. The trust will issue the following [ ] classes of
trust certificates:
[IDENTIFY RESIDUAL CLASS, IF ANY]
[IDENTIFY AMORTIZING CLASS, IF ANY]
[IDENTIFY OTHER CLASSES]
Each trust certificate will represent a fractional undivided interest in the
assets of the trust.
[RESIDUAL CLASS CERTIFICATES]
- ---------------------------------
certificate principal balance
- ---------------------------------
final scheduled distribution date
- ---------------------------------
Owners of the residual class certificates will not receive any cash
distributions unless the underlying securities are redeemed prior to maturity.
If you own a residual class certificate which remains outstanding on the final
scheduled distribution date, your trust certificate will automatically be
exchanged for an equivalent principal amount of the underlying securities on
such date. This exchange will occur without any action on your part.
[AMORTIZING CLASS CERTIFICATES]
- ---------------------------------
certificate principal balance
- ---------------------------------
final scheduled distribution date
- ---------------------------------
trust certificate rate
- ---------------------------------
certificate interest payment dates
- ---------------------------------
Owners of amortizing class certificates will not receive some or all of the
certificate interest payment if the trustee does not receive the full amount of
the corresponding scheduled interest payment on the underlying securities. If
any distribution date is not a business day, then payment will be made on the
next business day.
Owners of the amortizing class certificates have no right to principal payments
on the underlying securities unless the underlying securities are redeemed.
[DESCRIBE FEATURES OF OTHER CLASSES OF TRUST CERTIFICATES (E.G., INITIAL
CERTIFICATE PRINCIPAL BALANCE OR NOTIONAL AMOUNT, FINAL SCHEDULED DISTRIBUTION
DATE, DISTRIBUTION DATES AND AMOUNTS) IN TABULAR FORM AS APPROPRIATE]
SOURCE OF PAYMENTS ON TRUST CERTIFICATES. The trustee will periodically
distribute the amounts which it receives from the underlying securities and
other trust assets (after payment of the expenses of the trust) to the holders
of the various classes of trust certificates to pay interest, then principal and
then premium to the most senior class of trust certificates and, to the extent
of remaining available funds, to each other class of trust certificates in order
of seniority. If the underlying securities or other trust assets are
insufficient to make payments on the trust certificates, you will not receive
full payment of your trust certificates. NONE OF THE DEPOSITOR OR THE TRUSTEE OR
ANY OF THEIR AFFILIATES HAS ANY OBLIGATION TO MAKE PAYMENTS ON THE TRUST
CERTIFICATES IF THE UNDERLYING SECURITIES AND OTHER TRUST ASSETS ARE
INSUFFICIENT TO MAKE SUCH PAYMENTS.
S-4
<PAGE>
THE TRUST ASSETS
TERMS OF THE UNDERLYING SECURITIES
[REPEAT, AS NECESSARY FOR EACH UNDERLYING SECURITY]
- ---------------------------------
name of issuer
- ---------------------------------
original issue date
- ---------------------------------
outstanding principal amount as of
[date]
- ---------------------------------
interest rate
- ---------------------------------
interest payment dates
- ---------------------------------
maturity date
- ---------------------------------
collateral
- ---------------------------------
specified currency/denominations
- ---------------------------------
DISTRIBUTIONS ON THE REDEMPTION OR ADVANCEMENT OF MATURITY OF THE UNDERLYING
SECURITIES. The issuer of the underlying securities may redeem the underlying
securities prior to their final maturity date or advance their final maturity
date if:
[SPECIFY REDEMPTION OR ADVANCEMENT-OF-MATURITY EVENTS, OR, IF
FEASIBLE, PRESENT IN TABULAR FORMAT].
The trustee will distribute the amounts received as a result of any redemption
of the underlying securities to the owners of the trust certificates as follows:
[SPECIFY ALLOCATION METHOD].
If the underlying securities issuer advances the maturity of the underlying
securities, the trustee will sell the underlying securities and allocate the
resulting sale proceeds to the owners of the trust certificates as follows:
[SPECIFY ALLOCATION METHOD].
CASH DISTRIBUTION TO TRUST CERTIFICATEHOLDERS ON PAYMENT DEFAULT OR
ACCELERATION. The trustee will [sell the underlying securities and distribute
the sale proceeds to the trust certificateholders] [SPECIFY OTHER ACTION], If:
[the underlying securities issuer defaults in the payment of principal or
interest on the underlying securities,] or
[the payment of the underlying securities is accelerated as the result of
any other default under the agreements governing the underlying
securities].
[SPECIFY OTHER EVENTS, IF ANY]
IN-KIND DISTRIBUTION TO TRUST CERTIFICATEHOLDERS ON FAILURE TO FILE PERIODIC
REPORTS, PAYMENT DEFAULT OR ACCELERATION. The trustee will distribute the
underlying securities to the owners of the trust certificates in-kind if:
[an] underlying securities issuer ceases to provide periodic reports and
other information to the SEC as required by federal securities law,
[the underlying securities issuer defaults in the payment of principal or
interest on the underlying securities, or ]
[the payment of the underlying securities is accelerated as the result of a
default under the agreements governing the underlying securities.]
[SPECIFY OTHER EVENTS, IF ANY]
The distribution in-kind will be made as follows: [specify allocation method].
OTHER TRUST ASSETS
[DESCRIBE ANY OTHER TRUST ASSETS, INCLUDING ANY CREDIT SUPPORT, SWAPS OR
DERIVATIVE INSTRUMENTS]
S-5
<PAGE>
TRUST CERTIFICATEHOLDER EXCHANGE RIGHT
On any scheduled distribution date on or after [ ], [ ], any holder of both
amortizing class certificates and residual class certificates will have the
right to exchange trust certificates representing an identical percentage (but
not less than 10%) of the aggregate certificate balance of all trust
certificates of each class for an equivalent percentage of the underlying
securities in the trust.
TERMINATION OF THE TRUST
The trust will terminate upon the occurrence of any of the following events:
[SPECIFY TERMINATION EVENTS].
DENOMINATIONS
You may purchase trust certificates in denominations of [$][ ] and integral
multiples of [$][ ] in excess of [$][ ].
SPECIFIED CURRENCY
The trust certificates will be denominated and payable in [SPECIFY U.S., FOREIGN
OR COMPOSITE CURRENCY (SUCH AS ECU)].
[BOOK-ENTRY] FORM OF SECURITY
The trust certificates will be issued in book-entry form through the facilities
of The Depository Trust Company, New York, New York. You will not receive
definitive securities representing your investment in the trust certificates,
except in limited circumstances described in the accompanying prospectus.
THE TRUSTEE
The Chase Manhattan Bank will serve as trustee and administer the trust. The
trustee's fees will be payable from the trust assets prior to the trust
certificates.
THE DEPOSITOR
The depositor is a Delaware corporation and a wholly-owned limited-purpose
subsidiary of Prudential Securities Group, Inc. The depositor will acquire the
underlying securities and deposit them into the trust. The trust certificates do
not constitute an obligation of the depositor or any of its affiliates.
FEDERAL TAX STATUS
Special tax counsel to the depositor is of the opinion that under existing law
the trust will be a grantor trust or a partnership for federal income tax
purposes. In general, your trust certificate will be treated as a synthetic debt
instrument issued on the date it is acquired by you. You will be subject to the
original issue discount rules of federal income tax law. See "Federal Income Tax
Consequences" in this prospectus supplement and in the prospectus.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement, the [IDENTIFY PARTICULAR CLASSES OF TRUST
CERTIFICATES] are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts. For reasons described under
"ERISA Considerations" in this prospectus supplement, the [IDENTIFY OTHER
CLASSES OF TRUST CERTIFICATES] are not eligible for purchase by persons
investing assets of employee benefit plans or individual retirement accounts
other than an insurance company investing assets of its general account.
S-6
<PAGE>
RISK FACTORS
You should consider the following material risk factors (and any other
risk factors identified in the prospectus) in deciding whether to purchase trust
certificates.
THE TRUST IS A SPECIAL PURPOSE TRUST AND HAS NO ASSETS OTHER THANTHE UNDERLYING
SECURITIES [AND THE CREDIT SUPPORT] TO PAY THE TRUST CERTIFICATES; YOU MAY
EXPERIENCE A LOSS IF SUCH ASSETS ARE INSUFFICIENT
The trust has no significant assets other than the underlying securities [and
other assets or credit support identified in this prospectus supplement]. No
other assets are available to pay your trust certificates. None of the
depositor, the trustee or any of their affiliates is obligated to pay your trust
certificates if the trust assets are insufficient. Consequently, if the
underlying securities and assets that are in the trust are insufficient to pay
your trust certificates, you may experience a loss on your investment.
Accordingly, you are strongly encouraged to obtain as much information
concerning the underlying securities as you would if you were investing directly
in the underlying securities. This prospectus supplement provides the material
information concerning the underlying securities and refers to publicly
available information from the underlying securities issuers. For guidance on
how to obtain additional information about the underlying securities, please see
"Description of the Underlying Securities - Publicly Available Information" in
this prospectus supplement.
A SECONDARY MARKET FOR YOUR TRUST CERTIFICATES MAY NOT DEVELOP OR CONTINUE; THUS
IT MAY BE DIFFICULT TO RESELL YOUR TRUST CERTIFICATES. THE TRUST WILL NOT
ACTIVELY MANAGE THE UNDERLYING SECURITIES TO AVOID LOSSES AND MAY BE REQUIRED TO
DISPOSE OF THE UNDERLYING SECURITIES UNDER ADVERSE MARKET CONDITIONS.
The underwriter[s] may assist in resales of the trust certificates but they are
not obligated to do so. A secondary market for the trust certificates may not
develop. If a secondary market does develop, it may not continue or be
sufficiently liquid to allow you to resell your trust certificates and you may
experience a loss on your investment.
The trust will not dispose of any underlying security except when required by
the trust agreement. If adverse financial conditions arise, the trust will
continue to hold the underlying securities regardless of whether losses could be
reduced by selling or disposing of the securities. On the other hand, if a
default or acceleration of the underlying securities occurs, the trustee will be
required to sell or distribute the underlying securities even if market
conditions are unfavorable at the time. See "Description of the Trust
Certificates-Distributions on Payment Default or Acceleration of the Underlying
Securities". The trustee will have no discretion to do otherwise. If the trustee
sells the underlying securities, you may experience greater losses than might
occur if the trust continued to hold the securities.
S-7
<PAGE>
YOUR ABILITY TO ENFORCE COVENANTS UNDER THE TRUST AGREEMENT MAY BE LIMITED
BECAUSE THERE ARE NO EVENTS OF DEFAULT UNDER THE TRUST AGREEMENT
The trust agreement does not provide for any events of default. Payments on your
trust certificates will not be accelerated even if a covenant under the trust
agreement has been breached, unless an event of default has also occurred with
respect to the underlying securities and the payments on the underlying
securities have been accelerated. Consequently, your ability to enforce
covenants of the underlying securities issuer and the trustee for the underlying
securities contained in the trust agreement may be limited.
THE MARKET VALUE OF YOUR TRUST CERTIFICATES MAY DECLINE DUE TO INTEREST RATE AND
MARKET RISKS; THUS YOU MAY EXPERIENCE A SUBSTANTIAL LOSS IF YOU SELL YOUR TRUST
CERTIFICATES PRIOR TO MATURITY
As with other fixed-income investments, the market price of your trust
certificates will vary inversely with prevailing interest rates at the time of
sale. All else being equal, when interest rates rise, the market price of your
trust certificates will fall; when interest rates fall, the market price of your
trust certificates will rise. In addition, the price at which you may be able to
sell your trust certificates will depend on the supply of and demand for
fixed-income investments similar to the trust certificates at the time you sell
your trust certificates. Inflationary factors may also erode potential buyers'
purchasing power. Consequently, if you sell you trust certificates prior to
maturity, you may experience a substantial loss on your investment.
YOUR EXPECTED INVESTMENT YIELD MAY BE REDUCED BY A REDEMPTION, DEFAULT OR
ACCELERATION OF THE UNDERLYING SECURITIES AND YOUR ABILITY TO REINVEST AT A
COMPARABLE YIELD MAY BE LIMITED
The yield which you realize on your investment in the trust certificates may
depend on a number of factors including
the purchase price of your trust certificates,
the degree to which the timing of payments on your trust certificates is
sensitive to the timing of payments on the underlying securities, and
whether the maturity of your trust certificates is shortened as a result of
a redemption, default or acceleration of the underlying securities.
[IDENTIFY OTHER FACTORS WHICH MAY AFFECT YIELD ON THE TRUST CERTIFICATES]
Neither the depositor nor the trustee can predict if or when a redemption,
default or acceleration of the underlying securities will occur. If the trust
certificates are prepaid or the trustee distributes the underlying securities
in-kind to the trust certificateholders, your investment in the trust
certificates and the underlying securities will have a shorter average maturity.
If the trust certificates are prepaid when prevailing market interest rates are
lower than the yield on your trust certificates, you may be unable to realize a
comparable yield when you reinvest the funds which you receive from the
prepayment of your trust certificates.
S-8
<PAGE>
[YOUR ABILITY TO DETERMINE THE VALUE OF YOUR TRUST CERTIFICATES MAY BE LIMITED
BECAUSE TRUST CERTIFICATES WILL NOT BE LISTED ON AN EXCHANGE OR QUOTATION
SYSTEM]
[Your trust certificates are not required or expected to be listed on any
securities exchange or quoted on any automated quotation system of a registered
securities association. As a result, your ability to determine a market price
for your trust certificates or to resell your trust certificates may be
limited.]
[YOU MAY EXPERIENCE A LOSS ON YOUR INVESTMENT BECAUSE OF THE POTENTIAL
INSTABILITY OF A FOREIGN COUNTRY]
[Because your trust certificates represent an investment in obligations of
foreign corporations, you should consider political, economic, social and other
risks which are not typically associated with an investment in securities of a
United States issuer. Such risks include, but are not limited to:
the devaluation of the local currency, imposition of foreign exchange
controls to prevent free movement of the local currency, and
nationalization of an industry which could make it more difficult (if not
impossible) for the underlying securities issuer to meet its debt
obligations,
the repudiation by the underlying securities issuer of its foreign debts,
the imposition of a moratorium on payment or the rescheduling of foreign
debts,
the levying of a withholding tax or a confiscatory taxation scheme,
exchange rate fluctuations, and the risk that the underlying securities
issuer may not have sufficient U.S. dollar reserves necessary to convert
local currency to U.S. dollars in order to pay principal, interest or other
amounts due with respect to your trust certificates,
political or social instability in a foreign country which make it
difficult (if not impossible) for the underlying securities issuer to meet
its debt obligations.
YOU ARE STRONGLY ENCOURAGED TO CONSULT YOUR OWN FINANCIAL, TAX AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN TRUST CERTIFICATES
WHICH ARE ISSUED BY A FOREIGN COMPANY AND/OR DENOMINATED AND/OR PAYABLE IN
A FOREIGN OR COMPOSITE CURRENCY. SUCH TRUST CERTIFICATES ARE NOT AN
APPROPRIATE INVESTMENT IF YOU ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
OR COMPOSITE CURRENCY TRANSACTIONS.]
[ENFORCEMENT OF OBLIGATIONS IN FOREIGN JURISDICTIONS MAY BE MORE DIFFICULT
THAN ENFORCEMENT IN THE UNITED STATES]
[The underlying securities consist of debt securities issued by companies
incorporated or organized under the laws of a foreign country (I.E., foreign
issuers). The assets of the foreign issuers may be located outside the United
States. As a result, it may be difficult for the trust to pursue lawsuits or
obtain or enforce legal judgments against such issuers in the United States.]
S-9
<PAGE>
[THE FOREIGN ISSUERS DO NOT PREPARE REPORTS IN ACCORDANCE WITH U.S. GENERALLY
APPLIED ACCOUNTING PRINCIPLES, THUS INVESTORS MAY NOT HAVE ACCESS TO INFORMATION
NEEDED TO DETERMINE THE VALUE OF THE TRUST CERTIFICATES AND TO DETERMINE WHETHER
TO SELL TRUST CERTIFICATES]
[While a foreign issuer may make certain information available by filing
periodic reports and other information with the SEC, this information (including
financial information) may differ in timing, form and substance from that
normally available with respect to domestic issuers. Accordingly, investors may
not have access to the same volume of financial information concerning the
issuer of the underlying security that it would have for United States issuers,
thus making it difficult for investors to determine the value of the trust
certificates and whether to sell their trust S-32 certificates.]
[ADDITIONAL RISK FACTORS APPLICABLE TO THE SPECIFIC FOREIGN ISSUER]
[Include additional risk factors as necessary to address risks specific to the
foreign jurisdiction involved.]
S-10
<PAGE>
You can find listings of the pages where capitalized terms used in this
prospectus supplement and/or the accompanying prospectus are defined under the
captions "Index of Defined Terms" beginning on page S-29 in this prospectus
supplement and on page 37 in the accompanying prospectus.
THE TRUST
The trust will be formed under the laws of the [State of New York]
[identify other jurisdiction] pursuant to the trust agreement, which shall
consist of (i) the base trust agreement, dated as of [ ], [ ], by and between
the depositor and The Chase Manhattan Bank, as trustee, and (ii) the Series [
]-[ ] Supplement dated as of [ ], [ ] (the "Series Supplement"), between the
depositor and the trustee. Concurrently with the execution and delivery of the
Series Supplement, the depositor will deposit the underlying securities into the
trust. The underlying securities shall consist OF [IDENTIFY UNDERLYING
SECURITIES]. The trustee, on behalf of the trust, will accept such underlying
securities and on or about the closing date, [ ], [ ], will deliver the Receipts
on Corporate Securities, Series [ ]-[ ], which shall be referred to in this
prospectus supplement as the trust certificates, evidencing fractional undivided
interests in the trust, to or upon the order of the depositor.
The underlying securities were acquired in bona fide secondary market
transactions, not from the underlying securities issuer[s] or an affiliate of
the underlying securities issuer[s], and not as part of the original
distribution or any other distribution by or pursuant to any agreement with the
underlying securities issuer[s]. The underlying securities issuer[s] [is/are]
not participating in this offering and will not receive any of the proceeds of
the sale of the underlying securities to the depositor or the issuance of the
trust certificates.
DESCRIPTION OF THE UNDERLYING SECURITIES
The aggregate principal amount of the underlying securities is [$][ ]. The
principal economic terms of the underlying securities are set forth [below/in
Annex A hereto which is hereby incorporated herein by reference]. The
information in this prospectus supplement under this caption [and in Annex A] is
derived solely from the offering document(s) prepared for the underlying
securities by the [respective] underlying securities issuer[s] (the "Underlying
Securities Prospectus[es]"). Prospective investors in the trust certificates may
wish to read this prospectus supplement and the accompanying prospectus in
conjunction with the Underlying Securities Prospectus[es]. This prospectus
supplement sets forth material terms of the underlying securities, but does not
provide detailed information with respect to the underlying securities or the
underlying securities issuer[s]. This prospectus supplement relates only to the
trust certificates offered hereby and is not an offering document for the
underlying securities.
[INCLUDE THE FOLLOWING PARAGRAPH FOR ALL UNDERLYING SECURITIES ISSUERS
THAT ARE NOT GSES.] The underlying securities issuer[s] [is/are] subject to the
reporting requirements of the Exchange Act and, accordingly, are required to
file periodic reports and other information with the Securities and Exchange
Commission. For information on how to obtain such information and reports,
please see "-Publicly Available Information" below.
THE ABILITY OF OWNERS OF THE TRUST CERTIFICATES TO RECEIVE DISTRIBUTIONS
WILL DEPEND ON THE TRUST'S RECEIPT OF DISTRIBUTIONS ON THE UNDERLYING
SECURITIES. CONSEQUENTLY, POTENTIAL INVESTORS IN THE TRUST CERTIFICATES SHOULD
OBTAIN AND EVALUATE THE SAME INFORMATION CONCERNING THE UNDERLYING SECURITIES
AND THE UNDERLYING SECURITIES ISSUER[S] AS ONE WOULD OBTAIN AND EVALUATE IF
INVESTING DIRECTLY IN THE UNDERLYING SECURITIES OR IN OTHER SECURITIES ISSUED BY
THE UNDERLYING SECURITIES ISSUER[S].
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None of the depositor, the trustee or the underwriter[s], or any of their
affiliates, have participated in the preparation of (i) any Underlying
Securities Prospectus or (ii) any other document, report or other information
filed by the underlying securities issuer[s] with the SEC or otherwise made
available by the underlying securities issuers to the public or potential
investors in the trust certificates. None of the depositor, the trustee or the
underwriter[s], or any of their affiliates, has verified the accuracy or
completeness of such documents or reports. Information contained in such
documents and reports is as of the date(s) stated therein, and comparable
information, if given as of the date hereof, may be materially different. There
can be no assurance that events affecting the underlying securities or the
underlying securities issuer[s] have not occurred, which have not yet been
publicly disclosed, which would affect the accuracy of completeness of the
Underlying Securities Prospectus[es] or any other publicly available documents
described above.
The issuance of the trust certificates should not be construed as an
endorsement by the depositor, the trustee or the underwriter[s], or any of their
affiliates, of the financial condition or business prospects of the underlying
securities issuer[s].
TERMS OF UNDERLYING SECURITIES
[USE THE FOLLOWING TABLE IF THE UNDERLYING SECURITIES CONSIST OF
A SINGLE SECURITY]
The following table sets forth certain terms of the underlying securities
as derived from the Underlying Securities Prospectus.
--------------------------------------------------------
Issuer:
Title:
Dated Date:
Issue Date:
Stated Maturity Date:
Original Principal Amount
Issued:
Principal Amount Deposited
into the Trust:
Stated Interest Rate:
Interest Payment Dates:
Priority of
Payment/Collateral:
Denominations; Specified
Currency:
Method of Payment:
CUSIP Numbers:
Trustee:
[Other:]
--------------------------------------------------------
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[USE THE FOLLOWING LANGUAGE WHERE THE UNDERLYING SECURITIES CONSIST OF A POOL OF
SECURITIES]
Certain terms of the underlying securities as derived from the Underlying
Securities Prospectuses are set forth in Annex A hereto.
PUBLICLY AVAILABLE INFORMATION
The following information concerning the underlying securities issuer[s]
has been obtained from the [applicable] Underlying Securities Prospectus[es]:
[INSERT DESCRIPTIVE PARAGRAPH[S] FROM UNDERLYING SECURITIES PROSPECTUS[ES]
IDENTIFYING THE PRINCIPAL EXECUTIVE OFFICE[S] OF THE UNDERLYING SECURITIES
ISSUER[S] AND PROVIDING CONTACT INFORMATION THEREFOR.]
Information concerning the underlying securities issuer[s] may also be
inspected and copied at the public reference facilities maintained by the SEC at
its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549.
Information regarding the operation of the SEC's Public Reference Room may be
obtained by telephone at (800) 732-0330. Information concerning the underlying
securities issuer[s] can also be inspected at the SEC's public reference
facilities at the following Regional Offices of the SEC: New York Regional
Office, Room 1100, 7 World Trade Center, New York, New York 10048 and Chicago
Regional Office, Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of such material
can be obtained from the Public Reference Section of the SEC, Washington, D.C.
20549, at prescribed rates. Such material may also be accessed electronically by
means of the SEC's home page on the Internet at http://www.sec.gov. [In
addition, reports and other information concerning [SPECIFY UNDERLYING
SECURITIES ISSUER[S]] may be inspected at the Information Center of the New York
Stock Exchange Inc., 20 Broad Street, New York, New York 10005.]
[DESCRIPTION OF THE CREDIT SUPPORT]
[The holders of [IDENTIFY APPLICABLE CLASSES] will have the benefit of
credit support which will be obtained [and constitute part of the trust as
described below] to support or insure the [timely] [ultimate] distribution of
amounts due with respect to the trust certificates, in the form and amount
described below.]
[RESERVE ACCOUNT]
[On the closing date, the depositor will deposit in the trust, to be held
in a reserve account, cash, letters of credit and/or short-term investments
acceptable to the rating agency initially rating the trust certificates in the
amount of [$] [ ]. [In addition, collections with respect to the underlying
securities and other trust assets (together, the "Trust Assets") which are not
distributed to the holders of the trust certificates shall be deposited in the
reserve account.] Amounts so deposited in the reserve account will be used to
make payments of principal of and premium (if any) and interest on the trust
certificates, as the same become due, to the extent that funds are not otherwise
available. Immediately after any Distribution Date, amounts in the reserve
account in excess of [SPECIFY RESERVE ACCOUNT REQUIREMENT] [may be paid to the
depositor.]
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<PAGE>
[LETTER OF CREDIT]
[Simultaneously with its deposit of the underlying securities into the
trust, the depositor will obtain a letter of credit in favor of the trustee from
[ ], the letter of credit bank. The letter of credit will be irrevocable and
will support the [timely] [ultimate] remittance of amounts due with respect to
the [SPECIFY CLASSES] trust certificates. [The maximum amount that may be drawn
under the letter of credit will initially be equal to [$] [ ]. Thereafter, the
amount of the letter of credit with respect to any Distribution Date will equal
[the lesser of (i) [ ]% of the aggregate Certificate Principal Balance
outstanding on the preceding Distribution Date (after giving effect to any
payment of principal made on such preceding Distribution Date) but in any event
not less than [$] [ ], and (ii) the amount of the letter of credit on the
preceding Distribution Date, plus [(a) reimbursement of certain advances under
the letter of credit and (b) recoveries on defaulted underlying securities]
[DESCRIBE OTHER METHODS]. The letter of credit expires on [ ], [ ]. The trustee
will be obligated, in the event of a drawing on the letter of credit, to pursue
appropriate remedies against the underlying securities and other Trust Assets
and other collateral, and any realization thereon shall be paid to the letter of
credit bank to the extent of any amounts owing, in the manner and priority
specified herein.]
[ADD LANGUAGE REGARDING THE LETTER OF CREDIT BANK WITH RESPECT TO ITS DEBT
RATINGS, ACTIVITIES IN WHICH IT ENGAGES, REGULATORY AUTHORITIES HAVING
JURISDICTION OVER IT AND THE NATURE OF SUCH REGULATION, A NARRATIVE DESCRIPTION
OF ITS ASSETS, LIABILITIES (INCLUDING DEPOSITS) AND EQUITY, AND INCLUDE AN
ADDRESS FOR FURTHER INFORMATION CONCERNING THE LETTER OF CREDIT BANK. IN
ADDITION, TO THE EXTENT THAT THE LETTER OF CREDIT WILL COVER PAYMENT OF 20% OR
MORE OF THE CASHFLOW TO THE APPLICABLE SERIES OF TRUST CERTIFICATES, PROVIDE (OR
INCORPORATE BY REFERENCE) THE AUDITED FINANCIAL STATEMENTS OF THE LETTER OF
CREDIT BANK. TO THE EXTENT THAT THE LETTER OF CREDIT WILL COVER PAYMENT OF
BETWEEN 10 AND 20% OF THE CASHFLOW TO THE APPLICABLE SERIES, PROVIDE (OR
INCORPORATE BY REFERENCE) SUMMARIZED FINANCIAL INFORMATION WITH RESPECT TO THE
LETTER OF CREDIT BANK.]
[SURETY BOND]
[Simultaneously with its deposit of the underlying securities into the
trust, the depositor will obtain a surety bond in favor of the trustee from [ ],
the surety. The surety bond will guaranty [timely] [ultimate] distributions of
the principal of and premium (if any) and interest with respect to the [SPECIFY
CLASSES] trust certificates. The surety bond expires on [ ], [ ]. The trustee
will be obligated, in the event of a drawing on the surety bond, to pursue
appropriate remedies against the underlying securities and other Trust Assets
and other collateral, and any realization thereon shall be paid to the surety to
the extent of any amounts owing, in the manner and priority specified herein.]
[ADD LANGUAGE REGARDING THE ISSUER OF THE SURETY BOND WITH RESPECT TO ITS
DEBT RATINGS, ACTIVITIES IN WHICH IT ENGAGES, REGULATORY AUTHORITIES HAVING
JURISDICTION OVER IT AND THE NATURE OF SUCH REGULATION, A NARRATIVE DESCRIPTION
OF ITS ASSETS, LIABILITIES (INCLUDING DEPOSITS) AND EQUITY, AND INCLUDE AND
ADDRESS FOR FURTHER INFORMATION CONCERNING THE SURETY. IN ADDITION, TO THE
EXTENT THAT THE SURETY BOND WILL COVER PAYMENT OF 20% OR MORE OF THE CASHFLOW TO
THE APPLICABLE SERIES OF TRUST CERTIFICATES, PROVIDE (OR INCORPORATE BY
REFERENCE) THE AUDITED FINANCIAL STATEMENTS OF THE SURETY. TO THE EXTENT THAT
THE SURETY BOND WILL COVER PAYMENT OF BETWEEN 10 AND 20% OF THE CASHFLOW TO THE
APPLICABLE SERIES, PROVIDE (OR INCORPORATE BY REFERENCE) SUMMARIZED FINANCIAL
INFORMATION WITH RESPECT TO THE SURETY.]
[OTHER FORMS OF CREDIT ENHANCEMENT]
[DESCRIBE THE MATERIAL TERMS OF ANY OTHER FORM OF CREDIT ENHANCEMENT WHICH
IS INCLUDED IN THE TRUST, INCLUDING ANY INTEREST RATE, CURRENCY, SECURITIES,
COMMODITY OR CREDIT SWAPS, CAPS, FLOORS, COLLARS OR OPTIONS, AND IDENTIFY EACH
COUNTERPARTY THERETO. TO THE EXTENT THE CREDIT EXPOSURE PURSUANT TO SUCH CREDIT
S-14
<PAGE>
ENHANCEMENT WILL EQUAL OR EXCEED 20% OF THE CASHFLOW TO THE APPLICABLE SERIES,
PROVIDE (OR INCORPORATE BY REFERENCE) THE AUDITED FINANCIAL STATEMENTS OF THE
APPLICABLE COUNTERPARTY. TO THE EXTENT THAT SUCH EXPOSURE IS BETWEEN 10 AND 20%
OF CASHFLOW TO THE APPLICABLE SERIES, PROVIDE (OR INCORPORATE BY REFERENCE)
SUMMARIZED FINANCIAL INFORMATION WITH RESPECT TO THE COUNTERPARTY.]
DESCRIPTION OF THE OTHER TRUST ASSETS
[In addition to the underlying securities, the trust has entered into a
[swap agreement] [other trust assets.] [Describe the material terms of any other
trust assets which are included in the trust, including any interest rate,
currency, securities, commodity or credit swaps, caps, floors, collars or
options, and identify each counterparty thereto. To the extent the credit
exposure related to such trust assets will equal or exceed 20% of the cashflow
to the applicable series, provide (or incorporate by reference) the audited
financial statements of the applicable counterparty. To the extent that such
exposure is between 10 and 20% of cashflow to the applicable series, provide (or
incorporate by reference) summarized financial information with respect to the
counterparty.]
YIELD ON THE TRUST CERTIFICATES
[DESCRIBE FACTORS RELATING TO THE TRUST ASSETS, THE TERMS THEREOF AND THE
MANNER AND PRIORITY IN WHICH COLLECTIONS THEREON ARE PAID OR ALLOCATED TO EACH
CLASS OF THE TRUST CERTIFICATES THAT MAY AFFECT THE YIELD ON THE TRUST
CERTIFICATES.] See "Maturity and Yield Considerations" in the prospectus.
DESCRIPTION OF THE TRUST CERTIFICATES
GENERAL
The trust certificates will consist of [ ] classes of trust certificates,
designated as [ ] Class Certificates and [ ] Class Certificates. The trust
certificates will be denominated and distributions with respect thereto will be
payable in [ ] (the "Specified Currency"). The trust certificates represent in
the aggregate the entire beneficial ownership interest in the trust. The [ ]
Class Certificates have in the aggregate an initial Certificate Principal
Balance of [$] [ ] (approximate) and a [ %] [variable] Trust Certificate Rate.
The [ ] Class Certificates have in the aggregate an initial Certificate
Principal Balance of [$] [ ] (approximate) and a [ %] [variable] Trust
Certificate Rate. The [ ] Class Certificates have in the aggregate an initial
Certificate Principal Balance of [$] [ ] (approximate) and a [ %] [variable]
Trust Certificate Rate. [The [ ] Class Certificates, which are not being offered
hereby, will be transferred by the depositor to an affiliate on the closing
date, and may be sold at any time by the depositor in accordance with the terms
of the trust agreement.]
[REVISE THE FOLLOWING DESCRIPTION TO REFLECT THE SPECIFIC CHARACTERISTICS
OF EACH CLASS.] Payments received on the underlying securities will be
distributed to the holders of the trust certificates on each [ ] and [ ],
commencing [ ], [ ] (each, a "Distribution Date"). The final scheduled
Distribution Date for the securities (the "Final Scheduled Distribution Date")
is [ ], [ ].
The trust certificates [other than the [ ] Class Certificates [AND SPECIFY
OTHERS] (the "Definitive Classes")] will be issued, maintained and transferred
on the book-entry records of The Depository Trust Company, New York, New York
and its participants in minimum denominations of [$][ ] and [integral multiplies
thereof] [multiplies of [$][ ] in excess thereof]. [The [ ] Class Certificates
[and specify any others] will be offered in registered, certificated form, in
minimum percentage interests corresponding to the initial Certificate Principal
Balance of [$][ ] and integral multiples thereof, except that one trust
certificate of each such class may be issued with an initial Certificate
Principal Balance equal to an integral multiple of [$][ ] plus the excess of the
initial aggregate Certificate
S-15
<PAGE>
Principal Balance of such class over the greatest integral multiple of [$ ] that
is not more than such initial aggregate Certificate Principal Balance.]
The trust certificates [(other than the Definitive Classes of trust
certificates)] will initially be represented by one or more global certificates
registered in the name of the nominee of DTC (together with any successor
clearing agency selected by the depositor, the "Clearing Agency"), except as
provided below. The depositor has been informed by DTC that DTC's nominee will
be Cede. No beneficial owner of any such trust certificate will be entitled to
receive a certificate representing such person's interest, except as set forth
below under "--Definitive Certificates". Unless and until Definitive
Certificates are issued under the limited circumstances described herein, all
references to actions by holders with respect to any such trust certificates
shall refer to actions taken by DTC upon instructions from its DTC participants.
See "--Definitive Certificates" below and "Description of the Trust
Certificates--Global Securities" in the prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a beneficial
owners only at the direction of one or more DTC participants to whose DTC
account such trust certificates are credited. Additionally, DTC will take such
actions with respect to specified voting rights under the trust certificates
(the "Voting Rights") only at the direction and on behalf of DTC participants
whose holdings of such trust certificates evidence such specified Voting Rights.
DTC may take conflicting actions with respect to Voting Rights, to the extent
that DTC participants whose holdings of trust certificates evidence such Voting
Rights, authorize divergent action.
For certain information with respect to DTC and Year 2000 issues, see
"Year 2000" herein.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to beneficial owners or their
nominees respectively, 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 Clearing Agency with respect to a
class of trust certificates [(other than the Definitive Classes)] 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 is required to notify all DTC participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the trust certificates [(other than the
Definitive Classes of trust certificates)] and receipt of instructions for
re-registration, the trustee will reissue such trust certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such trust certificates, and thereafter the trustee will recognize the
holders of such Definitive Certificates as holders under the trust agreement.
COLLECTIONS AND DISTRIBUTIONS
Collections on the underlying securities and other Trust Assets that are
received for a given period (each, a "Collection Period") pursuant to the
collection procedures described herein and in the prospectus will be applied by
the trustee on each applicable Distribution Date to the following distributions
in the following order of priority, solely to the extent of Available Funds (as
defined below) on such Distribution Date:
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(i) [to the trustee, all unpaid fees and expenses owed thereto and its
respective agents, up to the Allowable Expense Amount (as defined below)
for the related Collection Period;]
(ii) [to the providers of credit support, any credit support
payments;]
(iii) to the trust certificateholders of each class, first to the
payment of Required Interest, second to the payment of Required Principal
and third, to the payment of Required Premium, in each case applicable to
such class, commencing with the most highly ranked class and, to the
extent Available Funds remain available, to each other class in accordance
with the ranking specified herein under "--Allocation of Losses;
Subordination";
(iv) [to the credit support providers, any credit support payments;]
(v) [to the trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to clause (i)
above;]
(vi) [to the reserve account until the balance therein equals the
required amount]; and
(vii) [all remaining amounts, if any, to the depositor.]
There can be no assurance that collections received from the underlying
securities, any other Trust Assets and any applicable credit support relating to
the trust certificates over a specified period will be sufficient, after payment
of all Allowable Expense Amounts [and payments of all amounts required to be
paid to the credit support providers] for such period, to make all required
distributions on the trust certificates. [To the extent Available Funds are
insufficient to make any such distributions due to any such series or class, any
shortfall will be carried over and will be distributed on the next Distribution
Date on which sufficient funds exist to pay such shortfalls.]
For purposes hereof, the following terms have the following meanings:
"Allowable Expense Amount" means, for any given Collection Period,
the sum of (x) [$] [ ]and (y) amounts in respect of the Allowable Expense
Amount from the preceding Collection Period that have not been applied on
the Distribution Date for such preceding Collection Period.
"Available Funds" for any Distribution Date means the sum of (a) all
amounts actually received on or with respect to the underlying securities
and any other Trust Assets (including investment income on Eligible
Investments) received during the preceding Collection Period[,] [and] (b)
amounts available as such Distribution Date pursuant to the credit support
described herein [and (c) any additional amount that the [depositor] may
remit to the trustee from time to time according to the terms of the trust
agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means [a
fixed percentage] [a percentage that varies depending on [DESCRIBE BASIS
FOR VARIABLE FORMULA, SUCH AS THE APPLICABLE DATE OR OTHER FACTORS OR
INDICES]].
"Eligible Investments" means, with respect to the trust certificates,
those investments acceptable to the rating agencies as being consistent
with the rating of such trust certificates. Generally, Eligible
Investments must be limited to obligations or securities that mature no
later than the business day prior to the next succeeding Distribution
Date.
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<PAGE>
"Required Interest" for the trust certificates or any class thereof
on any given Distribution Date means the accrued and undistributed
interest on the outstanding Certificate Principal Balance [or Notional
Amount] of such outstanding trust certificates, computed at the applicable
rate at which interest accrues on such class (the "Trust Certificate
Rate").
"Required Premium" for the trust certificates or any class thereof
for any Distribution Date means an amount equal to the product of (a) the
Required Principal for such trust certificates on such Distribution Date
and (b) the Call Premium Percentage for such Distribution Date.
"Required Principal" for the trust certificates or any class thereof
for any Distribution Date means the amount received on the underlying
securities or other Trust Assets attributable to principal payments thereon
during the related Collection Period, to the extent payable or allocable to
such trust certificates. The Certificate Principal Balance of a trust
certificate outstanding at any time represents the maximum amount that the
holder thereof is entitled to receive as distribution payable in respect of
or allocated to principal from the cash flow on the underlying securities,
any other Trust Assets and any credit support obtained for the benefit of
such holder. The Certificate Principal Balance of any trust certificates
[(other than the [ ] Class Certificates)] as of any date of determination
is equal to the initial Certificate Principal Balance thereof, reduced by
the aggregate of (a) all amounts allocable to principal previously
distributed with respect to such trust certificate and (b) any reductions
in the Certificate Principal Balance thereof deemed to have occurred in
connection with allocations of (i) Realized Losses allocable to principal
on the Trust Assets and (ii) Extraordinary Trust Expenses, as described
herein. [The Certificate Principal Balance of the [ ] Class Certificates as
of any date of determination is equal to [specify amount].] [Holders of the
[ ] Class Certificates are not entitled to receive any distributions
allocable to principal.]
[Notwithstanding the priorities described above, holders of the [ ] Class
Certificates and the [ ] Class Certificates will be entitled to receive on any
Distribution Date 100% of all principal collections received in the related
Collection Period with respect to the Trust Assets, to be distributed [on a PRO
RATA basis] in reduction of the Certificate Principal Balance of the [ ] Class
Certificates and the [ ] Class Certificates, if any of the following conditions
shall be satisfied: [DESCRIBE CONDITIONS, IF ANY BY WHICH A CERTAIN CLASS IS
GIVEN 100% OF THE PRINCIPAL CASH FLOW OTHER THAN PURSUANT TO SUBORDINATION THAT
IS IN EFFECT FROM THE CLOSING DATE].]
[ADVANCES]
[Subject to the following limitations, the trustee may, but will not be
obligated to, advance or cause to be advanced on or before each Distribution
Date from its own funds, or other available funds, in an amount equal to the
aggregate of payments of principal, premium (if any) and interest, net of that
portion of the Administration Fee attributable to fees and expenses of the
trustee, that were due during the related Collection Period and that were
delinquent on the related Determination Date.
Advances are required to be made only to the extent they are deemed by the
trustee to be recoverable from related late collections, insurance proceeds, if
any, or Liquidation Proceeds (as defined below). The purpose of making such
advance is to maintain a regular cash flow, rather than to guarantee or insure
against losses. The trustee will not be required to make any advances with
respect to reductions in the amount of the payments on the underlying securities
or other Trust Assets due to bankruptcy proceedings with respect to such
underlying securities or other Trust Assets.
All advances will be reimbursable from late collections, insurance
proceeds, if any, and any proceeds from the liquidation of the underlying
security or Trust Asset ("Liquidation Proceeds") as to
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which such unreimbursed advance was made. In addition, any advance previously
made in respect of any underlying security or Trust Asset that is deemed to be
nonrecoverable from related late collections, insurance proceeds, if any, or
Liquidation Proceeds may be reimbursed to the trustee out of any funds allocable
to any of the underlying securities or other Trust Assets prior to the
distributions on the trust certificates.]
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the [ ] Class Certificates
[and the [ ] Class Certificates] is designed to protect holders of the remaining
classes of trust certificates from certain losses and other shortfalls with
respect to the underlying securities and other Trust Assets. As a result, losses
and other shortfalls with respect to the underlying securities and other Trust
Assets will be borne by the remaining classes of trust certificates, to the
extent described below, only if such losses and other shortfalls are not so
covered, or the coverage in respect thereof has been exhausted.
[Realized Losses and Extraordinary Trust Expenses will be
allocated on any Distribution Date as follows: [describe
allocation among the various classes].]
[An "Extraordinary Trust Expense" is an expense of the trust
is excess of the Allowable Expense Amount.]
EXCHANGE OF TRUST CERTIFICATES FOR UNDERLYING SECURITIES
The trust certificates have been designated as an "Exchangeable Series."
Accordingly, commencing on [ ], [ ], any holder of both Amortizing Class
Certificates and Residual Class Certificates may, by delivery of a notice to the
trustee substantially in the form of the Notice of Exchange attached to a trust
certificate (a "Notice of Exchange"), elect to exchange trust certificates of
both classes for a PRO RATA share of the underlying securities on any
Distribution Date (an "Exchange Date"). Such Notice of Exchange must be received
by the trustee not less than 30 nor more than 45 days prior to the Exchange
Date. In order to exercise such exchange right (the "Exchange Right"), the
holder shall tender to the trustee on the Exchange Date both (a) Amortizing
Class Certificates evidencing the percentage specified in the Notice of Exchange
(which shall not be less than 10%) of the aggregate Certificate Principal
Balance of all Amortizing Class Certificates then outstanding and (b) Residual
Class Certificates evidencing the same percentage of the aggregate Certificate
Principal Balance of all Residual Class Certificates then outstanding as is
represented by the Amortizing Class Certificates tendered by such holder.
Upon tender of such trust certificates, duly endorsed by the holder to the
trustee, the trustee shall transfer to the holder (or its designee) a principal
amount of the underlying securities comprising the same percentage of the
underlying securities then held in the trust as the percentage of the applicable
class of trust certificates tendered by such holder on such Exchange Date,
rounded down to the nearest authorized denomination of the underlying
securities. Upon such exchange, the trustee shall cancel the tendered trust
certificates, provided that if the amount of underlying securities delivered to
the holder or its designee was rounded down in accordance with the preceding
sentence, the trustee shall issue to such holder new trust certificates of the
appropriate class evidencing percentage interests of such class (regardless of
whether such interests would otherwise be authorized denominations) equal to the
amount of such class in excess of the amount accepted for such exchange.
The delivery of a Notice of Exchange shall be irrevocable; provided,
however, that if (i) the proceeds of an optional redemption, a shortened
maturity redemption or an in-kind distribution of the underlying securities are
to be distributed on the Exchange Date to which such Notice of Exchange relates
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or (ii) if prior to such Exchange Date, the trustee gives notice to holders that
the proceeds of an optional redemption, shortened maturity redemption or an
in-kind distribution of the underlying securities are scheduled to be
distributed on a date subsequent to such Exchange Date, such Notice of Exchange
shall be automatically deemed cancelled and be of no further force and effect.
Any holder tendering trust certificates in exchange for underlying
securities on an Exchange Date shall be entitled to receive cash distributions
otherwise payable on such trust certificates on such Exchange Date.
Because initially and unless and until Definitive Certificates are issued
each trust certificate will be represented by one or more global certificates
registered in the name of DTC or its nominee, DTC or its nominee, as applicable,
will be the trust certificateholder of such trust certificate and therefore will
be the only entity that can exercise an Exchange Right. In order to ensure that
DTC or its nominee will timely exercise the Exchange Right with respect to a
particular trust certificate, the beneficial owners of such trust certificate
must instruct the broker or other direct or indirect DTC participant through
which it holds an interest in such trust certificate to notify DTC of its desire
to exercise the Exchange Right. Different securities firms or banks have
different cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owners should consult the broker or other direct or
indirect DTC participant through which it holds an interest in a trust
certificate in order to ascertain the cut-off time by which such an instruction
must be given in order for timely notice to be delivered to DTC or its nominee.
DISTRIBUTIONS ON PAYMENT DEFAULT OR ACCELERATION OF THE
UNDERLYING SECURITIES
If there is a payment default on the underlying securities or an
acceleration of the underlying securities (see "Description of the Underlying
Securities" herein), the trustee will [sell the underlying securities and
allocate the proceeds from the sale of the underlying securities between the [ ]
Class Certificates and the [ ] Class Certificates in accordance with the
Allocation Ratio][distribute the underlying securities between the [ ] Class
Certificates and the [ ] Class Certificates in accordance with the Allocation
Ratio (as defined below)][submit to a vote of the holders of the trust
certificates to decide the appropriate remedy].
As used herein, "Allocation Ratio" means [the ratio of the [ ] Class
Allocation to the [ ] Class Allocation. The "[ ] Class Allocation" means the sum
of the present values (discounted at the rate of [ ]% per annum) of each of the
unpaid interest coupons due or to become due on the underlying securities on or
prior to the Final Scheduled Distribution Date. The "[ ] Class Allocation" means
the sum of the present values (discounted at the rate of [ ]% per annum) of each
of the unpaid interest coupons due or to become due on the underlying securities
after the Final Scheduled Distribution Date plus the sum of the present values
(discounted as the rate of [ ]% per annum) of each of the principal amounts of
the underlying securities (in each case assuming that the underlying securities
were paid when due and were not redeemed prior to their stated maturity).]
[SPECIFY OTHER ALLOCATION RATIO METHODOLOGY].
DISTRIBUTIONS ON REDEMPTION OR ADVANCEMENT OF MATURITY OF THE
UNDERLYING SECURITIES
If there is a redemption of the underlying securities upon the occurrence
of a Tax Event [or] [SPECIFY OTHER EVENTS] (see "Description of the Underlying
Securities" herein), the proceeds of such redemption will be allocated between
the [ ] Class Certificates and the [ ] Class Certificates in accordance with the
Allocation Ratio. [If there is an advance of maturity of the underlying
securities upon the occurrence of a Tax Event (see "Description of the
Underlying Securities" herein), the underlying securities will be sold and the
proceeds from such sale will be allocated between the [ ] Class Certificates and
the [ ] Class Certificates in accordance with the Allocation Ratio.]
S-20
<PAGE>
DISTRIBUTIONS ON TERMINATION OF EXCHANGE ACT REPORTING
If an underlying securities issuer ceases to provide periodic reports and
other information to the SEC as required by the Exchange Act, the underlying
securities of such underlying securities issuer will be distributed in-kind to
the holders of the trust certificates no later than the date the next periodic
report is required to be made by the underlying securities issuer, as follows:
[SPECIFY ALLOCATION METHOD]. After any such distribution, the trust
certificateholders would be the direct holders of the distributed underlying
securities. CONSEQUENTLY, POTENTIAL INVESTORS IN THE TRUST CERTIFICATES SHOULD
OBTAIN AND EVALUATE THE SAME INFORMATION CONCERNING THE UNDERLYING SECURITIES
ISSUER[S] AND THE UNDERLYING SECURITIES AS ONE WOULD OBTAIN AND EVALUATE IF
INVESTING DIRECTLY IN THE UNDERLYING SECURITIES. See "Description of the
Underlying Securities" above and "Annex A - Terms of the Underlying Securities"
attached hereto.
[RESTRICTION ON TRANSFER OF THE [ ] CLASS CERTIFICATES]
[Because the [ ] Class Certificates are subordinate to the [ ] Class
Certificates and the [ ] Class Certificates to the extent set forth herein, the
[ ] Class Certificates may not be purchased by or transferred to persons
investing assets of employee benefit plans or individual retirement accounts,
except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations" herein.]
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The trust certificates will be issued pursuant to the trust agreement, a
form of which is filed as an exhibit to the Registration Statement. A Current
Report on Form 8-K relating to the trust certificates containing a copy of the
trust agreement as executed will be filed by the depositor with the SEC
following the issuance and sale of the trust certificates. The trust created
under the trust agreement will consist of (i) the underlying securities
[(exclusive of any interest retained by the depositor which is not part of the
trust)], (ii) all payments on or collections in respect of the underlying
securities due after the [closing date], together with any proceeds thereof[,]
[and] [(iii) any credit support in respect of any class or classes of trust
certificates] [and (iv) the rights of the depositor under the purchase agreement
for the underlying securities between the depositor and the seller of the
underlying securities]. [In addition, the trust certificateholders of the trust
certificates may also have the benefit of certain credit support discussed
above. See "Description of the Credit Support".] Reference is made to the
prospectus for important information in addition to that set forth herein
regarding the trust, the terms and conditions of the trust agreement and the
trust certificates. The material terms of the trust agreement are summarized
below and in the prospectus. Such summaries do not purport to be complete and
are subject to the detailed provisions contained in the form of trust agreement,
to which reference is hereby made for a full description of such provisions,
including the definition of certain terms used herein.
THE TRUSTEE
The Chase Manhattan Bank, a New York banking corporation, will act as
trustee for the trust certificates and the trust pursuant to the trust
agreement. The trustee's offices are located at [ ] and its telephone number is
( ) [ ]-[ ]. The trust agreement will provide that the trustee and any director,
officer, employee or agent of the trustee will be indemnified by the trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the trust agreement or the trust
certificates or the performance of the trustee's duties under the trust
agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the trustee under the trust agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
trustee's duties under the trust agreement.
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<PAGE>
ACTIONS BY TRUST CERTIFICATEHOLDERS
No trust certificateholder will have the right to institute any proceeding
with respect to the trust agreement, unless (i) such trust certificateholder
previously has given to the trustee written notice of a continuing breach, (ii)
trust certificateholders evidencing not less than the Required
Percentage-Remedies (as defined below) of the aggregate Voting Rights have
requested in writing that the trustee institute such proceeding in its own name
as trustee, (iii) such trust certificateholder or trust certificateholders have
offered the trustee such reasonable indemnity as it may require against the
costs, liabilities or expenses to be incurred thereon or thereby, and (iv) the
trustee has for 30 days failed to institute such proceeding. "Required
Percentage-Remedies" means [ ]% of the Voting Rights.
There are no events of default under the trust agreement.
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all Voting
Rights will be allocated among all holders of the [ ] Class Certificates and the
[ ] Class Certificates [in accordance with the Allocation Ration] [in proportion
to the outstanding Certificate Principal Balances [or s] of their respective
trust certificates]. Within each class of trust certificates, Voting Rights will
be allocated among all holders of such class in proportion to the then
outstanding [Certificate Principal Balances] [s] of their respective trust
certificates.
[SPECIFY CONDITIONS, IF ANY, UNDER WHICH THE ALLOCATION OF VOTING RIGHTS
MIGHT CHANGE FROM THE FOREGOING METHODOLOGY].
VOTING OF UNDERLYING SECURITIES; MODIFICATION OF UNDERLYING SECURITIES
AGREEMENTS
The trustee, as holder of the underlying securities, has the right to vote
and give consents and waivers in respect of such underlying securities as
permitted by the Clearing Agency and except as otherwise limited by the trust
agreement. In the event that the trustee receives a request from the Clearing
Agency, the trustee for the underlying securities or an underlying securities
issuer for it consent to any amendment, modification or waiver of the underlying
securities, the Underlying Securities Agreement or any other documents
thereunder or relating thereto, or receives any other solicitation for any
action with respect to underlying securities, the trustee shall mail notice of
such proposed amendment, modification, waiver or solicitation to each trust
certificateholder of record as of such date. The trustee shall request
instructions from the trust certificateholders as to whether or not to consent
to or vote to accept such amendment, modification, waiver or solicitation. The
trustee shall consent or vote, or refrain from consenting or voting, in the same
proportion (based on the relative Certificate Principal Balances [and Notional
Amounts] of the trust certificates) as the trust certificates were actually
voted or not by the trust certificateholders thereof as of date determined by
the trustee prior to the date on which such consent or vote is required [after
weighing the votes of the [ ] Class Certificateholders and the [ ] Class
Certificateholders according to the Allocation Ratio]; provided, however, that,
notwithstanding anything to the contrary, the trustee shall at no time vote or
consent to any matter (i) unless such vote or consent would not (based on an
opinion of counsel) alter the status of the trust for federal income tax
purposes, (ii) which would alter the timing or amount of any payment on the
underlying securities, except in the event of an event of default or early
amortization event with respect to the underlying securities or an event which
with the passage of time would become such an event of default or early
amortization event and with the unanimous consent of all the holders of
outstanding trust certificates or (iii) which would result in the exchange or
substitution of any of the outstanding underlying securities pursuant to a plan
for the refunding or refinancing of such underlying securities, but only with
the consent of trust certificateholders representing 100% of the aggregate
voting rights of each outstanding class of the trust
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<PAGE>
certificates. The trustee shall have no liability for any failure to act
resulting from trust certificateholders' late return of directions requested by
the trustee from the trust certificateholders.
In the event that an offer is made by the underlying securities issuer to
issue new obligations in exchange and substitution for any of the underlying
securities pursuant to a plan for the refunding or refinancing of the underlying
securities, or any other offer is made for the underlying securities, the
trustee shall notify the trust certificateholders of such offer as promptly as
practicable. The trustee must reject any such offer unless (i) the trustee is
directed by the affirmative vote of all of the trust certificateholders to
accept such offer and (ii) the trustee has received the tax opinion described
above.
If an event of default under the Underlying Securities Agreement occurs
and is continuing and if directed by all the holders of outstanding trust
certificates, the trustee shall vote the underlying securities in favor of
directing, or taking such other action as may be appropriate to direct, the
trustee for the underlying securities to declare the unpaid principal amount of
the underlying securities and any accrued and unpaid interest thereon to be due
and payable. In connection with a vote concerning whether to declare the
acceleration of the underlying securities, the interests of the holders of trust
certificates may differ from each other and from the interests of the holders of
any other securities issued by the underlying securities issuer.
TERMINATION OF THE TRUST
The trust will terminate upon the occurrence of any of the following
events: [SPECIFY TERMINATION EVENTS]. See "Description of the Trust
Agreement--Termination" in the prospectus.
The depositor will have the right to purchase all remaining underlying
securities in the trust and thereby effect early retirement of the trust
certificates on any Distribution Date, [(a)] if the aggregate principal amount
of the underlying securities at the time of any such purchase is not more than
[specify percentage not greater than 10%] of the aggregate principal amount of
the underlying securities as of the closing date [and (b) at the option of the
depositor at [SPECIFY WHEN AND ON WHAT TERMS ANY SUCH OPTION MAY BE EXERCISED];
provided, however, that the right to exercise any such option is contingent on
such exercise being consistent with the continued satisfaction by the depositor
and the trust of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder. In the event the depositor exercises any such
option, the portion of the purchase price allocable to the trust certificates of
each class will be, to the extent of available funds, [100% of their then
aggregate outstanding Certificate Principal Balance or Notional Amount, as
applicable, plus with respect to the [ ] Class Certificates [SPECIFY PERIOD]
interest thereon at the Fixed Trust Certificate Rate or the then applicable
Floating Trust Certificate Rate, as the case may be, plus, with respect to each
class of trust certificates, any previously accrued but unpaid interest
thereon.] [SPECIFY ALTERNATIVE ALLOCATIONS METHOD IF DIFFERENT FROM ABOVE.]
LEGAL ASPECTS OF THE TRUST ASSETS
[DESCRIBE ANY APPLICABLE LEGAL ASPECTS OF THE UNDERLYING SECURITIES OR
OTHER TRUST ASSETS OR RELATING TO THE ENFORCEABILITY BY THE TRUST
CERTIFICATEHOLDERS OF THE SECURITY INTEREST, IF ANY, SECURING SUCH UNDERLYING
SECURITIES OR TRUST ASSETS.]
THE DEPOSITOR
The depositor was incorporated in the State of Delaware on May 30, 1995,
as a wholly-owned, limited-purpose subsidiary of Prudential Securities Group,
Inc. The depositor will not engage in any business or other activities other
than issuing and selling securities from time to time and acquiring,
S-23
<PAGE>
owning, holding and transferring assets (including the underlying securities,
other Trust Assets and credit support) in connection therewith or with the
creation of the trust and in activities related or incidental thereto. The
depositor is a separate legal entity the assets of which are not available to
satisfy the claims of creditors of Prudential Securities Group, Inc., Prudential
Securities Incorporated or any other affiliate.
The depositor's only obligations with respect to the trust certificates
will be, pursuant to certain representations and warranties concerning the
underlying securities [and credit support], to assign and deliver the underlying
securities [and credit support] and certain related documents to the trustee.
The depositor has not guaranteed and is not otherwise obligated with respect to
the trust certificates.
The principal executive office of the depositor is located at One New York
Plaza, 14th Floor, New York, New York 10292-2014 (Telephone: (212) 809-6631).
See "The Depositor" in the prospectus.
YEAR 2000
Certain information technology ("IT") and non-IT systems (I.E., embedded
technology such as microcontrollers) may utilize older computer programs that
were written using two digits rather than four to define the applicable year.
Consequently, such computer programs may recognize a date using "00" as the Year
1900 rather than the Year 2000. These computer programs may fail to operate
properly in the Year 2000 and after if they are not modified or replaced to
comply with Year 2000 requirements.
Various underlying securities issuers may not timely conduct or complete a
Year 2000 assessment and there can be no assurance that any Term Assets Issuers
will make any necessary modifications or replacements of their IT or non-IT
systems in time, if at all. Failure to do so could result in a disruption of
operations of various underlying securities issuers, including, among other
things, a temporary inability to process funds or engage in similar normal
business practices. As a result, payments to trust certificateholders may be
interrupted or impaired.
[SUMMARIZE YEAR 2000 DISCLOSURE FROM UNDERLYING SECURITIES PROSPECTUS(ES)
CONCERNING READINESS, COSTS, MATERIAL RISKS AND CONTINGENCY PLANS, AS
APPLICABLE]
[INCLUDE YEAR 2000 DISCLOSURE FROM THE TRUSTEE, AS APPROPRIATE]
DTC. DTC has provided the following information regarding Year 2000 issues
for inclusion in this prospectus supplement. None of the depositor, the
underwriter[s] or the trustee assumes any responsibility for the accuracy or
completeness thereof:
DTC management is aware that some computer applications, systems and
the like for processing data ("Systems") that are dependent on calendar
dates, including dates before, on and after January 1, 2000, may encounter
"Year 2000 problems." DTC has informed its participants and other members
of the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to timely
payment of distributions (including principal and income payments) to
securityholders, book-entry deliveries, and settlements of trades within
DTC, continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and
their agents, as well as third party vendors from whom DTC licenses
software and hardware, and third party vendors on
S-24
<PAGE>
whom DTC relies for information or the provisions of services,
including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and
will continue to contact) third party vendors from whom DTC acquires
services to: (i) impress upon them the importance of such services
being Year 2000 compliant; and (ii) determine the extent of their
efforts for Year 2000 remediation (and, as appropriate, testing) of
their services. In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty or contract modification
of any kind.
FEDERAL INCOME TAX CONSEQUENCES
Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel, has delivered an
opinion that the trust will be a grantor trust or a partnership for federal
income tax purposes and not an association taxable as a corporation (or publicly
traded partnership treated as a corporation). Although such treatment is not
certain, the trustee intends for tax reporting purposes to treat the trust as a
grantor trust and the balance of this discussion assumes that the trust will be
so classified. For a discussion of the consequences of recharacterization of the
trust as a partnership for federal income tax purposes, see "--Possible
Recharacterization of the Trust as a Partnership" in "Federal Income Tax
Consequences" in the prospectus.
[INSERT A DISCUSSION OF THE TAX CHARACTERIZATION OF THE UNDERLYING SECURITIES AS
APPROPRIATE]
In general, each trust certificate will be treated as a synthetic debt
instrument issued on the date it is acquired by the holder thereof. Each trust
certificateholder will be subject to the original issue discount ("OID") rules
of the Internal Revenue Code of 1986 (the "Code") and Treasury Regulations with
respect to such trust certificates. Under those rules, the trust
certificateholder (whether on the cash or accrual method of accounting) will be
required to include in income the OID on its trust certificate as it accrues on
a daily basis, on a constant yield method regardless of when cash payments are
received. The amount of OID on the trust certificate generally will be equal to
the excess of all amounts payable on the trust certificate over the amount paid
to acquire the trust certificate and the constant yield used in accruing OID
generally will be the yield to maturity of the trust certificate as determined
by such holder based on that holder's purchase price for the trust certificate.
The amount of OID that is reported in income in any particular year will not
necessarily bear any relationship to the amount of distributions, if any, paid
to a holder in that year.
Payments made on a trust certificate to a person that is not a U.S. Person
and has no connection with the United States other than holding its trust
certificate generally will be made free of United States federal withholding
tax, provided that (i) the holder is not related (directly or indirectly) to
certain other specified persons and (ii) the holder complies with certain
identification and certification requirements imposed by the IRS.
See "Federal Income Tax Consequences" in the prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code, including an individual retirement account
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<PAGE>
("IRA") or Keogh plan, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
I.E., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in trust certificates should
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or Section 4975 of the Code. The underlying
securities issuer, the underwriter[s], the trustee and their respective
affiliates may be Parties in Interest with respect to any Plans.
If an investment in trust certificates by a Plan were to result in the
assets of the Trust being deemed to constitute "plan assets" of such Plan,
certain aspects of such investment, including the operations of the trust and
the deemed extension of credit between the underlying securities issuer and the
holder of a trust certificate (as a result of the underlying securities being
deemed to be plan assets), as well as subsequent transactions involving the
trust or its assets, might constitute or result in prohibited transactions under
Section 406 of ERISA and Section 4975 of the Code unless exemptive relief were
available under an applicable exemption issued by the United States Department
of Labor (the "DOL"). Neither ERISA nor the Code defines the term "plan assets."
Under Section 2510.3-101 of the DOL regulations (the "Regulation"), a Plan's
assets may include the assets of an entity if the Plan acquires an "equity
interest" in such entity unless an exception applies under the Regulation. Thus,
if a Plan acquires a trust certificate, for certain purposes (including the
prohibited transaction provisions of Section 406 of ERISA and Section 4975 of
the Code), the Plan would be considered to own an undivided interest in the
underlying assets of the trust unless such trust certificate is a
"publicly-offered security" or another exception applies under the Regulation.
[The underwriter[s] expect[s] that the trust certificates will satisfy the
criteria for treatment as publicly-offered securities under the Regulation.] A
publicly-offered security is a security that is (i) freely transferable, (ii)
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another at the conclusion of the initial offering, and
(iii) either is (A) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act, and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the SEC) after the end of the fiscal year of the issuer during
which the offering of such securities to the public occurred.
[The underwriter[s] will verify that there will be at least 100 separate
purchasers (whom the underwriter[s] ha[s][ve] no reason to believe are not
independent of the depositor or of one another) at the conclusion of the initial
offering.] There is no assurance that the 100 independent investor requirement
of the "public-offered security" exception will, in fact, be satisfied.
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION THAT AN INVESTMENT
IN THE TRUST CERTIFICATES WOULD MEET ANY OR ALL OF THE RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY, OR IS APPROPRIATE FOR, PLANS
GENERALLY OR ANY PARTICULAR PLAN. ANY PLAN OR ANY OTHER ENTITY THE ASSETS OF
WHICH ARE DEEMED TO BE "PLAN ASSETS," SUCH AS AN INSURANCE COMPANY INVESTING
ASSETS OF ITS GENERAL ACCOUNT, PROPOSING TO ACQUIRE TRUST CERTIFICATES SHOULD
CONSULT WITH ITS COUNSEL.
METHOD OF DISTRIBUTION
[MODIFY, AS APPROPRIATE FOR A BEST EFFORTS OFFERING] Subject to the terms
and conditions set forth in the underwriting agreement, dated as of [ ], [ ],
the depositor has agreed to sell and [Prudential
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<PAGE>
Securities Incorporated (an affiliate of the depositor)] (each of the
underwriters named below, including Prudential Securities Incorporated (an
affiliate of the depositor)][,] has [severally] agreed to purchase the [trust
certificates] [principal amount of each class of trust certificates set forth
below opposite its name].
[ ] CLASS [ ] CLASS [ ] CLASS
CERTIFICATES CERTIFICATE CERTIFICATES
Prudential $ $ $
Securities
Incorporated.....
----------------------
Total......
[Prudential Securities Incorporated has] [The several underwriters have]
agreed, subject to the terms and conditions set forth in the underwriting
agreement, to purchase all trust certificates offered hereby if any of such
trust certificates are purchased. [In the event of default by any underwriter,
the underwriting agreement provides that, in certain circumstances, the purchase
commitments of non-defaulting underwriters may be increased or the underwriting
agreement may be terminated.]
The depositor has been advised by the underwriter[s] that [it] [they]
propose[s] to offer the trust certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The underwriter[s] may effect such transactions by selling trust
certificates to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
underwriter[s] and any purchasers of trust certificates for whom they may act as
agents. The underwriter[s] and any dealers that participate with the
underwriter[s] in the distribution of trust certificates may be deemed to be
underwriters, and any profit on the resale of trust certificates by them may be
deemed to be underwriting discounts or commissions under the Securities Act.
The underwriting agreement provides that the depositor will indemnify the
underwriter[s] against certain civil liabilities, including liabilities under
the Securities Act, or will contribute to payments the underwriter[s] may be
required to make in respect thereof.
[Prudential Securities Incorporated (the "Representative"), on behalf of
the underwriter[s], may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the trust certificates offered hereby in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representative to reclaim a
selling concession from a syndicate member when the trust certificates offered
hereby originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the trust certificates offered hereby to be higher than it would
otherwise be in the absence of such transactions.]
Prudential Securities Incorporated is an affiliate of the depositor, and
the participation by Prudential Securities Incorporated is the offering of the
trust certificates complies with Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
affiliate.
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<PAGE>
LEGAL OPINIONS
The validity of the trust certificates and certain federal income tax
matters will be passed upon for the depositor and the underwriter[s] by Orrick,
Herrington & Sutcliffe LLP, New York, New York.
RATINGS
It is a condition to the issuance of the trust certificates that the trust
certificates have ratings assigned by [Moody's Investors Service, Inc., Standard
& Poor's Ratings Group, Fitch IBCA, Inc. and Duff & Phelps Credit Rating
Company] of [ ], [ ], [ ] and [ ], respectively.
The rating[s] address[es] the likelihood of the receipt by trust
certificateholders of payments required under the trust agreement, and [is/are]
based primarily on the credit quality of the underlying securities [and the
credit support]. The rating[s] on the trust certificates do[es] not, however,
constitute a statement regarding the occurrence or frequency of redemptions or
prepayments on, or extensions of the maturity of, the underlying securities, and
the corresponding effect on yield to investors.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
agency. Each security rating should be evaluated independently of similar
ratings on different securities. The revision or withdrawal of a rating may have
an adverse effect on the market price or liquidity of the trust certificates.
The depositor has not requested a rating on the trust certificates by any
rating agency other than the rating agencies listed above. However, there can be
no assurance as to whether any other rating agency will rate the trust
certificates, or, if it does, what rating would be assigned by any such other
rating agency. A rating on the trust certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned to the trust
certificates by the rating agencies listed above.
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<PAGE>
INDEX OF TERMS
[ ] Class Allocation..S-20
Allocation Ratio...........S-20
Allowable Expense Amount...S-17
Available Funds............S-17
Call Premium Percentage....S-17
Clearing Agency............S-16
Code.......................S-25
Collection Period..........S-16
Concentrated Underlying
Securities ............... S-31
Definitive Classes.........S-15
Distribution Date..........S-15
DOL........................S-26
Eligible Investments.......S-17
Exchange Date..............S-19
Exchange Right.............S-19
Extraordinary Trust ExpenseS-19
Final Scheduled
Distribution Date......... S-15
Industry...................S-24
IRA........................S-26
IT.........................S-24
Liquidation Proceeds.......S-18
Notice of Exchange.........S-19
OID........................S-25
Parties in Interest........S-26
Plan.......................S-26
Regulation.................S-26
Representative.............S-27
Required Interest..........S-18
Required Percentage
- -Remedies..................S-22
Required Premium...........S-18
Required Principal.........S-18
Series Supplement..........S-11
Specified Currency.........S-15
Systems....................S-24
Trust Assets...............S-13
Trust Certificate Rate.....S-18
Underlying Securities
Prospectus[es].............S-11
Voting Rights..............S-16
S-29
<PAGE>
ANNEX A
TERMS OF THE UNDERLYING SECURITIES
The underlying securities will consist of a pool of publicly issued
[SPECIFY, AS APPLICABLE] [(1) debt securities or asset backed securities issued
by one or more corporations, banking institutions, insurance companies or
special purpose vehicles (including trusts, limited liability companies,
partnerships or other special purpose entities) organized under the laws of the
United States of America or any state, the District of Columbia or the
Commonwealth of Puerto Rico, which are subject to the informational requirements
of the Exchange Act and file reports and other information with the SEC, or (for
certain banking institutions) with the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation or the Office of Thrift Supervision, as applicable, (2) fixed income
debt securities issued by one or more foreign private issuers (as defined in
Rule 405 under the Securities Act) and subject to the reporting requirements of
the Exchange Act and file reports and other information with the SEC, or (3)
fixed income debt securities which represent obligations of the United States of
America, any agency thereof for the payment of which the full faith and credit
of the United States of America is pledged or a United States government
sponsored enterprise created pursuant to federal law.]
The composition of the pool of underlying securities and the
distribution by ratings, remaining term to maturity and interest rate of the
underlying securities as of [ ], [ ], as derived from the relevant Underlying
Securities Prospectuses, is set forth below:
COMPOSITION OF THE UNDERLYING SECURITIES POOL
AS OF [ ], [ ]
Number of Underlying Securities:
Aggregate Principal Balance:
Average Principal Balance:
Largest Balance:
Weighted Average Interest Rate:
Weighted Average Original Term
to Maturity:
Weighted Average Remaining Term
to Maturity:
Longest Remaining Term to
Maturity:
DISTRIBUTION BY RATING
OF THE UNDERLYING SECURITIES POOL AS OF [ ], [ ]
- ---------------------------------------------------------------------
Rating Number Aggregate Percentage of
Principal Aggregate
Balance Principal Balance
- ---------------------------------------------------------------------
Total
- ---------------------------------------------------------------------
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<PAGE>
DISTRIBUTION BY REMAINING TERM TO MATURITY
OF THE UNDERLYING SECURITIES POOL AS OF [ ], [ ]
- ---------------------------------------------------------------------
Remaining Term Number Aggregate Percentage of
to Maturity Principal Aggregate
Balance Principal Balance
- ---------------------------------------------------------------------
Total
- ---------------------------------------------------------------------
DISTRIBUTION BY INTEREST RATE
OF THE UNDERLYING SECURITIES POOL AS OF [ ], [ ]
- ---------------------------------------------------------------------
Interest Rate Number Aggregate Percentage of
Principal Aggregate
Balance Principal Balance
- ---------------------------------------------------------------------
Total
- ---------------------------------------------------------------------
Certain information concerning each of the underlying securities that
comprise more than ten percent of aggregate principal amount of the underlying
securities pool ("Concentrated Underlying Securities"), as derived from the
applicable Underlying Securities Prospectus[es], is set forth below:
[DUPLICATE THE FOLLOWING PRESENTATION FOR EACH CONCENTRATED UNDERLYING SECURITY]
[Name of Underlying Securities Issuer]
[Title of Underlying Securities]
Principal Amount Deposited into Trust: [$] [ ]
Dated Date: [ ],
[ ]
Issue Date: [ ],
[ ]
Stated Interest Rate: [ ]%
Stated Maturity [ ],
Date/Scheduled Final [ ]
Distribution Date:
INTEREST PAYMENTS
The Underlying Securities Prospectus states as follows:
[INSERT INTEREST PAYMENT SECTION FROM THE UNDERLYING SECURITIES PROSPECTUS].
S-31
<PAGE>
PRINCIPAL PAYMENTS
The Underlying Securities Prospectus states as follows: [INSERT PRINCIPAL
PAYMENT SECTION FROM THE UNDERLYING SECURITIES PROSPECTUS].
[REDEMPTION OR CONVERSION FEATURES]
The Underlying Securities Prospectus states as follows:
[INSERT REDEMPTION OR CONVERSION FEATURE SECTION FROM THE UNDERLYING SECURITIES
PROSPECTUS].
[SECURITY FOR UNDERLYING SECURITIES]
The Underlying Securities Prospectus states as follows: [INSERT SECURITY SECTION
FROM THE UNDERLYING SECURITIES PROSPECTUS].
[ALLOCATION OF COLLECTIONS OR REVENUES]
The Underlying Securities Prospectus states as follows: [INSERT ALLOCATION OF
COLLECTIONS OR REVENUES SECTION FROM THE UNDERLYING SECURITIES PROSPECTUS].
[UNDERLYING SECURITIES EVENTS OF DEFAULT][EARLY AMORTIZATION
EVENTS]
The Underlying Securities Prospectus states as follows: [INSERT EVENTS OF
DEFAULT/EARLY AMORTIZATION EVENTS SECTION FROM THE UNDERLYING SECURITIES
PROSPECTUS].
S-32
<PAGE>
RECEIPTS ON CORPORATE SECURITIES TRUST [ ]-[ ]
$[ ]
RECEIPTS ON CORPORATE SECURITIES, SERIES [ ]-[ ]
$[ ] [ ] CLASS CERTIFICATES
$[ ] [ ] CLASS CERTIFICATES
PROSPECTUS SUPPLEMENT
Underwriter[s]
[PRUDENTIAL SECURITIES INCORPORATED]
You should rely only on the information contained or incorporated by
reference in this prospectus supplement or in the accompanying prospectus.
We have not authorized anyone to provide you with different information.
We are not offering the trust certificates in any state where the offer is
not permitted.
Dealers will be required to deliver a prospectus supplement and prospectus
when acting as underwriters of the trust certificates and with respect to
their unsold allotments or subscriptions. In addition, all dealers selling
the trust certificates may be required to deliver a prospectus supplement
and prospectus until [ ], [ ] (90 days after the date of this prospectus
supplement).
<PAGE>
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.
Depositor
The trust certificates offered by this prospectus will be issued in series. Each
series of trust certificates will represent beneficial interests in a separate
trust established by Prudential Securities Structured Assets, Inc., as
depositor.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED ON PAGES 5 THROUGH 7 OF
THIS PROSPECTUS.
The trust certificates will represent interests in the trust and will not
represent an obligation of the depositor or any of its affiliates.
The trust certificates will not represent a direct obligation of any of the
issuers of the trust assets.
This prospectus may be used to offer and sell trust certificates only if it is
accompanied by the prospectus supplement for such trust certificates.
EACH TRUST WILL CONSIST OF:
One or more debt securities or asset backed securities:
Issued by domestic corporations, banking institutions, insurance companies
or special purpose asset backed securities issuers;
Issued by foreign, non-governmental issuers; and/or
Issued by the United States of America, specified federal agencies,
government sponsored enterprises created under federal law, multilateral
bank issuers or other obligations guaranteed by the United States of
America; and
Assets, derivative instruments, heging contracts and other similar arrangements
incidental to (which may include for hedging purposes) the securities described
above.
EACH SERIES OF TRUST CERTIFICATES:
Will be payable only from the assets of the trust created for that series;
Will be rated in one of the four highest rating categories of a nationally
recognized rating agency; and
May include multiple classes of trust certificates and credit enhancement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRUST CERTIFICATES OR DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is [ ], [ ].
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the trust certificates in two separate
documents that progressively provide more detail:
this prospectus, which provides general information, some of which may not
apply to your trust certificates, and
the prospectus supplement, which describes specific terms of your trust
certificates.
We include cross-references in this prospectus and the prospectus
supplement to captioned sections of these documents where you may find further
related discussions. The following table of contents and the table of contents
included in the prospectus supplement provide the pages on which these captioned
sections are located.
You should rely only on the information provided in this prospectus and the
prospectus supplement, including any information incorporated by reference. You
may request information incorporated by reference from the depositor at (212)
809-6631 or at the following address: Prudential Securities Structured Assets,
Inc., One New York Plaza, 14th Floor, New York, New York 10292-2014. We have not
authorized anyone to provide you with different information. We are not offering
the trust certificates in any state where the offer is not permitted.
2
<PAGE>
TABLE OF CONTENTS
PAGE
RISK FACTORS......................................................5
PROSPECTUS SUPPLEMENT.............................................8
AVAILABLE INFORMATION.............................................9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................9
REPORTS TO TRUST CERTIFICATEHOLDERS..............................10
THE DEPOSITOR....................................................10
USE OF PROCEEDS..................................................10
FORMATION OF THE TRUST...........................................11
MATURITY AND YIELD CONSIDERATIONS................................11
DESCRIPTION OF THE TRUST CERTIFICATES............................12
General....................................................13
Distributions..............................................13
Certificate Principal Balance and Notional Amount of
the Trust Certificates................................14
Interest on the Trust Certificates.........................14
Optional Exchange..........................................16
Default and Remedies.......................................17
Call Rights................................................17
Put Rights.................................................18
Global Securities..........................................18
DESCRIPTION OF THE TRUST ASSETS..................................20
General....................................................20
Principal Economic Terms of Underlying Securities..........21
Publicly Available Information.............................22
Other Trust Assets.........................................22
Credit Support.............................................23
Collections................................................24
DESCRIPTION OF THE TRUST AGREEMENT...............................25
Assignment of Trust Assets.................................25
Collection and Other Administrative Procedures.............26
Retained Interest..........................................27
Trustee Compensation and Payment of Expenses...............27
Limitations on Rights of Trust Certificateholders..........27
3
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Modification and Waiver....................................28
Replacement Trust Certificates.............................28
Termination................................................29
Duties of the Trustee......................................29
The Trustee................................................29
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES...................29
CURRENCY RISKS...................................................30
FEDERAL INCOME TAX CONSEQUENCES..................................31
Tax Status of the Trust....................................32
Income of Trust Certificateholders.........................33
Possible Recharacterization of the Trust as a
Partnership...........................................33
Withholding Taxes..........................................34
Possible Characterization of the Underlying Securities
as Equity Securities..................................34
State and Other Tax Consequences...........................35
PLAN OF DISTRIBUTION.............................................35
LEGAL MATTERS....................................................36
INDEX OF DEFINED TERMS...........................................37
4
<PAGE>
RISK FACTORS
You should consider the following material risk factors (and any
other material risk factors identified in the applicable prospectus supplement)
in deciding whether to purchase trust certificates.
YOUR TRUST CERTIFICATES ARE SECURED BY THE TRUST ASSETS ONLY; THE PERFORMANCE OF
THE UNDERLYING SECURITIES WILL AFFECT THE VALUE OF YOUR INVESTMENT AND YOU MAY
EXPERIENCE A LOSS IF THE TRUST ASSETS ARE INSUFFICIENT TO PAY YOUR TRUST
CERTIFICATES
Your trust certificates will represent an interest in the assets of the
applicable trust only and will not represent an obligation of the depositor, the
trustee, the underwriters, the issuer[s] of the trust assets or any of their
affiliates. The assets of the trust will include certain securities (the
underlying securities) and other assets described in the prospectus supplement
for your trust certificates. See "Description of the Trust Assets" in this
prospectus and "Description of the Underlying Securities" in the applicable
prospectus supplement. Your trust certificates will not be insured or guaranteed
by the depositor, the trustee, the underwriters or any of their affiliates. If
the trust assets are insufficient to make payments on your trust certificates,
you will experience a loss of some or all of your investment.
YOUR ABILITY TO MAKE AN INFORMED INVESTMENT DECISION MAY BE IMPEDED IF AN
UNDERLYING SECURITIES ISSUER CEASES TO MAKE INFORMATION PUBLICLY AVAILABLE
In deciding whether to invest in or sell trust certificates, you should obtain
and evaluate information concerning each issuer of the underlying securities as
if you were investing directly in that issuer and its securities. The
information that each underlying securities issuer makes available to the public
is important in considering whether to invest in or sell trust certificates. See
"Description of the Underlying Securities-Publicly Available Information" in the
applicable prospectus supplement.
Accordingly, to the extent that an underlying securities issuer ceases to make
information about itself and the underlying securities publicly available, your
ability to make an informed decision to purchase or sell trust certificates
could be impeded. The depositor, the trustee, the underwriters and their
affiliates (1) have not verified, and have not undertaken to verify, the
accuracy, completeness or continued availability of any such information by an
underlying securities issuer (whether or not filed with the SEC), (2) have made
no investigation of the financial condition or creditworthiness of any
underlying securities issuer, and (3) assume no responsibility for any
information considered by any purchaser or potential purchaser of the trust
certificates that is not expressly contained in this prospectus or the
applicable prospectus supplement.
You should not construe the issuance of the trust certificates as an endorsement
by the depositor, the trustee, the underwriters or any of their affiliates of
the financial condition or business prospects of any underlying securities
issuer.
REMEDIES UNDER THE TRUST AGREEMENT ARE LIMITED;THE TRUST WILL NOT ACTIVELY
MANAGE THE UNDERLYING SECURITIES TO AVOID LOSSES
The trust agreement authorizing the issuance of your trust certificates will
govern the actions of the trustee on your behalf. The remedies available to the
trustee are predetermined and limited. Therefore, by virtue of the trust, you
will have less discretion over the exercise of remedies under the underlying
securities than if you had invested
5
<PAGE>
directly in the underlying securities themselves.
Each trust will generally hold the related trust assets to the final scheduled
distribution date for the trust certificates. Even if adverse financial or other
events or conditions occur, the trust will not dispose of the underlying
securities or other trust assets prior to the final scheduled distribution date,
except in certain limited circumstances. The applicable prospectus supplement
will describe the particular circumstances, if any, under which a trust asset
may be disposed of prior to maturity.
TRUST CERTIFICATES DENOMINATED IN FOREIGN CURRENCY INVOLVE SPECIAL
CURRENCY-RELATED RISKS
If your trust certificates are denominated and/or payable in a currency other
than U.S. dollars (I.E., a foreign or composite currency), your investment
entails significant currency-related risks. Such risks include the possibility
of:
significant changes in exchange rates between the U.S. dollar and the
foreign currency, and
the imposition or modification of foreign exchange controls.
These risks generally depend on economic, social and political events and
the supply of and demand for the relevant currencies. In recent years,
rates of exchange between the U.S. dollar and certain foreign currencies
have been highly volatile. You should be aware, however, that past
fluctuations in any particular exchange rate do not necessarily indicate
fluctuations in the rate that may occur during the term of your trust
certificates. If the currency in which your trust certificates are
denominated and/or payable depreciates in value against the U.S. dollar,
the effective yield of your trust certificates (on a dollar-equivalent
basis) would decrease and you may experience a loss on your investment,
which may be substantial.
Governments may from time to time impose exchange controls that could
affect exchange rates and the availability of foreign currency. These
exchange controls could restrict or prohibit distributions of amounts due
on your trust certificates. Even if there are no actual exchange controls
in place, it is possible that sufficient amounts of foreign currency may
not be available to make distributions of principal, interest or premium on
your trust certificates. See "Currency Risks" in this prospectus.
YOU ARE STRONGLY ENCOURAGED TO CONSULT YOUR OWN FINANCIAL, TAX AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN TRUST CERTIFICATES
WHICH ARE ISSUED BY A FOREIGN COMPANY AND/OR DENOMINATED AND/OR PAYABLE IN
A FOREIGN OR COMPOSITE CURRENCY. SUCH TRUST CERTIFICATES ARE NOT AN
APPROPRIATE INVESTMENT IF YOU ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
OR COMPOSITE CURRENCY TRANSACTIONS.
6
<PAGE>
ISSUANCE OF THE TRUST CERTIFICATES AS GLOBAL SECURITIES AS GLOBAL SECURITIES MAY
LIMIT YOUR ABILITY TO EXERCISE RIGHTS UNDER OR PLEDGE YOUR TRUST CERTIFICATES
If your trust certificates are issued as AS global securities and deposited
with, or on behalf of, a securities depositary, you will not be recognized as a
trust certificateholder under the applicable trust agreement. In such event, you
will only be able to exercise the rights of trust certificateholders indirectly
through the securities depositary and its participants (E.G., banks and
broker-dealers). As a result, your ability to pledge your trust certificates to
persons or entities that do not participate in the depositary's system, or to
otherwise to act with respect to such trust certificates, may be limited. See
"Description of the Trust Certificates-Global Securities" in this prospectus and
any further description contained in the applicable prospectus supplement.
THE TRUST AGREEMENT MAY BE AMENDED WITHOUT YOUR CONSENT
The trust agreement that governs the terms of your trust certificates may be
amended or otherwise modified without your consent upon compliance with certain
conditions specified in the trust agreement. See "Description of the Trust
Agreement-Modification and Waiver" in this prospectus. Any amendment or other
modification of the applicable trust agreement could have a material adverse
effect on your trust certificates.
NO RULINGS WILL BE OBTAINED FROM THE INTERNAL REVENUE SERVICE CONCERNING THE
TRUST CERTIFICATES AND THE INTERNAL REVENUE SERVICE MAY DISAGREE WITH SPECIAL
TAX COUNSEL
Orrick, Herrington & Sutcliffe LLP, special tax counsel, has delivered an
opinion that the trust will not be characterized as an association taxable as a
corporation (or publicly traded partnership treated as an association) for
federal income tax purposes. Special tax counsel has not delivered (and unless
otherwise indicated in the applicable prospectus supplement does not intend to
deliver) any other opinions regarding the trust or your trust certificates.
You should be aware that no rulings have been, or will be, sought from the
Internal Revenue Service, and that legal opinions are not binding on the IRS or
the courts. Accordingly, there can be no assurance that the IRS or the courts
will agree with special tax counsel's opinions. If, contrary to special tax
counsel's opinion, the trust is characterized or treated as a corporation for
federal income tax purposes, among other consequences, the trust would be
subject to federal income tax (and similar state income or franchise taxes) on
its income and distributions on your trust certificates would be impaired. See
"Federal Income Tax Consequences" in this prospectus and in the applicable
prospectus supplement.
NO CERTAINTY OF CHARACTERIZATION FOR TAX PURPOSES OF THE UNDERLYING SECURITIES
Except as discussed under "Federal Income Tax Consequences-Possible
Characterization of the Underlying Securities as Equity Securities" the
discussion under "Federal Income Tax Consequences" in this prospectus assumes
that the underlying securities will be characterized as indebtedness for federal
income tax purposes. If this assumption were not correct and the underlying
securities were treated as equity securities for federal income tax purposes,
the timing and character of income on the trust certificates may differ from
that otherwise discussed under "Federal Income Tax Consequences" and, with
respect to any particular investor, the effect of such characterization might be
adverse. See "Federal Income Tax Consequences-Possible Characterization of the
Underlying Securities as Equity Securities" in this prospectus.
7
<PAGE>
The prospectus supplement for your trust certificates will set forth
information regarding additional material risk factors, if any.
The Receipts on Corporate Securities, which shall be referred to in
this prospectus and the accompanying prospectus supplement as the trust
certificates, to be issued by separate trusts established by the depositor and
offered by this prospectus and by supplements hereto will be offered from time
to time in one or more series and in one or more classes within each such
series.
PROSPECTUS SUPPLEMENT
The prospectus supplement relating to a series of trust certificates
to be offered hereby will set forth with respect to such series:
(a) the specific designation and Certificate Principal Balance and/or
Notional Amount of such series;
(b) the Specified Currency or Currencies in which the principal,
premium, if any, and any interest on such series is distributable;
(c) the number of classes and, with respect to each such class, its
designation and Certificate Principal Balance or Notional Amount and the
minimum denominations of the trust certificates;
(d) whether the trust certificates of such series and each class within
such series will be issued as bearer certificates or registered
certificates;
(e) a description of the assets deposited in the trust for such series
(the "Trust Assets"), including underlying securities, which shall be debt
securities or asset backed securities; derivative instruments; and credit
support, if any, consisting of letters of credit, surety bonds, reserve
accounts or other credit support;
(f) the identity of each underlying securities issuer and each obligor
with respect to any of the other Trust Assets;
(g) the relative rights and priorities of each series or class;
(h) the name of the trustee for such series and the Administrative
Agent, if any;
(i) the Trust Certificate Rate for each class or the applicable method
of calculation thereof and the basis on which such Trust Certificate Rate
is computed;
(j) the Distribution Date of any interest, premium (if any) and/or
principal for each class within such series;
(k) the original issue date(s) on which, or periods during which, such
series of trust certificates may be issued;
(l) the Final Scheduled Distribution Date, if applicable, for each class
within such series;
(m) the remedies upon the occurrence of a payment default on the
underlying securities;
8
<PAGE>
(n) the applicable Required Percentages and Voting Rights with regard to
certain actions by the depositor or the trustee with respect to the
applicable trust; and
(o) any other material terms of the trust certificates (including terms
relating to the rights of the trust or any third party to redeem or
purchase such trust certificates prior to the Final Scheduled Distribution
Date).
AVAILABLE INFORMATION
The depositor has filed with the Securities and Exchange Commission a
registration statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the trust certificates. This prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. For further information, reference is hereby made to the Registration
Statement. The depositor, on behalf of the trust, is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith will file reports and other
information with the SEC. Such reports and other information concerning the
trust may be inspected and copied at the public reference facilities maintained
by the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Information regarding the operation of the SEC's Public Reference
Room is available by telephone at (800) 732-0330. Such reports and information
concerning the trust are also available at the SEC's public reference facilities
located at the following Regional Offices of the SEC: New York Regional Office,
Room 1100, 7 World Trade Center, New York, New York 10048 and Chicago Regional
Office, Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and copies of such material can be obtained
from the Public Reference Section of the SEC, Washington, D.C. 20549, at
prescribed rates. Such material may also be accessed electronically by means of
the SEC's home page on the Internet at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the depositor on behalf of the trust pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this prospectus and prior to the termination of the offering of the trust
certificates shall be deemed to be incorporated by reference in this prospectus.
Such documents may include, without limitation, Annual Reports on Form 10-K and
Current Reports on Form 8-K. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded to the extent that a statement in any subsequently
filed document modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus. The depositor will provide without
charge to each person to whom a copy of this prospectus is delivered, on the
written or oral request of any such person, a copy of any or all of the
documents incorporated herein by reference, except the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Written requests for such copies should be directed to
Prudential Securities Structured Assets, Inc., One New York Plaza, 14th Floor,
New York, New York 10292-2014. Telephone requests for such copies should be
directed to the depositor at (212) 809-6631.
9
<PAGE>
REPORTS TO TRUST CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, unaudited
reports containing information concerning the related trust will be prepared
annually by the related trustee and sent on behalf of the related trust only to
Cede & Co. ("Cede"), as nominee of DTC, The Depository Trust Company, or its
successor, as securities depository for the trust certificates (the
"Depositary") and registered holders of the trust certificates. If Definitive
Certificates are issued, such reports will be prepared by the related trustee
and sent on behalf of the related trust directly to the trust certificateholders
in accordance with the trust agreement. See "Description of the Trust
Certificates--Global Securities". Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The depositor, on behalf of each trust, will cause to be filed with the SEC such
periodic reports as are required under the Exchange Act. The depositor does not
intend to send any financial reports to trust certificateholders.
References herein to "U.S. dollars", "U.S. $", "dollar" or "$" are to the
lawful currency of the United States.
THE DEPOSITOR
The depositor was incorporated in the State of Delaware on May 30,
1995, as a wholly-owned, limited-purpose direct subsidiary of Prudential
Securities Group, Inc. The depositor will not engage in any business or other
activities other than issuing and selling securities from time to time and
acquiring, owning, holding and transferring assets (including the underlying
securities, other Trust Assets and credit support) in connection therewith or
with the creation of trusts and in activities related or incidental thereto. The
depositor does not have, nor is it expected to have, any significant
unencumbered assets. The depositor is a separate legal entity the assets of
which are not available to satisfy the claims of creditors of Prudential
Securities Group, Inc., Prudential Securities Incorporated or any other
affiliate.
The depositor's only obligations with respect to the trust
certificates of any series will be, pursuant to certain representations and
warranties concerning the underlying securities and the credit support, if any,
for such series, to assign the underlying securities, any such credit support
and any related documents to the trustee. The depositor will not guarantee or
otherwise be obligated with respect to the trust certificates.
The principal executive office of the depositor is located at One New
York Plaza, 14th Floor, New York, New York 10292-2014 (Telephone: (212)
809-6631).
USE OF PROCEEDS
If the related Trust Assets are to be purchased by the depositor, the
net proceeds to be received from the sale of each series of trust certificates
(whether or not offered hereby) will be transferred to the depositor for such
purchase. In addition, the depositor may use such net proceeds to arrange
certain credit support, if any, including, if specified in the applicable
prospectus supplement, required deposits into any reserve account or the
applicable Trust Certificate Account for the benefit of the trust
certificateholders of such series or class. The remaining net proceeds, if any,
will be used by the depositor for purposes related to the deposit of Trust
Assets into one or more trusts and the preparation, distribution and filing by
the depositor of periodic reports and other information, including, but not
limited to, the fees and expenses of the depositor incurred in connection with
the ongoing activities of the trust(s).
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FORMATION OF THE TRUST
Each series (or, if more than one class exists, the classes within
such series) of trust certificates will be issued pursuant to a trust agreement,
which shall consist of a base trust agreement and a supplement thereto, each
between the depositor and the trustee named in the applicable prospectus
supplement; a form of which trust agreement is attached as an exhibit to the
Registration Statement. The depositor will assign and deliver the Trust Assets
for each series of trust certificates to the trustee named in the applicable
prospectus supplement, in its capacity as trustee, for the benefit of the
holders of such series. See "Description of the Trust Agreement--Assignment of
Trust Assets". The trustee will administer the Trust Assets pursuant to the
trust agreement and will receive a fee for such services. Any administrative
agent named in the applicable prospectus supplement (the "Administrative Agent")
will perform such tasks as are specified therein and in the trust agreement and
will receive a fee (the "Administration Fee") for its services. The trustee or
an Administrative Agent, if applicable, will either cause the assignment of the
Trust Assets to be recorded on the books and records of DTC or will obtain an
opinion of counsel that no recordation is required to obtain a first priority
perfected security interest in such Trust Assets.
The depositor's assignment of the Trust Assets to the trustee will be
without recourse to the depositor (except as to certain limited representations
and warranties, if any).
The applicable prospectus supplement will set forth the jurisdiction
in which the trust was established and the property of each trust, which may
consist of (i) the Trust Assets, or interests therein, exclusive of any interest
in such assets (the "Retained Interest") retained or acquired by the depositor,
or any previous owner thereof or any other person or entity, as from time to
time are specified in the trust agreement; (ii) such assets as from time to time
are identified as deposited in the related Trust Certificate Account; (iii)
rights under the agreement or agreements pursuant to which the depositor or the
trustee has acquired such Trust Assets; (iv) those elements of credit support,
if any, provided with respect to any series (or class within such series) that
are specified as being part of the related trust in the applicable prospectus
supplement, as described therein and under "Description of the Trust
Assets--Credit Support" herein; and (v) any cash or other property received upon
the sale, exchange, collection or other disposition of any of the foregoing.
Each trust will be formed under the laws of, and have its principal place of
business in, the United States, any of its States or Territories or the District
of Columbia.
MATURITY AND YIELD CONSIDERATIONS
Each prospectus supplement will, to the extent applicable, contain
information with respect to the types and maturities of the related underlying
securities and the terms, if any, upon which such underlying securities may be
subject to early redemption or repayment. Provisions for optional or mandatory
redemption or repayment prior to stated maturity, if exercised, will reduce the
weighted average life of underlying securities and the related series (or class
within such series) of trust certificates. A variety of tax, accounting,
economic and other factors will influence whether the applicable underlying
securities issuer exercises any right of redemption in respect of its
securities. All else remaining equal, if prevailing interest rates are below the
interest rates on the related underlying securities, the likelihood of
redemption would be expected to increase. There can be no assurance that any
underlying security redeemable at the option of an underlying securities issuer
will remain outstanding until its stated maturity.
In addition, the effective yield to holders of the trust certificates
of any series (and class within such series) may be affected by certain terms of
the Trust Assets or the manner and priorities of allocations of collections with
respect to such Trust Assets between classes of a given series.
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As specified in the applicable prospectus supplement, each of the underlying
securities may be subject to acceleration upon the occurrence of certain events
of default under the terms of the underlying securities. The maturity and yield
on the trust certificates will be affected by any early repayment of the
underlying securities as a result of the acceleration of the underlying
securities by or on behalf of the holders thereof. See "Description of Trust
Assets--Principal Economic Terms of Underlying Securities". If an underlying
securities issuer becomes subject to a bankruptcy proceeding, the timing and
amount of payments with respect to the principal of, the premium on, if any, and
the interest to be distributed in respect of the trust certificates may be
materially and adversely affected. Several factors influence the performance of
issuers that are corporations or other business entities; these factors may
affect an underlying securities issuer's ability to satisfy its obligations
under the underlying securities, including the company's operating and financial
condition, leverage, and economic, geographic, legal and social factors.
The extent to which the yield to maturity of such trust certificates
may vary from the anticipated yield will depend on the rate and timing of
payments on the Trust Assets, the degree to which the trust certificates are
purchased at a discount or premium and the degree to which the timing of
payments thereon is sensitive to the rate and timing of payments on the Trust
Assets.
To the extent that the Trust Certificate Rate, if any, for such
series (or class) is based on variable or adjustable interest rates, the yield
to maturity of any series (or class) of trust certificates will also be affected
by variations in the interest rates applicable to, and the corresponding
payments in respect of, such trust certificates. With respect to any series of
trust certificates representing an interest in a pool of debt or other eligible
securities, disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled maturity or
upon early redemption) on the related underlying securities having interest
rates higher or lower than the then applicable Trust Certificate Rates, if any,
applicable to such trust certificates may affect the yield thereon.
The prospectus supplement for each series of trust certificates will
set forth additional information regarding yield and maturity considerations
applicable to such series (and each class within such series) and the related
Trust Assets, including the applicable underlying securities.
DESCRIPTION OF THE TRUST CERTIFICATES
The provisions of the trust agreement for a series of trust
certificates may vary depending upon the terms of both the trust certificates to
be issued thereunder and the Trust Assets, as well as any credit support with
respect to the trust. The following summaries describe the material provisions
of the trust agreement which may be applicable to each series of trust
certificates. The applicable prospectus supplement for a series of trust
certificates will describe any material provision of the trust agreement or the
trust certificates that is not described herein. The following summaries do not
purport to be complete and are subject to the detailed provisions of the form of
trust agreement to which reference is hereby made for a full description of such
provisions, including the definition of certain terms used, and for other
information regarding the trust certificates. Wherever particular defined terms
of the trust agreement are referred to, such defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
A copy of the supplement to the trust agreement relating to each
series of trust certificates issued from time to time will be filed by the
depositor as an exhibit to a Current Report on Form 8-K, which will be filed
with the SEC following the issuance of such series.
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GENERAL
The series (or classes within such series) of trust certificates to
be issued under a trust agreement will represent the entire beneficial ownership
interest in the trust for such series created pursuant to such trust agreement.
Each such class will be allocated certain relative priorities to receive
specified collections from, and a certain percentage ownership interest of the
assets deposited in, such
trust, all as identified and described in the applicable prospectus supplement.
See "Description of the Trust Assets--Collections" herein. Reference is made to
the applicable prospectus supplement for a description of additional material
terms of the series of trust certificates in respect of which this prospectus
and such prospectus supplement are being delivered. See "Prospectus Supplement"
herein.
The United States federal income tax consequences and ERISA
consequences relating to any series or any class within such series of trust
certificates will be described in this prospectus and the applicable prospectus
supplement. In addition, any special considerations with respect to the issuance
of any series or class within such series of trust certificates on which the
principal of and any premium and interest are distributable in a Specified
Currency other than U.S. dollars will be described in the applicable prospectus
supplement.
Transfers of beneficial ownership interests in any Global Security
will be effected in accordance with the normal procedures of DTC or any other
specified Depositary. If Definitive Certificates are issued in the limited
circumstances described herein, they may be transferred or exchanged for like
trust certificates of the same series at the corporate trust office or agency of
the applicable trustee in The City of New York, subject to the limitations set
forth in the trust agreement, without the payment of any service charge, other
than any tax or governmental charge payable in connection therewith.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest
on the trust certificates of each series (and each class within such series)
will be made by or on behalf of the trustee on each Distribution Date as
specified in the applicable prospectus supplement, and the amount of each
distribution will be determined as of the close of business on the date
specified in the applicable prospectus supplement (the "Record Date").
Except as provided in the succeeding paragraph, distributions with
respect to trust certificates will be made at the corporate trust office or
agency of the trustee specified in the applicable prospectus supplement in The
City of New York; provided that any such amounts distributable on the Final
Scheduled Distribution Date of a trust certificate will be distributed only upon
surrender of such trust certificate at the applicable location set forth above.
Distributions on trust certificates will be made, except as provided
below, by check mailed to the trust certificateholders listed on the relevant
Record Date in the ownership register maintained for that purpose under the
trust agreement (which, in the case of Global Securities, will be a nominee of
the Depositary). A trust certificateholder of $10,000,000 or more in aggregate
principal amount of trust certificates of a given series, and any holder of a
Global Security, shall be entitled to receive such distributions by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the trustee for such series not
later than 10 calendar days prior to the applicable Distribution Date.
"Business Day" with respect to any trust certificate means any day
(i) which is not a Saturday, a Sunday or a legal holiday or a day on which
banking institutions or trust companies in The
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City of New York are authorized or obligated by law, regulation or executive
order to close and (ii) is a "business day," as such term is used in the
indenture, trust agreement, fiscal agency agreement or other authorizing
document for the underlying securities (each, an "Underlying Securities
Agreement").
CERTIFICATE PRINCIPAL BALANCE AND NOTIONAL AMOUNT OF THE TRUST CERTIFICATES
Each trust certificate will have either a Certificate Principal
Balance or a Notional Amount. The Certificate Principal Balance of a trust
certificate, at any time, will equal the maximum amount that the holder thereof
will be entitled to receive in respect of principal out of the future cash flow
on the Trust Assets and credit support and other assets included in the related
trust. The Notional Amount of a trust certificate represents the principal
amount of the Trust Assets and credit support in the related trust in respect of
which such trust certificate is entitled to receive the payments of interest
made on such principal amount, to the extent specified in the related prospectus
supplement. The outstanding Certificate Principal Balance of a trust certificate
will be reduced to the extent of distributions thereon in respect of principal
on the underlying Trust Assets and credit support, and, if applicable pursuant
to the terms of the related series, by the amount of any net losses realized on
any Trust Asset ("Realized Losses") allocated thereto. The outstanding Notional
Amount of a trust certificate may also be subject to reduction, if and to the
extent described in the applicable prospectus supplement. The initial aggregate
Certificate Principal Balance and initial aggregate Notional Amount of a series
and each class thereof will be specified in the related prospectus supplement.
Distributions of principal of any class of trust certificates will be made on a
pro-rata basis among all the trust certificates of such class. Trust
certificates with no Certificate Principal Balance will not receive
distributions of principal.
INTEREST ON THE TRUST CERTIFICATES
Each class of trust certificates of a given series may have a
different Trust Certificate Rate, which may be a fixed rate or floating rate, as
described below. In the case of Strip trust certificates with a nominal or no
Certificate Principal Balance, such distributions of interest will be made as
described in the applicable prospectus supplement.
FIXED RATE TRUST CERTIFICATES. Each trust certificate with a fixed
Trust Certificate Rate (each, a "Fixed Rate Trust Certificate") will bear
interest, on the outstanding Certificate Principal Balance thereof from its
original issue date, or from the last date to which interest has been paid, at
the fixed Trust Certificate Rate stated on the face thereof and in the
applicable prospectus supplement (the "Fixed Trust Certificate Rate") until the
principal amount thereof is distributed or made available for repayment (or, in
the case of Fixed Rate Trust Certificates with a nominal or no principal amount,
until the Notional Amount thereof is reduced to zero), except that, if so
specified in the applicable prospectus supplement, the Fixed Trust Certificate
Rate for such series or any such class or classes may be subject to adjustment
from time to time in response to designated changes in the rating assigned to
such trust certificates by one or more rating agencies, in accordance with a
schedule or otherwise, all as described in such prospectus supplement. Interest
on each series or class of Fixed Rate Trust Certificates will be distributable
in arrears on each Distribution Date specified in such prospectus supplement.
Each such distribution of interest shall include interest accrued through the
day specified in the applicable prospectus supplement. Interest on Fixed Rate
Trust Certificates will be computed on the basis specified in the applicable
prospectus supplement.
FLOATING RATE TRUST CERTIFICATES. Each trust certificate with a
variable Trust Certificate Rate (each, a "Floating Rate Trust Certificate") will
bear interest, on the outstanding Certificate Principal Balance thereof from its
original issue date to but excluding the first Interest Reset Date (as defined
below) for such series at the initial Trust Certificate Rate set forth on the
face thereof and in the applicable prospectus supplement. Thereafter, the Trust
Certificate Rate on such series (the "Floating
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Trust Certificate Rate") for each Interest Reset Period (as defined below) will
be determined by reference to an interest rate basis (the "Base Rate"), plus or
minus the Spread (as defined below), if any, or multiplied by the Spread
Multiplier (as defined below), if any. The "Spread" is the number of basis
points (one basis point equals one one-hundredth of a percentage point) that may
be specified in the applicable prospectus supplement as being applicable to such
series, and the "Spread Multiplier" is the percentage that may be specified in
the applicable prospectus supplement as being applicable to such series, except
that if so specified in the applicable prospectus supplement, the Spread or
Spread Multiplier on such series of Floating Rate Trust Certificates may be
subject to adjustment from time to time in response to designated changes in the
rating assigned to such trust certificates by one or more rating agencies, in
accordance with a schedule or otherwise, all as described in such prospectus
supplement. The applicable prospectus supplement will designate the Base Rate
applicable to a Floating Rate Trust Certificate. Interest will be payable only
from cash received by the trustee from the underlying securities or other assets
deposited in the trust and available for application to such payment,
notwithstanding the accrual of interest on the Certificate Principal Balance at
a higher rate.
As specified in the applicable prospectus supplement, Floating Rate
Trust Certificates of a given series may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period specified in the applicable prospectus
supplement ("Maximum Trust Certificate Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest accrual
period ("Minimum Trust Certificate Rate"). In addition to any Maximum Trust
Certificate Rate that may be applicable to any series of Floating Rate Trust
Certificates, the Trust Certificate Rate applicable to any series of Floating
Rate Trust Certificates will in no event be higher than the maximum rate
permitted by applicable New York and United States federal law.
The depositor will appoint, and enter into agreements with, agents
(each, a "Calculation Agent") to calculate Floating Trust Certificate Rates on
each series of Floating Rate Trust Certificates. The applicable prospectus
supplement will set forth the identity of the Calculation Agent for each series
of Floating Rate Trust Certificates. All determinations of interest by the
Calculation Agent shall, if made on a commercially reasonable basis and in good
faith, be conclusive for all purposes and binding on the holders of Floating
Rate Trust Certificates of a given series.
The Floating Trust Certificate Rate will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period", and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable prospectus supplement.
Interest Reset Dates with respect to each series will be specified in the
applicable prospectus supplement. If an Interest Reset Date for any series of
Floating Rate Trust Certificates would otherwise be a day that is not a Business
Day, such Interest Reset Date will occur on the next Business Day, except that,
in the case of a LIBOR Trust Certificate, if such Business Day would fall in the
next calendar month, such Interest Reset Date will be the immediately preceding
Business Day.
Interest payable in respect of Floating Rate Trust Certificates shall
be the accrued interest from and including the original issue date of such
series or the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date. With respect to a Floating Rate Trust Certificate, accrued
interest shall be calculated by multiplying the Certificate Principal Balance of
such trust certificate by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. The interest
factor (expressed as a decimal calculated to seven decimal places without
rounding) for each such day is computed by dividing the Trust Certificate Rate
in effect on such day by 360, in the case of LIBOR Trust Certificates,
Commercial Paper Rate Trust Certificates, Federal Funds Rate Trust Certificates,
Prime Rate Trust Certificates and CD Rate
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Trust Certificates or by the actual number of days in the year, in the case of
Treasury Rate Trust Certificates. For purposes of making the foregoing
calculation, the Floating Trust Certificate Rate in effect on any Interest Reset
Date will be the applicable rate as reset on such date.
All percentages resulting from any calculation of the Floating Trust
Certificate Rate on a Floating Rate Trust Certificate will be rounded, if
necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths
of a percentage point rounded upward, and all currency amounts used in or
resulting from such calculation on Floating Rate Trust Certificates will be
rounded to the nearest one-hundredth of a unit (with .005 of a unit being
rounded upward).
Interest on any series of Floating Rate Trust Certificates will be
distributable on the Distribution Dates and for the interest accrual periods as
and to the extent set forth in the applicable prospectus supplement.
The "Calculation Date", where applicable, pertaining to a Record Date
will be the earlier of (i) the tenth calendar day after such Record Date or, if
any such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day preceding the applicable Distribution Date.
Upon the request of the holder of any Floating Rate Trust Certificate
of a given series, the Calculation Agent for such series will provide the
Floating Trust Certificate Rate then in effect and, if determined, the Floating
Trust Certificate Rate that will become effective on the next Interest Reset
Date with respect to such Floating Rate Trust Certificate.
OPTIONAL EXCHANGE
The trust agreement for any given series of trust certificates may
provide that the holder of any trust certificate of such series (or class within
such series) may exchange its trust certificate for a PRO RATA portion of the
Trust Assets for such series (an "Optional Exchange"). If the trust agreement
does provide for an Optional Exchange right, the applicable prospectus
supplement will designate such series as an "Exchangeable Series". The terms
upon which a trust certificateholder may exchange trust certificates of any
Exchangeable Series for a PRO RATA portion of the Trust Assets of the related
trust will be specified in the related prospectus supplement; provided that any
right of Optional Exchange shall be exercisable only to the extent that (i) such
Optional Exchange would not be inconsistent with continued satisfaction by the
trust and the depositor of the applicable requirements for exemption under Rule
3a-7 under the Investment Company Act of 1940 and (ii) such Optional Exchange
would not materially and adversely affect the characterization of the trust for
federal income tax purposes. Unless explicitly provided for in the prospectus
supplement, an opinion of counsel addressing clauses (i) and (ii) will not be
required to be delivered in connection with the exercise of the Optional
Exchange. Such terms may include, but are not limited to, the following:
(a) a requirement that the exchanging trust certificateholder tender
to the trustee certificates of each class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each trust certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each trust certificate tendered for exchange be an
integral multiple of an amount specified in the prospectus supplement;
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(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging trust certificateholder
to receive any benefit upon exchange from any credit support or other assets
(other than the underlying securities) deposited in the applicable trust; and
(f) adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and the establishment
of a reserve for any anticipated Extraordinary Trust Expenses.
Upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Trust Assets, as described in the
applicable prospectus supplement, the applicable trust certificateholder will be
entitled to receive a distribution of a PRO RATA share of the Trust Assets
related to the Exchangeable Series of the trust certificate being exchanged, in
the manner and to the extent described in such prospectus supplement.
Alternatively, to the extent so specified in the applicable prospectus
supplement, the applicable trust certificateholder, upon satisfaction of such
conditions, may direct the related trustee to sell, on behalf of such trust
certificateholder, such PRO RATA share of the Trust Assets, in which event the
trust certificateholder shall be entitled to receive the net proceeds of such
sale, less any costs and expenses incurred by such trustee in facilitating such
sale, subject to any additional adjustments set forth in the prospectus
supplement.
DEFAULT AND REMEDIES
If there is a payment default on or acceleration of the underlying
securities, then the trustee of the relevant trust will exercise one of the
following remedies: (i) sell all of such underlying securities and distribute
the proceeds from such sale to the trust certificateholders in accordance with
the Allocation Ratio (as defined below) (any such sale may result in a loss to
the trust certificateholders of the relevant series if the sale price is less
than the purchase price for such underlying securities), (ii) distribute such
underlying securities in kind to the trust certificateholders in accordance with
the Allocation Ratio, or (iii) elect either (i) or (ii) based upon a majority of
votes cast by the affected trust certificateholders. The choice of remedies will
be set forth for a given series in the prospectus supplement, and the trustee,
the depositor and the trust certificateholders will have no discretion in this
respect.
The "Allocation Ratio" is the allocation between classes of a given
series of the total expected cash flows from the Trust Assets of that series.
The prospectus supplement for any series with more than one class will set forth
the Allocation Ratio for that series. In addition to distributions as a result
of default on or of the acceleration on underlying securities, the Allocation
Ratio relates to voting rights held by owners of underlying securities because
such rights will be allocated among the trust certificateholders of different
classes of a given series in accordance with their economic interests.
CALL RIGHTS
Prudential Securities Incorporated or the depositor or, if so
specified in the relevant prospectus supplement, a transferee as a result of a
private placement to eligible investors, may hold the right to purchase all or
some of the trust certificates of a given series or class from the holders
thereof prior to maturity (a "Call Right"). If one or more specified persons
holds a Call Right, the applicable prospectus supplement will designate such
series as a "Callable Series". The terms upon which any such specified person or
entity may exercise a Call Right will be specified in the applicable prospectus
supplement. Such terms may relate to, but are not limited to, the following:
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(a) a requirement that the Certificate Principal Balance of each
trust certificate being purchased be an integral multiple of an
amount specified in the prospectus supplement;
(b) specified dates during which a Call Right may be exercised,
which may include any and all times that the trust certificates
remain outstanding; and
(c) the price or prices at which a Call Right may be exercised,
which may include fixed dollar amounts or be calculated as a
percentage of the principal amount of the trust certificates
outstanding (each, a "Call Price").
After receiving notice of the exercise of a Call Right, the trustee
will provide notice thereof as specified in the trust agreement. Upon the
satisfaction of any applicable conditions to the exercise of a Call Right, each
trust certificateholder will be entitled to receive (in the case of a purchase
of less than all of the trust certificates) payment of a PRO RATA share of the
Call Price paid in connection with such exercise.
PUT RIGHTS
Trust certificates may be issued with underlying securities that
permit the holder thereof to require the underlying securities issuer to
repurchase or otherwise repay (in each case, a "Put Option") such underlying
securities ("Puttable Underlying Securities") on or after a fixed date. In such
cases, the trustee for such series of trust certificates will be required to
exercise the Put Option on the first date such option is available to be
exercised (the "Put Date") and the Put Date will also be the Final Scheduled
Distribution Date with respect to such series; provided, however, if the holder
of a Call Right has exercised that right prior to the Final Scheduled
Distribution Date, then the trust certificates of the Callable Series will be
repurchased as described above under in "Description of the Trust
Certificates--Call Rights". The depositor will not issue a series of trust
certificates with Puttable Underlying Securities if it would either (i) cause
the trust or depositor to fail to satisfy the applicable requirements for
exemption under Rule 3a-7 under the Investment Company Act of 1940 or (ii)
materially and adversely affect the characterization of the applicable trust for
federal income tax purposes.
GLOBAL SECURITIES
Unless issued in definitive or bearer form as specified in the
applicable prospectus supplement, all trust certificates of a given series will,
upon issuance, be represented by one or more global securities (each a "Global
Security") that will be deposited with, or on behalf of, the Depositary, and
registered in the name of a nominee of the Depositary. Unless and until it is
exchanged in whole or in part for the individual trust certificates represented
thereby (each, a "Definitive Certificate"), a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor.
The Depository Trust Company, DTC, has advised the depositor as
follows: 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 the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among the
institutions that have accounts with DTC in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
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physical movement of securities certificates. DTC participants include
securities brokers and dealers (including Prudential Securities Incorporated),
banks (including The Chase Manhattan Bank), trust companies, clearing
corporations and certain other organizations, some of which (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
Upon the issuance of a Global Security, the Depositary for such
Global Security will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual trust certificates
represented by such Global Security to the accounts of its participants. The
accounts to be accredited shall be designated by the underwriters of such trust
certificates, or, if such trust certificates are offered and sold directly
through one or more agents, by the depositor or such agent or agents. Ownership
of beneficial interests in a Global Security will be limited to participants or
persons or entities that may hold beneficial interests through participants.
Ownership of beneficial interests in a Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary for such Global Security or by participants or persons or
entities that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of such securities.
Prospective investors in the trust certificates are advised to consult their own
legal advisors concerning the applicability of any such restrictions. Such
requirements and similar laws may limit the market for beneficial interests in a
Global Security.
So long as the Depositary for a Global Security, or its nominee, is
the owner of such Global Security, such Depositary or such nominee, as the case
may be, will be considered the sole trust certificateholder of the individual
trust certificates represented by such Global Security for all purposes under
the trust agreement governing such trust certificates. Except as set forth
below, owners of beneficial interests in a Global Security will not be entitled
to have individual trust certificates represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such trust certificates and will not be considered the trust
certificateholders thereof under the trust agreement governing such trust
certificates. Because the Depositary can only act on behalf of its participants,
the ability of a holder of any trust certificate to pledge that trust
certificate to persons or entities that do not participate in the Depositary's
system, or to otherwise act with respect to such trust certificate, may be
limited due to the lack of a physical certificate for such trust certificate.
Distributions of principal of (and premium, if any) and any interest
on individual trust certificates represented by a Global Security will be made
to the Depositary or its nominee, as the case may be, as the trust
certificateholder of such Global Security. None of the depositor, the trustee
for such trust certificates, any paying agent or trust certificate registrar for
such trust certificates will have responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial interests in
such Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
The depositor expects that the Depositary for trust certificates of a
given series, upon receipt of any distribution of principal, premium or interest
in respect of a definitive Global Security representing any of such trust
certificates, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Depositary also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
registered in "street name" and will be the responsibility of such participants.
If the Depositary for trust certificates of a given series is at any
time unwilling or unable to continue as depository and a successor depository is
not appointed by the depositor within 90 days, the
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depositor will issue individual Definitive Certificates in exchange for the
Global Security or Securities representing such trust certificates. In addition,
the depositor may at any time and in its sole discretion determine not to have
any trust certificates of a given series represented by one or more Global
Securities and, in such event, will issue Definitive Certificates of such series
in exchange for the Global Security or Securities representing such trust
certificates. Further, if the depositor so specifies with respect to the trust
certificates of a given series, an owner of a beneficial interest in a Global
Security representing trust certificates of such series may, on terms acceptable
to the depositor and the Depositary for such Global Security, receive individual
Definitive Certificates in exchange for such beneficial interest. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery of individual Definitive Certificates of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Definitive Certificates registered in its
name.
The applicable prospectus supplement will set forth any specific
terms of the depository arrangement with respect to any series of trust
certificates being offered thereby to the extent not set forth or different from
the description set forth above.
DESCRIPTION OF THE TRUST ASSETS
GENERAL
Each trust certificate of each series (or if more than one class exists,
each class (whether or not each such class is offered hereby) within such
series) will represent an ownership interest specified for such series (or
class) of trust certificates in one or more of the following categories of
underlying securities:
(i) a publicly issued debt security or asset backed security or pool of
such debt securities or asset backed securities issued by one or more
corporations, banking organizations, insurance companies or special purpose
vehicles (including trusts, limited liability companies, partnerships or other
special purpose entities) organized under the laws of the United States or any
state, the District of Columbia or the Commonwealth of Puerto Rico, which are
subject to the informational requirements of the Exchange Act and which, in
accordance therewith, file reports and other information with the SEC or (for
certain banking institutions) with the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation or the Office of Thrift Supervision, as applicable and which, if
such security or securities are Concentrated Underlying Securities (as defined
below), the depositor reasonably believes (based on publicly available
information) meet the market capitization and other requirements for a primary
issuance of common stock on Form S-3 at the time of the offering of the trust
certificates;
(ii) a publicly issued debt security or pool of publicly issued debt
securities of one or more foreign private issuers (as such term is defined in
Rule 405 under the Securities Act) subject to the informational requirements of
the Exchange Act and which in accordance therewith files reports and other
information with the SEC and which the depositor reasonably believes (based on
publicly available information) is eligible to offer securities on Form F-3 at
the time of offering of the trust certificates;
(iii) a publicly issued debt security or pool of publicly issued debt
securities issued by (a) the United States of America or any agency thereof for
the payment of which the full faith and credit of the United States of America
is pledged, (b) the Federal National Mortgage Association or Federal Home Loan
Mortgage Corporation or another U.S. government sponsored enterprise created
pursuant to federal statute that has a comparable market capitalization and that
makes information publicly available comparable to that of Exchange Act
reporting companies (a "GSE") or (c) a Multilateral Bank Issuer; or
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(iv) publicly issued government trust certificates ("GTC") or publicly
issued debt securities guaranteed as to timely payment by the United States of
America; provided that, with respect to the GTCs or the publicly issued debt
securities, the trust certificateholders (or the trustee on their behalf) are
entitled to sue the United States government for enforcement of the guarantee.
A "Multilateral Bank Issuer" means the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the International Finance Corporation, the
European Bank for Reconstruction and Development, or another multilateral
development bank that has a comparable volume of outstanding securities and
files with the Commission, comparable publicly available information, and the
securities of which are exempted from registration under the Securities Act.
GTCs are certificates evidencing undivided fractional interests in a trust, the
assets of which consist of promissory notes (the "GTC Notes"), payable in U.S.
Dollars, of a certain foreign government, backed by a full faith and credit
guaranty issued by the United States of America, acting through the Defense
Security Assistance Agency of the Department of Defense, of the due and punctual
payment of 90% of all payments of principal and interest due on the GTC Notes
and a security interest in collateral, consisting of non-callable securities
issued or guaranteed by the United States government or agencies thereof,
sufficient to pay the remaining 10% of all payments of principal and interest
due on the GTC Notes.
With respect to any Concentrated Underlying Securities, the applicable
prospectus supplement will set forth (i) information regarding the public
availability of information concerning the applicable underlying securities
issuer(s), and (ii) the material terms of the Concentrated Underlying
Securities, in each case as derived from (a) the offering documents (the
"Underlying Securities Prospectuses") utilized by such underlying securities
issuer(s) in connection with the initial offering of such underlying securities
and (b) other publicly available information. The term "Concentrated Underlying
Securities" refers to any underlying security, or group of underlying securities
with a common obligor, which constitutes ten percent or more of the aggregate
principal amount of the underlying securities for any series of trust
certificates as of the date of the applicable prospectus supplement.
The following is a general description of the Trust Assets which the
depositor is permitted to include in a trust and does not purport to be a
complete description of any such Trust Asset. This description is qualified in
its entirety by reference to the applicable prospectus supplement.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
The applicable prospectus supplement will disclose the name of each
underlying securities issuer with respect to the applicable series of trust
certificates. In addition, reference is made to the applicable prospectus
supplement with respect to each series of trust certificates for a description
of the following terms, as applicable, of any Concentrated Underlying
Securities: (i) the title and series of such underlying securities, the
aggregate principal amount, denomination and form thereof; (ii) whether such
underlying securities are senior or subordinated to any other obligations of the
underlying securities issuer; (iii) whether any of the underlying securities are
secured or unsecured and the nature of any collateral; (iv) the limit, if any,
upon the aggregate principal amount of such underlying securities; (v) the dates
on which, or the range of dates within which, the principal of (and premium, if
any, on) such underlying securities will be payable; (vi) the rate or rates or
the method of determination thereof, at which such underlying securities will
bear interest, if any ("Underlying Securities Rate"); the date or dates from
which such interest will accrue ("Underlying Securities Interest Accrual
Periods"); and the dates on which such interest will be payable ("Underlying
Securities Payment Dates"); (vii) the obligation, if any, of the underlying
securities issuer to redeem the underlying securities pursuant to any sinking
fund or analogous provisions, or at the option of a holder thereof, and the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such underlying securities may be
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redeemed or repurchased, in whole or in part, pursuant to such obligation;
(viii) the periods within which or the dates on which, the prices at which and
the terms and conditions upon which such underlying securities may be redeemed,
if any, in whole or in part, at the option of the underlying securities issuer;
(ix) whether the underlying securities were issued at a price lower than the
principal amount thereof; (x) if other than United States dollars, the foreign
or composite currency in which such debt securities aredenominated, or in which
payment of the principal of (and premium, if any) or any interest on such
underlying securities will be made (the "Underlying Securities Currency"), and
the circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such underlying securities; (xii) the rating thereof, if any; and (xiii) any
other material terms of such underlying securities.
With respect to a trust comprised of a pool of underlying securities, the
related prospectus supplement will, to the extent applicable, describe the
composition of the underlying securities pool, certain material events of
default or restrictive covenants common to the underlying securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to certain terms set forth above in the
preceding paragraph and any other material terms regarding such pool of
securities.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, the applicable prospectus supplement will
describe, with respect to each underlying securities issuer of Concentrated
Underlying Securities, the existence and type of certain information that is
made publicly available by such underlying securities issuer regarding the
underlying securities and will disclose where and how prospective purchasers of
the trust certificates may obtain such publicly available information with
respect to each such underlying securities issuer. Such information will
typically consist of such underlying securities issuer's annual report, which
contains financial statements or similar financial information, and can be
obtained from the SEC, if so specified in the applicable prospectus supplement,
or from the office of such underlying securities issuer identified in the
related prospectus supplement. However, the precise nature of such publicly
available information and where and how it may be obtained with respect to any
given underlying securities issuer will vary, and, as described above, will be
set forth in the applicable prospectus supplement.
OTHER TRUST ASSETS
In addition to the underlying securities, the depositor may also
depositinto a given trust, or the trustee on behalf of the trust
certificateholders of a trust may enter into an agreement constituting or
providing for the purchase of (to the extent described in the related prospectus
supplement), certain assets incidental to one or more of such underlying
securities or to some other asset deposited in the trust, including derivative
instruments, hedging contracts and other similar arrangements (such as puts,
calls, interest rate swaps, currency swaps, floors, caps, collars, credit swaps,
options or indexed instruments), cash and assets ancillary or incidental to the
foregoing or to the underlying securities (including assets obtained through
foreclosure or in settlement of claims with respect thereto) (all such assets
for any given series, together with the related underlying securities, the
"Trust Assets"). The applicable prospectus supplement will to the extent
appropriate contain analogous disclosure with respect to the foregoing assets as
referred to above with respect to the underlying securities.
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The Trust Assets for a given series of trust certificates and the related
trust will not constitute Trust Assets for any other series of trust
certificates. The trust certificates of each class of a given series will
generally possess an equal and ratable interest in the related Trust Assets.
However, the applicable prospectus supplement may specify that certain assets
constituting a part of the Trust Assets relating to any given series may be
beneficially owned solely by or deposited solely for the benefit of one class or
a group of classes within such series. In such event, the other classes of such
series will not possess any beneficial ownership interest in those specified
assets constituting a part of the Trust Assets.
CREDIT SUPPORT
As specified in the applicable prospectus supplement for a given series of
trust certificates, the trust for any series of trust certificates may include,
or the trust certificateholders of such series (or any class or group of classes
within such series) may have the benefit of, credit support. Credit support
directly benefits the relevant trust and thereby benefits trust
certificateholders. Such credit support may be provided by any combination of
the following means described below or any other means described in the
applicable prospectus supplement. The applicable prospectus supplement will set
forth whether the trust for any class or classes of trust certificates contains,
or the trust certificateholders of such trust certificates have the benefit of,
credit support and, if so, the amount, type and other relevant terms of each
element of credit support with respect to any such class or classes and certain
information with respect to the obligors of each such element. In addition, the
applicable prospectus supplement will include (or incorporate by reference, as
applicable) audited financial statements for any obligor providing credit
support for 20% or more of the cash flow of the relevant series and summarized
financial information for any obligor providing credit support for between 10
and 20% of the cash flow of such series.
SUBORDINATION. As discussed below under "--Collections", the rights of the
trust certificateholders of any given class within a series of trust
certificates to receive collections from the trust for such series and any
credit support may be subordinated to the rights of the trust certificateholders
of one or more other classes of such series to the extent described in the
applicable prospectus supplement. Such subordination accordingly provides some
additional credit support to those trust certificateholders of those other
classes. For example, if losses are realized during a given period on the Trust
Assets relating to a series of trust certificates such that the collections
received thereon are insufficient to make all distributions on the trust
certificates of such series, those Realized Losses would be allocated to the
trust certificateholders of any class of any such series that is subordinated to
another class, to the extent and in the manner provided in the applicable
prospectus supplement. In addition, if so provided in the applicable prospectus
supplement, certain amounts otherwise payable to trust certificateholders of any
class that is subordinated to another class may be required to be deposited into
a reserve account.
If so provided in the applicable prospectus supplement, the credit support
for any series or class of trust certificates may include, in addition to
subordination, other forms of credit support described below. Any such other
forms of credit support that are solely for the benefit of a given class will be
limited to the extent necessary to make required distributions to the trust
certificateholders of such class or as otherwise specified in the applicable
prospectus supplement. In addition, if so provided in the applicable prospectus
supplement, the obligor of any other forms of credit support may be reimbursed
for amounts paid pursuant to such credit support out of amounts otherwise
payable to one or more of the classes of the trust certificates of such series.
Further, payments to be made in respect of any forms of credit support arranged
for on behalf of the trust certificateholders may be required to be paid prior
to any distributions that must be made to trust certificateholders.
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LETTER OF CREDIT; SURETY BOND. The trust certificateholders of any series
(or class or group of classes of trust certificates within such series) may, if
specified in the applicable prospectus supplement, have the benefit of a letter
or letters of credit issued by a bank or a surety bond or bonds issued by a
surety company. In either case, the trustee, the depositor or such other person
specified in the applicable prospectus supplement will use its reasonable
efforts to cause the letter of credit or the surety bond, as the case may be, to
be obtained, to be kept in full force and effect (unless coverage thereunder has
been exhausted through payment of claims) and to pay timely the fees or premiums
therefor unless, as described in the applicable prospectus supplement, provision
has otherwise been made for the payment of such fees or premiums. The trustee,
the depositor or such other person specified in the applicable prospectus
supplement will make or cause to be made draws under the letter of credit or the
surety bond, as the case may be, under the circumstances and to cover the
amounts specified in the applicable prospectus supplement. Any amounts otherwise
available under the letter of credit or the surety bond will be reduced to the
extent of any prior unreimbursed draws thereunder. The applicable prospectus
supplement will provide the manner, priority and source of funds by which any
such draws are to be repaid.
If so provided in the applicable prospectus supplement, if the letter of
credit bank or the surety, as applicable, ceases to satisfy any credit rating or
other applicable requirements specified in the prospectus supplement, the
trustee, the depositor or such other person specified in the prospectus
supplement will use its reasonable efforts to obtain or cause to be obtained a
substitute letter of credit or surety bond, as applicable, or other form of
credit enhancement providing similar protection, that meets such requirements
and provides the same coverage to the extent available for the same cost. There
can be no assurance that any letter of credit bank or any surety, as applicable,
will continue to satisfy such requirements or that any such substitute letter of
credit, surety bond or similar credit enhancement will be available providing
equivalent coverage for the same cost. To the extent not so available, the
credit support otherwise provided by the letter of credit or the surety bond (or
similar credit enhancement) may be reduced to the level otherwise available for
the same cost as the original letter of credit or surety bond.
RESERVE ACCOUNTS. If so provided in the applicable prospectus supplement,
the trustee or such other person specified in the prospectus supplement will
deposit or cause to be deposited into a reserve account, which shall be an
account maintained with an eligible institution (which may be the trustee) any
combination of cash or permitted investments in specified amounts, which will be
applied and maintained in the manner and under the conditions specified in such
prospectus supplement. In the alternative or in addition to such deposit, a
reserve account may be funded through application of a portion of collections
received on the Trust Assets for a given series of trust certificates, in the
manner and priority specified in the applicable prospectus supplement. Amounts
may be distributed to trust certificateholders of such class or group of classes
within such series, or may be used for other purposes, in the manner and to the
extent provided in the applicable prospectus supplement. Amounts deposited in
any reserve account will be invested in certain permitted investments by, or at
the direction of, the trustee, the depositor or such other person as may be
specified in the applicable prospectus supplement.
OTHER CREDIT SUPPORT. If so provided in the related prospectus supplement,
the trust may include, or the trust certificateholders of any series (or any
class or group of classes within such series) may have the benefit of, one or
more interest rate, currency, securities, commodity or credit swaps, caps,
floors, collars or options. The prospectus supplement will identify the
counterparty to any such instrument and will provide a description of the
material terms thereof.
COLLECTIONS
The trust agreement will establish procedures by which the trustee, the
Administrative Agent, if any, or such other person as may be specified in the
prospectus supplement is obligated, for the
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benefit of the trust certificateholders of each series of trust certificates, to
administer the related Trust Assets, including making collections of all
payments made thereon, depositing from time to time prior to any applicable
Distribution Date such collections into a segregated trust account maintained or
controlled by the applicable trustee for the benefit of such series (each a
"Trust Certificate Account"). An Administrative Agent, if any is appointed, will
direct the trustee, and otherwise the trustee will make all determinations, as
to the appropriate application of such collections and other amounts available
for distribution to the payment of any administrative or collection expenses
(such as the Administration Fee) and certain credit support-related ongoing fees
(such as insurance premiums, letter of credit fees or any required account
deposits) and to the payment of amounts then due and owing on the trust
certificates of such series (and classes within such series), all in the manner
and priorities described in the applicable prospectus supplement. The applicable
prospectus supplement will specify the collection periods, if applicable, and
Distribution Dates for a given series of trust certificates and the particular
requirements relating to the segregation and investment of collections received
on the Trust Assets during a given collection period or on or by certain
specified dates. There can be no assurance that amounts received from the Trust
Assets and any credit support obtained for the benefit of trust
certificateholders for a particular series or class of trust certificates over a
specified period will be sufficient, after payment of all prior expenses and
fees for such period, to pay amounts then due and owing to holders of such trust
certificates. The applicable prospectus supplement will also set forth the
manner and priority by which any Realized Loss will be allocated among the
classes of any series of trust certificates, if applicable.
The relative priorities of distributions with respect to collections from
the assets of the trust assigned to classes of a given series of trust
certificates may permanently or temporarily change over time upon the occurrence
of certain circumstances specified in the applicable prospectus supplement.
Moreover, the applicable prospectus supplement may specify that the Allocation
Ratio in respect of each class of a given series for purposes of payments of
certain amounts, such as principal, may be different from the Allocation Ratio
assigned to each such class for payments of other amounts, such as interest or
premium.
DESCRIPTION OF THE TRUST AGREEMENT
The following summaries describe material provisions of the trust
agreement. The applicable prospectus supplement for a series of trust
certificates will describe any material provision of the trust agreement that is
not described herein. The following summaries do not purport to be complete, and
such summaries are qualified in their entirety by reference to the detailed
provisions of the form of trust agreement to which reference is hereby made for
a full description of such provisions, including the definition of certain terms
used, and for other information regarding the trust certificates. Wherever
particular defined terms of the trust agreement are referred to, such defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference. For information on
how to obtain a copy of the trust agreement, see "Available Information" herein.
ASSIGNMENT OF TRUST ASSETS
At the time any series of trust certificates is issued, the depositor will
cause the underlying securities and the Trust Assets specified in the prospectus
supplement, if any, to be assigned and delivered to the trustee to be deposited
in the related trust, together with all principal, premium (if any) and interest
received by or on behalf of the depositor on or with respect to such underlying
securities and other Trust Assets after the cut-off date specified in the
prospectus supplement, other than principal, premium (if any) and interest due
on or before the cut-off date and other than any Retained Interest. Concurrently
with such assignment, the depositor will execute, and the trustee will
authenticate and deliver, the trust certificates to the depositor in exchange
for the underlying securities and other Trust
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Assets, if any. Each Trust Asset will be identified in a schedule to the trust
agreement. Such schedule will include certain summary identifying information
with respect to each underlying security and each other Trust Asset as of the
cut-off date. Such schedule will include, to the extent applicable, information
regarding the payment terms of any Concentrated Underlying Security, the
Retained Interest, if any, with respect thereto, the maturity or terms thereof,
the rating, if any, thereof and any other material information with respect
thereto.
In addition, the depositor will, with respect to each Trust Asset, deliver
or cause to be delivered to the trustee (or to the custodian hereinafter
referred to) all documents necessary to transfer ownership of such Trust Asset
to the trustee. The trustee (or such custodian) will hold such documents in
trust for the benefit of the trust certificateholders.
The depositor will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the trust agreement. Upon a breach of any such representation of the depositor
which materially and adversely affects the interests of the trust
certificateholders, the depositor will be obligated to cure the breach in all
material respects.
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
GENERAL. With respect to any series of trust certificates, the trustee or
such other person specified in the prospectus supplement, directly or through
administrative agents, will establish and maintain certain accounts for the
benefit of the holders of the relevant trust certificates and will deposit in
such accounts all amounts received by it in respect of the Trust Assets. The
trustee on behalf of the trust may direct any depository institution maintaining
such accounts to invest the funds in such accounts in one or more eligible
investments, pursuant to the trust agreement, bearing interest or sold at a
discount. Any earnings with respect to such investments will be paid to, and any
losses with respect to such investments will be solely for the account of, the
trust certificateholders (and, if applicable, the holder of the Retained
Interest) in accordance with the Allocation Ratio. Further, the trustee or such
other person specified in the prospectus supplement will make reasonable efforts
to collect all scheduled payments under the Trust Assets and will follow or
cause to be followed such collection procedures, if any, as it would follow with
respect to comparable financial assets that it held for its own account,
provided that such procedures are consistent with the trust agreement and any
related instrument governing any credit support and provided further that,
except as otherwise expressly set forth in the applicable prospectus supplement,
it shall not be required to expend or risk its own funds or otherwise incur
personal financial liability.
REALIZATION UPON DEFAULTED TRUST ASSETS. The trustee will present claims
under each applicable credit support instrument and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Trust Assets. As set forth above, all collections by or on
behalf of the trustee under any credit support instrument are to be deposited in
the Trust Certificate Account for the related trust, subject to withdrawal as
described above.
The trustee will be obligated to follow or cause to be followed such normal
practices and procedures as it deems necessary or advisable to realize upon any
defaulted Trust Asset; provided that, the trustee will not be required to expend
or risk its own funds or otherwise incur financial liability in taking any such
action. If the proceeds of any liquidation of the defaulted Trust Asset are less
than the sum of (i) the outstanding principal balance of the defaulted Trust
Asset, (ii) interest accrued but unpaid thereon at the applicable interest rate
and (iii) the aggregate amount of expenses incurred by the trustee in connection
with such proceedings to the extent reimbursable from the assets of the trust
under the trust agreement, the trust for the applicable series will realize a
loss in the amount of such difference. To the extent provided in the applicable
prospectus supplement, the trustee will be entitled to withdraw or cause
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to be withdrawn from the related Trust Certificate Account out of the net
proceeds recovered on any defaulted Trust Asset, prior to the distribution of
such proceeds to trust certificateholders, amounts representing its normal
administrative compensation on the Trust Asset, unreimbursed administrative
expenses incurred with respect to the Trust Asset and any unreimbursed advances
of delinquent payments made with respect to the Trust Asset.
RETAINED INTEREST
The prospectus supplement for a series of trust certificates will specify
whether there will be any Retained Interest in the Trust Assets, and, if so, the
owner thereof. If so provided, the Retained Interest will be established on an
asset-by-asset basis and will be specified in an exhibit to the applicable trust
agreement. A Retained Interest in a Trust Asset represents a specified ownership
interest therein and a right to a portion of the payments thereon. Payments in
respect of the Retained Interest will be deducted from payments on the Trust
Assets as received and, in general, will not be deposited in the applicable
Trust Certificate Account or become a part of the related trust. After the
trustee deducts all applicable fees (as provided for in the trust agreement)
from any partial recovery on an underlying security, the trustee will allocate
any such partial recovery between the holder of the Retained Interest (if any)
and the trust certificateholders of the applicable series.
TRUSTEE COMPENSATION AND PAYMENT OF EXPENSES
The trustee will be entitled to receive from the depositor or an affiliate
of the depositor as compensation for the trustee's services hereunder, trustee's
fees pursuant to a separate agreement between the trustee and the depositor, and
will be reimbursed for all reasonable expenses, disbursements and advances
incurred or made by the trustee (including the reasonable compensation,
disbursements and expenses of its counsel and other persons not regularly in its
employ). The depositor will agree to indemnify and hold harmless the trustee and
its successors, assigns, agents and servants against any and all loss, liability
or reasonable expense (including attorney's fees) incurred by it in connection
with the administration of the trust and the performance of its duties
thereunder; the disclosure by the depositor with respect to the underlying
securities except where such information is based on erroneous information from
the trustee; any registration statement of the trust certificates of any series
under the Securities Act; registration of the arrangement created by the trust
agreement under the Investment Company Act of 1940; any failure by the depositor
to file Exchange Reports on behalf of the trust as may be required; and any
defect in the rights of the trust to the underlying securities arising under a
breach of warranty by the depositor made pursuant to the trust agreement.
LIMITATIONS ON RIGHTS OF TRUST CERTIFICATEHOLDERS
No trust certificateholder of a given series will have the right under the
trust agreement to institute any proceeding with respect thereto unless (i) such
trust certificateholder previously has given to the trustee written notice of a
continuing breach, (ii) trust certificateholders evidencing not less than the
Required Percentage-Remedies of the aggregate Voting Rights have made written
request upon the trustee to institute such proceeding in its own name as
trustee, (iii) such trust certificateholder or trust certificateholders have
offered the trustee reasonable indemnity, (iv) the trustee for 30 days has
failed to institute any such proceeding and (v) no direction inconsistent with
such written request has been given to the trustee during such 30 day period by
trust certificateholders evidencing not less than the Required
Percentage--Remedies of the aggregate Voting Rights. The trustee, however, is
under no obligation to exercise any of the trusts or powers vested in it by the
trust agreement or to make any investigation into the facts of matters arising
under the trust agreement or stated in any document believed by it to be
genuine, unless requested in writing to do so by trust certificateholders of the
Required Percentage--Direction of Trustee (as defined in the trust agreement) or
to institute, conduct or defend any litigation
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thereunder or in relation thereto at the request, order or direction of any of
the holders of trust certificates covered by the trust agreement, unless such
trust certificateholders have offered to the trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
MODIFICATION AND WAIVER
The trust agreement may be amended from time to time by the depositor and
the trustee without notice to or the consent of any of the trust
certificateholders for any of the following purposes: (i) to cure any ambiguity
or to correct or supplement any provision therein which may be defective or
inconsistent with any other provision therein; (ii) to add or supplement any
credit support for the benefit of any trust certificateholders; (iii) to add to
the covenants, restrictions or obligations of the depositor or the trustee for
the benefit of the trust certificateholders; (iv) to add, change or eliminate
any other provisions with respect to matters or questions arising under the
trust agreement; (v) to comply with any requirements imposed by the Code; (vi)
to evidence and provide for the acceptance of appointment hereunder of a trustee
other than the party named presently as trustee for a series of trust
certificates, and to add to or change any of the provisions of the trust
agreement as shall be necessary to provide for or facilitate the administration
of the separate trusts hereunder by more than one trustee; (vii) to evidence and
provide for the acceptance of appointment hereunder by a successor trustee with
respect to the trust certificates of one or more series or to add or change any
of the provisions of the trust agreement as shall be necessary to provide for or
facilitate the administration of the trusts hereunder; or (viii) to provide for
the issuance of new trust certificates; so long as (x) any such amendment
described in (i) through (viii), but not (vi), will not, as evidenced by an
opinion of counsel, cause the trust (unless otherwise specified in a related
Series Supplement) to fail to be characterized as a grantor trust for federal
income tax purposes or result in a sale or exchange of any trust certificate for
federal income tax purposes and (y) the trustee has received an officer's
certificate from the depositor that such amendment will not have a material
adverse effect on any class of trust certificateholders.
Without limiting the generality of the foregoing, with respect to any
series, the trust agreement may also be modified or amended from time to time by
the depositor and the trustee with the consent of the holders of trust
certificates representing the Required Percentage--Amendment of the aggregate
Voting Rights of each class voting as a class, of those trust certificates to
which such modification or amendment relates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the trust agreement or of modifying in any manner the rights of the holders of
trust certificates; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or alter the timing of, payments received on
underlying securities which are required to be distributed on any trust
certificate without the unanimous consent of the holders of such trust
certificates, (ii) adversely affect in any material respect the interests of the
holders of any series (or class within such series) of trust certificates in a
manner other than as described in (i), without the consent of the holders of
trust certificates of such series or class evidencing not less than the Required
Percentage--Amendment of the aggregate Voting Rights of such series or class or
(iii) reduce the percentage of aggregate Voting Rights required by (ii), as
described in (ii), without the consent of the holders of all trust certificates
of such series or class then outstanding; and provided further that the
depositor shall furnish to the trustee an opinion of counsel (unless otherwise
indicated in a related Series Supplement) stating that, in the opinion of such
counsel, any such amendment would not cause the trust to fail to be
characterized as a grantor trust for federal income tax purposes or result in a
sale or exchange of any trust certificate for federal income tax purposes.
REPLACEMENT TRUST CERTIFICATES
If a mutilated trust certificate is surrendered at the corporate trust
office or agency of the trustee or the depositor and the trustee receive
satisfactory evidence that such trust certificate has been
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lost, destroyed or stolen it may be replaced upon payment by the holder of such
expenses as may be incurred by the trustee in connection therewith and the
furnishing of such security and indemnity as the trustee and the depositor may
require to hold each of them and any paying agent harmless; provided that
neither the depositor nor the trustee has received notice that such trust
certificate was acquired by a BONA FIDE purchaser. Mutilated trust certificates
must be surrendered before new trust certificates will be issued.
TERMINATION
The respective obligations and responsibilities under the trust agreement
of the depositor and the trustee (other than the obligations of the trustee to
make distributions to holders of the trust certificates of any given series)
will terminate (subject to surviving rights of indemnity) upon the distribution
to such holders of all amounts held in all the Accounts for such series and
required to be paid to such holders pursuant to the trust agreement on the
Distribution Date coinciding with or following the earlier to occur of (i) if
and as provided in the Series Supplement for such series, the purchase by, and
at the sole option of the depositor, as provided in the Series Supplement for
such series, of all remaining underlying securities for such series in the trust
for such series on any Distribution Date, provided that such option may be
exercised only if the aggregate principal amount of such underlying securities
at the time of any such purchase is less than 10% (or such other percentage as
may be specified in such Series Supplement) of the aggregate principal amount of
all underlying securities deposited in such trust as of the applicable cut-off
date and (ii) the final payment on or other liquidation (which may include
redemption or other purchase thereof by the applicable underlying security
issuer) of the last underlying security remaining in the trust for such series
or the disposition of all property acquired upon foreclosure or liquidation of
any such underlying security; provided, however, that in no event shall the
trust continue to exist if its continued existence would result in a violation
of any applicable common-law or statutory Rule Against Perpetuities.
DUTIES OF THE TRUSTEE
The trustee makes no representations as to the validity or sufficiency of
the trust agreement, the recitals contained therein, the trust certificates of
any series or any Trust Asset or related document and is not accountable for the
use or application by the depositor of any of the trust certificates or the
Trust Assets, or the proceeds thereof. The trustee is required to perform only
those duties specifically required under the trust agreement with respect to
such series. However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the trustee is required to examine
such documents and to determine whether they conform to the applicable
requirements of the trust agreement.
THE TRUSTEE
The trustee for any given series of trust certificates under the trust
agreement will be named in the applicable prospectus supplement. The commercial
bank, national banking association or trust company serving as trustee will be
unaffiliated with, but may have banking relationships with or provide financial
services to, the depositor, any Administrative Agent and their affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States federal income tax laws and regulations,
the depositor and any underwriter, agent or dealer participating in the offering
of any bearer certificate will agree that, in connection with the original
issuance of such bearer certificate and during the period ending 40 days
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after the issue date of such bearer certificate, they will not offer, sell or
deliver such bearer certificate, directly or indirectly, to a U.S. Person or to
any person within the United States, except to the extent permitted under U.S.
Treasury regulations.
Bearer certificates will bear a legend to the following effect: "Any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
1650(j) and 1287(a) of the Internal Revenue Code". The sections referred to in
the legend provide that, with certain exceptions, a United States taxpayer who
holds bearer certificates will not be allowed to deduct any loss with respect
to, and will not be eligible for capital gain treatment with respect to any gain
realized on a sale, exchange, redemption or other disposition of, such bearer
certificates.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
bearer certificates, as the case may be, trust certificates that are issuable as
bearer certificates may initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common depositary in
London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear"), and Cedelbank for credit to the
accounts designated by or on behalf of the purchases thereof. Following the
availability of a definitive Global Security in bearer form, without coupons
attached, or individual bearer certificates and subject to any further
limitations described in the applicable prospectus supplement, the temporary
Global Security will be exchangeable for interests in such definitive Global
Security or for such individual bearer certificates, respectively, only upon
receipt of a Certificate of Non-U.S. Beneficial Ownership. A "Certificate of
Non-U.S. Beneficial Ownership" is a certificate to the effect that a beneficial
interest in a temporary Global Security is owned by a person that is not a U.S.
Person or is owned by or through a financial institution in compliance with
applicable U.S. Treasury regulations. No bearer certificate will be delivered in
or to the United States. If so specified in the applicable prospectus
supplement, interest on a temporary Global Security will be distributed to each
of Euroclear and Cedelbank with respect to that portion of such temporary Global
Security held for its account, but only upon receipt as of the relevant
Distribution Date of a Certificate of Non-U.S. Beneficial Ownership.
CURRENCY RISKS
An investment in a trust certificate having a Specified Currency other than
U.S. dollars entails significant risks that are not associated with a similar
investment in a U.S. dollar-denominated security. Such risks include, without
limitation, the possibility of significant changes in rates of exchange between
the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
depositor has no control, such as economic and political events and the supply
of and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. Past fluctuations in any
particular exchange rate do not necessarily indicate, however, fluctuations in
the rate that may occur during the term of any trust certificate. Depreciation
of the Specified Currency for a trust certificate against the U.S. dollar would
decrease the effective yield of such trust certificate below its Trust
Certificate Rate and, in certain circumstances, could result in a loss to the
investor on a U.S. dollar basis.
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Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates and the availability of a
Specified Currency for making distributions in respect of trust certificates
denominated in such currency. At present, the depositor has identified the
following currencies in which distributions of principal, premium and interest
on trust certificates may be made: Australian dollars, Canadian dollars, Danish
kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU.
However, trust certificates distributable in another Specified Currency may be
issued at any time, based upon investor demand for trust certificates
denominated in such currencies. There can be no assurance that exchange controls
will not restrict or prohibit distributions of principal, premium or interest in
any Specified Currency. Even if there are no actual exchange controls, it is
possible that, on a Distribution Date with respect to any particular trust
certificate, the currency in which amounts then due to be distributed in respect
of such trust certificate would not be available.
IT IS STRONGLY RECOMMENDED THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN TRUST
CERTIFICATES DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH TRUST
CERTIFICATES ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN OR COMPOSITE CURRENCY TRANSACTIONS.
Any prospectus supplement relating to trust certificates having a Specified
Currency other than U.S. dollars will contain historical exchange rates for such
currency against the U.S. dollar, a description of such currency, any exchange
controls affecting such currency and any other required information concerning
such currency. Such prospectus supplement will also discuss risk factors
relating to any such Specified Currency.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the ownership of the trust certificates as of the date hereof.
(Certain minor and incidental consequences are discussed as well.) It is based
on the advice of Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel
("Special Tax Counsel"), which has delivered an opinion to the depositor that
the discussion below, to the extent it constitutes matters of law or legal
conclusions thereto, is true and correct in all material respects.
Special Tax Counsel has also delivered an opinion that the trust will not
be characterized as an association taxable as a corporation (or publicly traded
partnership treated as an association) for federal income tax purposes. Special
Tax Counsel has not delivered (and unless otherwise indicated in the prospectus
supplement does not intend to deliver) any other opinions regarding the trust or
the trust certificates. Prospective investors should be aware that no rulings
have been, or will be, sought from the Internal Revenue Service, and that legal
opinions are not binding on the IRS or the courts. Accordingly, there can be no
assurance that the IRS or the courts will agree with Special Tax Counsel's
opinions. If, contrary to Special Tax Counsel's opinion, the trust is
characterized or treated as a corporation for federal income tax purposes, among
other consequences, the trust would be subject to federal income tax (and
similar state income or franchise taxes) on its income and distributions to
trust certificateholders would be impaired. In light of Special Tax Counsel's
opinion, however, the balance of this discussion assumes that the trust will not
be characterized or treated as a corporation.
This summary is based on the Internal Revenue Code of 1986 (the "Code") as
well as Treasury regulations and administrative and judicial rulings and
practice. Legislative, judicial and
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administrative changes may occur, possibly with retroactive effect, that could
alter or modify the continued validity of the statements and conclusions set
forth herein. This summary is intended as an explanatory discussion of the
consequences of holding the trust certificates generally and does not purport to
furnish information in the level of detail or with the investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, it is strongly recommended that each prospective investor consult
with its own tax advisor regarding the application of United States federal
income tax laws, as well as any state, local, foreign or other tax laws, to
their particular situations.
Except with respect to certain withholding tax matters discussed below
under "Withholding Taxes", the discussion is limited to consequences to U.S.
Persons. For purposes of this discussion, a "U.S. Person" is: (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust that is a United States Person within the
meaning of Section 7701(a)(30) of the Code. References herein to a holder or
trust certificateholder are references to the beneficial owner of a trust
certificate.
Except as discussed below under "-Possible Characterization of the
Underlying Securities as Equity Securities," for the purposes of this
discussion, the depositor and Special Tax Counsel have assumed, without inquiry,
that the underlying securities will be characterized as indebtedness for federal
income tax purposes. The prospectus supplement may contain additional
information about the federal income tax characterization of the underlying
securities.
TAX STATUS OF THE TRUST
The trustee intends for tax reporting purposes to treat the trust as a
grantor trust. Prospective investors should be aware, however, that certain of
the terms of trust certificates (for example, the allocation of the proceeds of
a disposition of the underlying securities) may be viewed by the IRS as
inconsistent with the grantor trust rules and, accordingly, unless otherwise
indicated in the prospectus supplement, Special Tax Counsel is not able to
deliver an opinion that the trust will be treated as a grantor trust.
Nonetheless, because treating the trust as a grantor trust is the more
appropriate approach for tax reporting purposes, the trustee currently intends
to treat the trust as a grantor trust and, except as specifically indicated
otherwise under "-Possible Recharacterization of the Trust as a Partnership"
below, the balance of this discussion assumes that the trust will be so
classified. (The trust agreement prohibits the trust from electing to be taxed
as a corporation.)
Each trust certificateholder will be treated, for federal income tax
purposes, (i) as if it had purchased its pro rata interest of the trust's
underlying assets and (ii) as if it were the obligor on its pro rata portion of
the trust's obligations. Thus, for example, if the trust certificates are
subject to early redemption on account of the trust being the obligor under any
call options ("Call Warrants"), each trust certificateholder will be treated as
if it had sold Call Warrants with respect to the underlying securities in an
amount representing its pro rata interest in the trust. Further, if the income
of the trust is used (directly or indirectly) to pay expenses of the trust, the
holders will be treated as if each had first earned its pro rata share of that
income and then paid its share of the expense. Prospective investors should be
aware that expenses of the trust may be subject to limitations on deductibility,
which may depend on each particular investor's circumstances, but would include,
in the case of an individual (or entity treated as an individual) Section 67 of
the Code that allows miscellaneous itemized deductions only to the extent that
in the aggregate they exceed 2 percent of adjusted gross income.
The trust has identified the underlying securities and any Call Warrants as
part of an integrated transaction within the meaning of Treasury Regulation ss.
1.1275-6. Among other consequences of such identification is the treatment
generally of each trust certificate as a synthetic debt instrument
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issued on the date it is acquired by the holder thereof. Similar treatment will
also generally apply to trust certificates representing "stripped coupons"
and/or "stripped bonds," which generally will be the case when trust
certificates are issued in multiple classes and the different classes represent
the ownership of differing percentage ownership interests of the right to
interest and principal on the underlying securities. It is also possible that
each trust certificate will be treated as an actual debt instrument issued on
the closing date. In that case, the trust certificates would be taxed like
conventional debt instruments and the discussion under "--Income of Trust
Certificateholders" would not apply. If a series of trust certificates has more
than one class and some but not all classes are treated as actual debt
instruments issued on the closing date, income on the classes not so treated may
be treated as unrelated business taxable income (and thus subject to tax) in the
hands of pension plans, individual retirement accounts and other tax-exempt
investors.
INCOME OF TRUST CERTIFICATEHOLDERS
ORIGINAL ISSUE DISCOUNT. Each trust certificateholder will be subject to
the original issue discount ("OID") rules of the Code and Treasury Regulations
with respect to such trust certificates. Under those rules, the trust
certificateholder (whether on the cash or accrual method of accounting) will be
required to include in income the OID on the trust certificates as it accrues on
a daily basis, on a constant yield method regardless of when cash payments are
received. The amount of OID on a trust certificate generally will be equal to
the excess of all amounts payable on the trust certificate over the amount paid
to acquire the trust certificate and the constant yield used in accruing OID
generally will be the yield to maturity of a trust certificate as determined by
each holder based on that holder's purchase price for the trust certificate. It
is unclear whether the holder of a trust certificate should, in calculating OID,
assume that the underlying securities will, or will not, be called pursuant to
any Call Warrant. It is unclear how actual and expected future prepayments or
losses on the underlying securities are to be taken into account.
The trustee intends for information reporting purposes to account for OID,
if any, reportable by trust certificateholders by reference to the price paid
for a trust certificate by an initial purchaser at an assumed issue price,
although the amount of OID will differ for other purchasers. Such purchasers
should consult their tax advisors regarding the proper calculation of OID.
The amount of OID that is reported in income in any particular year will
not necessarily bear any relationship to the amount of distributions, if any,
paid to a holder in that year.
PURCHASE AND SALE OF A TRUST CERTIFICATE. A trust certificateholder's tax
basis in a trust certificate generally will equal the cost of the trust
certificates increased by any amounts includable in income as OID, and reduced
by any payments made on the trust certificates. If a trust certificate is sold
or redeemed, capital gain or loss will be recognized equal to the difference
between the proceeds of sale and the trust certificateholder's adjusted basis in
the trust certificates.
POSSIBLE RECHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
As indicated above, it is possible that the IRS will seek to recharacterize
the trust as a partnership. If the IRS were to successfully recharacterize the
trust as a partnership, the trust would not be subject to federal income tax.
Under Treasury Regulation 1.761-2, certain partnerships may "elect out" of
subchapter K of the Code (partnership tax accounting). Although subject to
uncertainty, the trust is likely to be eligible for this election. Assuming that
it is so eligible, each trust certificateholder will be required to report its
respective share of the items of income, deductions, and credits of the
organization on their respective returns (making such elections as to individual
items as may be appropriate) in a manner consistent with the exclusion of the
trust from partnership tax accounting. Such reporting should
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be substantially similar to the income tax reporting that would be required
under the grantor trust rules. In mutual consideration for each holder's
purchase of trust certificate, each such holder is deemed to consent to the
trust's making of a protective election out of subchapter K of the Code.
If the election to be excluded from the partnership tax accounting
provisions of the Code is not effective, among other consequences, (i) the trust
would be required to account for its income and deductions at the trust level
(not necessarily taking into account any particular holder's circumstances,
including any difference between the holder's basis in its trust certificates
and the trust's basis in its assets) and to utilize a taxable year for reporting
purposes and (ii) each holder would be required to separately take into account
such holder's distributive share of income and deductions of the trust. A holder
would take into account its distributive share of trust income and deductions
for each taxable year of the trust in the holder's taxable year which ends with
or within the trust's taxable year. A holder's share of the income of the trust
computed at the trust level would not necessarily be the same if computed under
the OID rule described above under "--Income of Trust Certificateholders" and,
in particular, may not take account of any difference in the yield on the trust
certificate to the holder based on the trust certificateholder's purchase price
and the yield on the underlying securities determined at the trust level.
WITHHOLDING TAXES
Payments made on a trust certificate to a person that is not a U.S. Person
and has no connection with the United States other than holding its certificates
generally will be made free of United States federal withholding tax, provided
that (i) the holder is not related (directly or indirectly) to the obligor,
guarantor, if any, or sponsor of the underlying securities, the depositor, the
holder of any other class of trust certificates (if such series provides for
multiple classes of trust certificates), the holder of any Call Warrant or the
counterparty on any notional principal contract or other derivative contract of
which the trust is a party and (ii) the holder complies with certain
identification and certification requirements imposed by the IRS.
POSSIBLE CHARACTERIZATION OF THE UNDERLYING SECURITIES AS EQUITY
SECURITIES
As noted above, for the purposes of the forgoing discussion, the depositor
and Special Tax Counsel have assumed, without inquiry, that the underlying
securities will be characterized as indebtedness for federal income tax
consequences. If the assumption were not correct and the underlying securities
are treated as equity securities for federal income tax purposes, the timing and
character of income on the trust certificates may differ from that discussed
above and, with respect to any particular investor, might be adverse.
If the offering materials relating to the underlying securities indicated
that counsel to the issuer of the underlying securities provided an opinion
regarding the tax characterization of those securities in connection with their
original issue the prospectus supplement will so indicate. Neither the depositor
nor Special Tax Counsel will investigate the circumstances surrounding the
issuance of the opinion and neither will make any representation as to its
accuracy or continuing applicability.
If an underlying security were treated as an equity security for federal
income tax purposes, depending on, among other things, the nature of the issuer
of the underlying security as a partnership or corporation for federal income
tax purposes, among other potential consequences: (i) income paid to non-U.S.
investors may be subject to a 30% withholding tax, unless that tax were
eliminated under a treaty between the United States and the country of residence
of the investor (ii) the integration rules of Treasury Regulation ss. 1.1275-6
(discussed above) might not apply, (iii) gain on the sale of the trust
certificates that would otherwise be long-term capital gain might be
characterized as short-term capital gain or ordinary income, (iv) the OID rules
(discussed above) may not apply, however,
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the rules of section 305(c) or 305(e) relating to stock issued with redemption
premium or stripped preferred stock may apply, and (v) the rules described under
"Possible Recharacterization of the Trust as a Partnership" would more likely
apply.
Prospective investors should consult with their own tax advisors regarding
the likelihood that the underlying securities of any particular series may be
recharacterized and the effect, if any, such a characterization would have on
them.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of the trust
certificates. State, local and foreign tax law may differ substantially from
federal tax law, and this discussion does not purport to describe any aspect of
the tax law of a state or other jurisdiction (including whether the trust, if
treated as a partnership for federal income tax purposes, would be treated as a
partnership under any state or local jurisdiction). Therefore, it is strongly
recommended that prospective purchasers consult their own tax advisors with
respect to such matters.
PLAN OF DISTRIBUTION
Trust certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable prospectus supplement will set forth the terms of
the offering of any series of trust certificates, which may include the names of
any underwriters, or initial purchasers, the purchase price of such trust
certificates and the proceeds to the depositor from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or paid
to dealers, any securities exchanges on which such trust certificates may be
listed, any restrictions on the sale and delivery of trust certificates in
bearer form and the place and time of delivery of the trust certificates to be
offered thereby.
If underwriters are used in the sale, trust certificates will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such trust
certificates may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Such managing underwriters or underwriters in the United States will include
Prudential Securities Incorporated, an affiliate of the depositor. The
obligations of the underwriters to purchase such trust certificates will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all such trust certificates if any of such trust certificates are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Trust certificates may also be sold through agents designated by the
depositor from time to time. Any agent involved in the offer or sale of trust
certificates will be named, and any commissions payable by the depositor to such
agent will be set forth, in the applicable prospectus supplement. Unless
otherwise indicated in the applicable prospectus supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in the applicable prospectus supplement, the depositor will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase trust certificates at the public offering price
described in such prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified
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in such prospectus supplement. Such contracts will be subject only to those
conditions set forth in the applicable prospectus supplement and such prospectus
supplement will set forth the commissions payable for solicitation of such
contracts.
Any underwriters, dealers or agents participating in the distribution of
trust certificates may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of trust certificates may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
depositor to indemnification by the depositor against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the depositor or its affiliates in the ordinary
course of business.
Prudential Securities Incorporated is an affiliate of the depositor and is
a wholly owned subsidiary of Prudential Securities Group Inc., the parent
corporation of the depositor. The participation of Prudential Securities
Incorporated in the offer and sale of trust certificates complies with the
requirements of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
As to each series of trust certificates, only those classes rated in one of
the investment grade rating categories by a rating agency will be offered
hereby. Any unrated classes or classes rated below investment grade may be
retained by the depositor or sold at any time to one or more purchasers.
Affiliates of the underwriters may act as agents or underwriters in
connection with the sale of the trust certificates. Any affiliate of the
underwriters so acting will be named, and its affiliation with the underwriters
described, in the related prospectus supplement. Also, affiliates of the
underwriters may act as principals or agents in connection with market-making
transactions relating to the trust certificates. A prospectus supplement will be
prepared with respect to the trust certificates for use by such affiliates in
connection with offers and sales related to market-making transactions in the
trust certificates.
LEGAL MATTERS
The validity of the trust certificates and certain federal income tax
matters will be passed upon for the depositor and the underwriters by Orrick,
Herrington & Sutcliffe LLP, New York, New York or other counsel identified in
the applicable prospectus supplement.
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INDEX OF DEFINED TERMS
Administration Fee...........11
Administrative Agent.........11
Allocation Ratio.............17
Base Rate....................15
Business Day.................13
Calculation Agent............15
Calculation Date.............16
Call Price...................18
Call Right...................17
Call Warrants................32
Callable Series..............17
Cede.........................10
Certificate of Non-U.S.
Beneficial Ownership........30
Clearing Agency..............18
clearing corporation.........18
Code.........................31
Concentrated Underlying
Securities...................21
Definitive Certificate.......18
Depositary...................10
dollar.......................10
Euroclear....................30
Exchange Act..................9
Exchangeable Series..........16
Fixed Rate Trust Certificate.14
Fixed Trust Certificate Rate.14
Floating Rate Trust
Certificate..................14
Floating Trust Certificate
Rate........................15
Global Security..............18
GSE..........................20
GTC..........................21
GTC Notes....................21
Interest Reset Date..........15
Interest Reset Period........15
Maximum Trust Certificate
Rate........................15
Minimum Trust Certificate
Rate........................15
Multilateral Bank Issuer.....21
OID..........................33
Optional Exchange............16
Optional Exchange Date.......17
Put Date.....................18
Put Option...................18
Puttable Underlying
Securities...................18
Realized Losses..............14
Record Date..................13
Registration Statement........9
Retained Interest............11
Securities Act................9
Special Tax Counsel..........31
Spread.......................15
Spread Multiplier............15
Trust Assets..............8, 22
Trust Certificate Account....25
U.S. $.......................10
U.S. dollars.................10
U.S. Person..............30, 32
Underlying Securities
Agreement...................14
Underlying Securities
Currency....................22
Underlying Securities
Interest Accrual Periods.....21
Underlying Securities
Payment Dates................21
Underlying Securities
Prospectuses.................21
Underlying Securities Rate...21
United States................30
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[ALTERNATE COVER FOR MARKET MAKING PROSPECTUS SUPPLEMENT]
Prospectus Supplement
(To Prospectus dated [ ], [ ])
[$][ ]
RECEIPTS ON CORPORATE SECURITIES, SERIES [ ]-[ ]
Issued By
RECEIPTS ON CORPORATE SECURITIES TRUST [ ]-[ ]
Evidencing
FRACTIONAL INTERESTS IN [[TITLE(S) OF UNDERLYING SECURITIES] DUE [ ],[ ]]
[POOL OF [SPECIFY TYPE OF SECURITIES]]
PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.,
Depositor
PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.,
Depositor
- ----------------------------------------------
The trust will [IDENTIFY [IDENTIFY
issue: CLASS OF TRUST CLASS OF
CERTIFICATES] TRUST
CERTIFICATES]
- -----------------------------------------------
Initial certificate principal balance/
notional amount
- -----------------------------------------------
Trust certificate rate
- -----------------------------------------------
Distribution dates
- -----------------------------------------------
Final scheduled distribution date
- -----------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED ON PAGES S-[ ] THROUGH
S-[ ] IN THIS PROSPECTUS SUPPLEMENT AND ON PAGES [ ] THROUGH [ ] IN THE
PROSPECTUS.
The trust certificates represent interests in the trust only and do not
represent an obligation of the depositor or any of its affiliates. The trust
certificates do not represent a direct obligation of [the issuer[s] of the
underlying securities] or any of [its] [their] affiliates. [The issuer[s] of the
underlying securities [is] [are] not [an] affiliate[s] of the trust or the
depositor and will not receive any proceeds from the sale of the trust
certificates.]
This prospectus supplement may not be used to offer trust certificates unless it
is accompanied by the related prospectus.
The trust certificates offered by this prospectus supplement will be rated [ ]
by [SPECIFY RATING AGENCY].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE TRUST CERTIFICATES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus supplement is to be used by the underwriter in connection with
offers and sales related to market making transactions in the trust certificates
in which the underwriter acts as principal. The underwriter may also act as
agent in such transactions. Sales will be made at prices related to prevailing
prices as the time of sale.
[PRUDENTIAL SECURITIES INCORPORATED]
The date of this prospectus supplement is [ ], [ ].
<PAGE>
PLAN OF DISTRIBUTION
This prospectus supplement is to be used by the underwriter, Prudential
Securities Incorporated, in connection with offers and sales related to market
making transactions in the trust certificates in which the underwriter acts as
principal. The underwriter may also act as agent in such transactions. Sales
will be made at prices related to prevailing market prices at the time of sale.
<PAGE>
PART II
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
Registration Fee........................... $ 139,000.00
Printing and Engraving Expenses............ 50,000.00
Trustee's Fees............................. 300,000.00
Legal Fees and Expenses.................... 400,000.00
Securities Exchange Listing Fees, Blue Sky
Fees and Expenses.......................... 10,000.00
Accountants' Fees and Expenses............. 75,000.00
Rating Agency Fees......................... 200,000.00
Miscellaneous.............................. 25,000.00
-------------
Total................................... $1,199,000.00
-------------
Item 15....INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Depositor's Bylaws provide that the Depositor shall indemnify each of
its directors and officers who was or is a party or is threatened to be made a
party to any threatened, pending or contemplated action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director or officer of the Depositor other than an action by
or in the right of the Depositor (for which the Depositor may indemnify such
persons under certain circumstances).
Section 145 of the Delaware General Corporation Law (the "GCL") provides
as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
II-1
<PAGE>
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by a majority vote of the board of directors who
are not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
II-2
<PAGE>
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent for such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise Provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k)..The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Amended and Restated Certificate of Incorporation also limits the
personal liability of directors to the Depositor and its stockholders for
monetary damages resulting from certain breaches of the directors' fiduciary
duties. The Amended and Restated Certificate of Incorporation of the Depositor
provides as follows:
"No director of the Corporation shall be personally liable to the
Corporation or its
II-3
<PAGE>
stockholders for monetary damages for breach of fiduciary duty as a director;
provided that the provisions of this Article Eleventh shall not eliminate or
limit the liability of a director (a) for any breach of the Director's duty of
loyalty to the Corporation and to its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which such director derived any
improper personal benefit. If the GCL is amended after the filing of this
Amended and Restated Certificate of Incorporation so as to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of each director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the law of the State of Delaware as the same
exists from time to time. Any repeal or modification of this Article Eleventh by
the stockholders of the Corporation shall not adversely affect any elimination
or limitation on the personal liability of a director existing at the time of
such repeal or modification."
- ---------------------
Item 16....EXHIBITS
1.1 Form of proposed Underwriting Agreement for Trust Certificates.*
4.1 Form of Trust Agreement, with form of Trust Certificate attached
thereto.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).
25.1 Statement of eligibility of Trustee (The Chase Manhattan Bank).*
_________________
*Incorporated by reference from Registration Statement on Form S-3 (File
No. 333-70233 filed on January 7, 1999.
---------------------
Item 17. UNDERTAKINGS
------------
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to this
registration statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or
events arising after the effective date of this registration statement (or the
most recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of
II-4
<PAGE>
securities offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may be
reflected in the form of Prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement; PROVIDED,
HOWEVER, that the undertakings set forth in clauses (i) and (ii) above do not
apply if the information required to be included in a post-effective amendment
by those clauses is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are incorporated by reference in this
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(e) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling person of
the registrant pursuant to the provisions above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
II-5
<PAGE>
(g) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3, reasonably believes that the security
rating requirement contained in Transaction Requirement B.5. of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on this 5th day of November, 1999.
PRUDENTIAL SECURITIES STRUCTURED
ASSETS, INC.
By: *
------------------------
Name: Jeffrey J. Theodorou
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
November 5, 1999 By: *
- -------------------- ---------------------------
Date Name: Howard Whitman
Title: Chairman of the Board
and Director
November 5, 1999 By: *
- -------------------- --------------------------
Date Name: Jeffrey J. Theodorou
Title: President
(Principal Executive Officer)
November 5, 1999 By: *
- -------------------- ---------------------------
Date Name: William J. Horan
Title: Chief Financial Officer
(Principal Financial and
Accounting Officer)
November 5, 1999 By: *
- -------------------- ---------------------------
Date Name: Elizabeth W. Castagna
Title: Treasurer
November 5, 1999 By: *
- -------------------- ---------------------------
Date Name: Ruth Lavelle
Title: Director
*The undersigned, by signing his name hereto does hereby sign this Amendment No.
3 on behalf of each of the persons indicated above pursuant to a power of
attorney filed with Registration Statement on Form S-3 (File No. 333-70233)
filed on January 7, 1999.
By: /s/ Lawrence S. Motz
---------------------------
Name: Lawrence S. Motz
Title: Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
Description of Exhibit
Exhibit
No.
1.1 Form of proposed Underwriting Agreement for Trust Certificates.*
4.1 Form of Trust Agreement, with form of Trust Certificates attached
thereto.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to legality.
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.
23.1 Consents of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).
25.1 Statement of eligibility of Trustee (The Chase Manhattan Bank).*
_________________
*Incorporated by reference from Registration Statement on Form S-3 (File
No. 333-70233 filed on January 7, 1999.
II-8
EXHIBIT 5.1
November 5, 1999
Prudential Securities Structured Assets, Inc.
One New York Plaza, 14th Floor
New York, New York 10292
Re: PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.
REGISTRATION STATEMENT ON FORM S-3
---------------------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
filed by Prudential Securities Structured Assets, Inc., a Delaware corporation
(the "Registrant"), with the Securities and Exchange Commission on the date
hereof (the "Registration Statement"), in connection with the registration under
the Securities Act of 1933, as amended (the "Act"), of certain trust
certificates (the "Certificates"). The Certificates are issuable in series
(each, a "Series"). Each Series of Certificates will be issued under a separate
Series Supplement to that certain Base Trust Agreement (together, the "Trust
Agreement") by and between the Registrant and a trustee named therein,
establishing an individual trust for such Series (each, a "Trust"). Each Series
of Certificates is to be sold as set forth in the Registration Statement, any
amendments thereto, and the prospectus and prospectus supplement relating to
such Series.
We have examined such instruments, documents and records as we deemed
relevant and necessary as a basis of our opinion hereinafter expressed. In such
examination, we have assumed the following: (a) the authenticity of original
documents and the genuineness of all signatures; (b) the conformity to the
originals of all documents submitted to us as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that when the Certificates
of each Series have been duly executed, authenticated and delivered in
accordance with the Trust Agreement and sold in the manner described in the
Registration Statement, any amendment thereto and the prospectus and prospectus
supplement relating thereto, the Certificates of such Series will be legally
issued, fully paid, binding and non-assessable obligations of the Trust created
by the Trust Agreement, and the holders of the Certificates of such Series will
be entitled to the benefits of the Trust Agreement except as enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to or
affecting the rights of creditors generally and general
<PAGE>
principles of equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing, and the possible unavailability of
specific performance or injunctive relief, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever appearing in the
Registration Statement and each prospectus contained therein. In giving such
consent, we do not consider that we are "experts," within the meaning of the
term as used in the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder, with respect to any part of the
Registration Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
--------------------------------------
ORRICK, HERRINGTON & SUTCLIFFE LLP
EXHIBIT 8.1
November 5, 1999
Prudential Securities Structured Assets, Inc.
One New York Plaza, 14th Floor
New York, New York 10292
Re: PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC.
REGISTRATION STATEMENT ON FORM S-3
---------------------------------------------
Ladies and Gentlemen:
We have advised Prudential Securities Structured Assets, Inc., a Delaware
corporation (the "Registrant"), in connection with the above captioned
registration statement on Form S-3 (the "Registration Statement") with respect
to certain federal income tax aspects of the issuance of trust certificates (the
"Certificates"). As described in the Registration Statement, the Certificates
will be issued from time to time in series (each, a "Series"), with each Series
being issued by an individual trust to be formed by the Registrant pursuant to a
separate Series Supplement to that certain Base Trust Agreement (together, the
"Trust Agreement") between the Registrant and a trustee named therein (the
"Trustee"). Capitalized terms not otherwise defined herein are used as defined
in the Registration Statement.
In that connection, we are generally familiar with the proceedings
required to be taken in connection with the proposed authorization, issuance and
sale of any Series of Certificates and we have examined copies of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for the purposes of this opinion, including the Registration
Statement and the exhibits to the Registration Statement. We have assumed that
each Series of Certificates is executed and delivered and has terms consistent
with those contemplated by the Registration Statement.
Based on the foregoing and assuming that the Trust Agreement with respect
to each Series of Certificates is executed and delivered in substantially the
form we have examined and that the transactions contemplated to occur under the
Registration Statement and the Trust Agreement in fact occur in accordance with
the terms thereof, we hereby confirm that we are of the opinion that: (i) while
the description of federal income tax consequences to holders of the
Certificates that appears under the heading "Federal Income Tax Consequences" in
the prospectus supplement (the "Prospectus Supplement") and the prospectus (the
"Prospectus") does not purport to discuss all possible income tax ramifications
of the proposed issuance, with
<PAGE>
respect to those tax consequences which are discussed, the description is
accurate in all material respects and (ii) each Trust will be a grantor trust or
partnership for federal income tax purposes and not an association taxable as a
corporation (or publicly traded partnership treated as an association).
This opinion is based on the facts and circumstances set forth in the
Prospectus Supplement and the Prospectus and in the other documents reviewed by
us. Our opinion as to the matters set forth herein could change with respect to
a particular Series of Certificates as a result of changes in facts and
circumstances, changes in the terms of documents reviewed by us, or changes in
the law subsequent to the date hereof. As the Registration Statement
contemplates Series of Certificates with numerous different characteristics, the
particular characteristics of each Series of Certificates must be considered in
determining the applicability of this opinion to a particular Series of
Certificates.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever appearing in the
Registration Statement and the Prospectus and Prospectus Supplement contained
therein. In giving such consent, we do not consider that we are "experts,"
within the meaning of the term as used in the Act or the rules and regulations
of the Commission issued thereunder, with respect to any part of the
Registration Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
--------------------------------------
ORRICK, HERRINGTON & SUTCLIFFE LLP
