<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-73438
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 15, 1995)
$12,550,000
CORPORATE BOND-BACKED CERTIFICATES, Series 1996-DHC-1
(UNDERLYING SECURITIES WILL BE 8.50% DEBENTURES DUE DECEMBER 1, 2022 ISSUED
BY DAYTON HUDSON CORPORATION)
PASS-THROUGH CERTIFICATES
Each Corporate Bond-Backed Certificate, Series 1996-DHC-1 offered hereby
(collectively, the "Certificates") represents a beneficial interest in a
trust (the "Trust") formed pursuant to the Trust Agreement dated as of
November 27, 1996 between Lehman ABS Corporation (the "Depositor") and The
Bank of New York, as trustee (the "Trustee"). The Certificates will be issued
in two classes, Class A-1 and Class A-2, having the characteristics described
herein.
The principal assets of the Trust will be $12,550,000 aggregate principal
amount of 8.50% Debentures due December 1, 2022 (the "Underlying Securities")
issued by Dayton Hudson Corporation (the "Underlying Securities Issuer"),
having the characteristics described herein under "Description of the
Underlying Securities."
Dayton Hudson Corporation is not participating in, and will not receive
any proceeds in connection with, the offering of the Certificates, and is not
an affiliate of the Depositor or any of its affiliates. The Underlying
Securities were originally issued and sold as part of a public offering in
December 1992, and will be acquired by an affiliate of the Depositor in the
secondary market before being deposited by the Depositor into the Trust for
the benefit of Certificateholders.
The Class A-1 Certificates will not be entitled to distributions of
interest. On December 1, 2002 (the "Final Scheduled Distribution Date"), the
Class A-1 Certificates will be entitled to a distribution of: (i) all
Underlying Securities held by the Trust as of such date and/or, if
applicable, (ii) the proceeds of a redemption of such Underlying Securities
by the Underlying Securities Issuer on such date. The Class A-2 Certificates
will be entitled to receive, on June 1 and December 1 of each year (or if
such date is not a Business Day (as defined herein), the next succeeding
Business Day) (each a "Distribution Date"), commencing December 2, 1996 and
ending on the Final Scheduled Distribution Date, interest distributions at a
rate of 8.50% per annum on the principal amount of the Underlying Securities
(the "Notional Amount") as interest is received on the Underlying Securities.
All distributions of Underlying Securities or redemption proceeds (in the
case of the Class A-1 Certificates) or interest (in the case of the Class A-2
Certificates) will be made on a pro rata basis to the holders of the
respective Certificate class. It is a condition to the issuance of the
Certificates that the Certificates have ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), equivalent to the ratings of the
Underlying Securities, which, as of the date of this Prospectus Supplement
were "Baa1" by Moody's and "BBB+" by S&P.
The Class A-1 Certificates have been authorized for listing, upon official
notice of issuance, with the New York Stock Exchange ("NYSE").
See "Risk Factors" herein on pages S-10 and 11, and in the Prospectus on
pages 4 and 5.
(Cover continued on next page)
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY OF ITS AFFILIATES. THE
CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL AGGREGATE
PRINCIPAL/NOTIONAL FINAL SCHEDULED
CLASS AMOUNT CERTIFICATE INTEREST RATE DISTRIBUTION DATE CUSIP NUMBER
- ----------- ------------------ ------------------------- ------------------- --------------
<S> <C> <C> <C> <C>
Class A-1 $12,550,000 0.00%(1) December 1, 2002(1) 219 87J AA9
Class A-2 $12,550,000(2) 8.50%(2) December 1, 2002 219 87J AB7
</TABLE>
- ------------
(1) The Class A-1 Certificates will not be entitled to distributions of
interest. On the Final Scheduled Distribution Date, the Class A-1
Certificates will be entitled to a distribution of: (i) all of the
Underlying Securities then held by the Trust and/or, if applicable,
(ii) the proceeds of a redemption of the Underlying Securities by the
Underlying Securities Issuer on such date.
(2) The Class A-2 Certificates will be entitled to receive, on June 1 and
December 1 of each year, commencing on December 2, 1996 and ending on
the Final Scheduled Distribution Date, interest distributions at a rate
of 8.50% per annum on the Notional Amount. The Class A-2 Certificates
will not be entitled to distribution of principal.
The Class A-1 and Class A-2 Certificates offered hereby will be purchased
by Lehman Brothers Inc. (the "Underwriter") from the Depositor and will be
offered by the Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The
aggregate proceeds to the Depositor from the sale of the Class A-1 and Class
A-2 Certificates will be approximately $13,757,100, before deducting expenses
payable by the Depositor, subject to the terms and conditions set forth in
the Underwriting Agreement referred to herein under "Method of Distribution."
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts
or commissions, see "Method of Distribution." The Certificates are offered
subject to receipt and acceptance by the Underwriter, to prior sale and to
the Underwriter's right to reject any order in whole or in part and to
withdraw, cancel or modify the offer without notice. It is expected that
delivery of the Certificates will be made in book-entry form through the
facilities of The Depository Trust Company on or about November 27, 1996 (the
"Closing Date").
LEHMAN BROTHERS
November 25, 1996
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee
with respect to the Underlying Securities will be distributed to
Certificateholders in the manner and priority described herein.
There is currently no secondary market for the Certificates, and there can
be no assurance that a secondary market for the Certificates will develop or,
if it does develop, that it will continue. See "Risk Factors" in the
Prospectus.
The Certificates initially will be represented by certificates registered
in the name of CEDE & Co., as nominee of The Depository Trust Company
("DTC"). The interests of beneficial owners of such Certificates will be
represented by book entries on the records of participating members of DTC
("Participants"). Definitive certificates will be available for such
Certificates only under the limited circumstances described herein. See
"Description of the Certificates -- Definitive Certificates."
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO
ITS PROSPECTUS DATED NOVEMBER 15, 1995, OF WHICH THIS PROSPECTUS SUPPLEMENT
IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS
CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED
HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER
CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN
THIS PROSPECTUS SUPPLEMENT.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY
The following summary of certain pertinent information does not purport to
be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the headings "Description of the Certificates" and "Description of the
Underlying Securities." Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement on the pages indicated in the "Index
of Defined Terms" or, to the extent not defined herein, have the meanings
assigned to such terms in the Prospectus.
THE CERTIFICATES
CERTIFICATES OFFERED ... The Corporate Bond-Backed Certificates,
Series 1996-DHC-1 (the "Certificates").
The Certificates will be offered in two
classes, Class A-1 and Class A-2, having
the characteristics described herein. Each
class of Certificates represents a
proportionate undivided beneficial
interest in certain distributions to be
made by the Trust, and will be issued
pursuant to the Trust Agreement. The
Underlying Securities will be the sole
asset of the Trust from which
Certificateholders will receive any
distributions.
THE TRUST .............. The Corporate Bond-Backed Certificates
Trust, Series 1996-DHC-1 (the "Trust").
The Trust will be formed pursuant to the
Series Supplement, Series 1996-DHC-1 (the
"Series Supplement"), which incorporates
the Standard Terms for Trust Agreements
(the "Standard Terms"; together with the
Series Supplement, the "Trust Agreement")
by and between the Depositor and the
Trustee.
DEPOSITOR .............. Lehman ABS Corporation (the "Depositor"), an
indirect wholly-owned subsidiary of Lehman
Brothers Inc., will deposit the Underlying
Securities into the Trust. See "The
Depositor" in the Prospectus.
TRUSTEE ................ The Bank of New York
CLOSING DATE ........... On or about November 27, 1996
INITIAL AGGREGATE
PRINCIPAL
BALANCE OF CLASS A-1
CERTIFICATES .......... $12,550,000
INITIAL AGGREGATE
NOTIONAL
AMOUNT OF CLASS A-2
CERTIFICATES .......... $12,550,000
FINAL SCHEDULED
DISTRIBUTION DATE ..... December 1, 2002
TRUST ASSETS ........... The principal assets of the Trust will be
$12,550,000 aggregate principal amount of
the 8.50% Debentures due December 1, 2022
(the "Underlying Securities") issued by
Dayton Hudson Corporation (the "Underlying
Securities Issuer"), having the
characteristics described herein.
S-3
<PAGE>
DISTRIBUTIONS
GENERAL ............... The Underlying Securities will be the sole
source of distributions on the
Certificates.
All distributions of Underlying Securities
or redemption proceeds (in the case of the
Class A-1 Certificates) or interest (in
the case of the Class A-2 Certificates)
will be made on a pro rata basis to the
holders of the respective Certificate
class.
__CLASS A-1
CERTIFICATES......... The Class A-1 Certificates will not be
entitled to distributions of interest. On
December 1, 2002, the Class A-1
Certificates will be entitled to a
distribution of: (i) all of the Underlying
Securities held by the Trust as of such
date and/or, if applicable, (ii) the
proceeds of a redemption of such
Underlying Securities by the Underlying
Securities Issuer on such date.
__CLASS A-2
CERTIFICATES......... The Class A-2 Certificates will not be
entitled to distributions of principal.
The Class A-2 Certificates will be
entitled to receive, on June 1 and
December 1 of each year (or if such date
is not a Business Day, the next succeeding
Business Day) (each, a "Distribution
Date"), commencing December 2, 1996 and
ending on the Final Scheduled Distribution
Date, interest distributions at a rate of
8.50% per annum on the principal amount of
the Underlying Securities held by the
Trust, as interest is received on the
Underlying Securities. Such interest will
be calculated on a 30/360 basis and will
accrue from and including the preceding
Distribution Date (or, in the case of the
first Interest Accrual Period, from and
including June 1, 1996) to but excluding
the current Distribution Date.
DISTRIBUTIONS ON THE
CERTIFICATES
IN THE EVENT OF A
DEFAULT ON THE
UNDERLYING SECURITIES . In the event of the occurrence of a payment
default on the Underlying Securities or an
acceleration of the maturity of the
Underlying Securities, the Trustee will
instruct the Market Agent (see "The Market
Agent Agreement" herein) to sell the
Underlying Securities in accordance with
the Sale Procedures (see "The Market Agent
Agreement -- Sale of the Underlying
Securities" herein). The proceeds of the
sale of the Underlying Securities will be
allocated between the Class A-1
Certificates and the Class A-2
Certificates in accordance with the
Allocation Ratio. As used herein,
"Allocation Ratio" means the ratio of (a)
in the case of the Class A-1 Certificates,
the sum of the present values (discounted
at the rate of 8% per annum) of (i) the
unpaid interest coupons due or to become
due on the Underlying Securities after the
Final Scheduled Distribution Date and (ii)
the principal amount 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) to (b) in the case
S-4
<PAGE>
of the Class A-2 Certificates, the present
value (discounted at the rate of 8% per
annum) of the unpaid interest coupons due
or to become due on the Underlying
Securities on or prior to the Final
Scheduled Distribution Date.
RECORD DATES ........... The day immediately preceding each
Distribution Date.
BUSINESS DAY ........... Any day other than (i) Saturday and Sunday
or (ii) a day on which banking
institutions in New York City or
Minneapolis, Minnesota are authorized or
obligated by law or executive order to be
closed for business.
DENOMINATIONS AND
SPECIFIED
CURRENCY .............. The Certificates will be denominated and
payable in U.S. dollars (the "Specified
Currency"). The Class A-1 Certificates
will be available for purchase in minimum
denominations of $1,000 and integral
multiples thereof. The Class A-2
Certificates will be issued in minimum
notional amounts of $1,000,000, and in
integral multiples of $1,000 in excess
thereof.
FORM OF SECURITY ....... Book-entry Certificates with The Depository
Trust Company ("DTC"), except in certain
limited circumstances. See "Description of
the Certificates -- Definitive
Certificates." Distributions thereon will
be settled in immediately available
(same-day) funds.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES ...... In the opinion of tax counsel to the Trust,
the Trust will be classified for Federal
income tax purposes as a grantor trust and
not as an association (or publicly traded
partnership) taxable as a corporation. The
Certificates represent a stripped bond for
federal income tax purposes and the Class
A-1 Certificates will be deemed to be
issued with original issue discount. See
"Certain Federal Income Tax Consequences."
RATINGS ................ It is a condition to the issuance of the
Certificates that the Certificates have
ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and by Standard
& Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P") equivalent to the
ratings of the Underlying Securities,
which, as of the date of this Prospectus
Supplement were "Baa1" by Moody's and
"BBB+" by S&P.
The rating of the Certificates by Moody's
addresses the likelihood of the ultimate
payment of principal and interest on the
Certificates or any Underlying Securities
distributed in respect thereof. The rating
of the Certificates by S&P addresses the
likelihood of timely receipt of interest
on the Class A-2 Certificates or any
Underlying Securities distributed in
respect of the Class A-1 Certificates and
ultimate receipt of principal on any
Underlying Securities distributed in
respect
S-5
<PAGE>
of the Class A-1 Certificates. There is no
assurance that any such rating will
continue for any period of time or that it
will not be revised or withdrawn entirely
by the related rating agency if, in its
judgment, circumstances (including,
without limitation, the rating of the
Underlying Securities) so warrant. A
revision or withdrawal of such rating may
have an adverse effect on the market price
of Certificates. A security rating is not
a recommendation to buy, sell or hold
securities. The rating on the Certificates
does not constitute a statement regarding
the occurrence or frequency of redemptions
on, or extensions of the maturity of, the
Underlying Securities, and the
corresponding effect on yield to
investors. See "Ratings."
ERISA CONSIDERATIONS ... An employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including an
individual retirement account (an "IRA")
or Keogh plan (a "Keogh") (each, a "Plan")
may purchase Certificates if either (i)
the Underwriter is able to confirm the
existence of at least 100 independent
purchasers or (ii) the Plan can represent
that its purchase of the Certificates
would not be prohibited under ERISA or the
Code. See "ERISA Considerations."
THE UNDERLYING SECURITIES
UNDERLYING SECURITIES .. $12,550,000 aggregate principal amount of
the 8.50% Debentures due December 1, 2022,
comprising a portion of a fixed rate,
publicly issued, unsecured debt security
issue of Dayton Hudson Corporation.
Interest on the Underlying Securities
accrues at the Underlying Securities Rate
for each Underlying Securities Accrual
Period and is payable on each Underlying
Securities Payment Date. The entire
principal amount of the Underlying
Securities will be payable on the
Underlying Securities Maturity Date. The
Underlying Securities are callable by the
Underlying Securities Issuer, in whole or
in part, on or after December 1, 2002.
UNDERLYING SECURITIES
ISSUER ................ Dayton Hudson Corporation is a Minnesota
corporation whose principal executive
offices are located at 777 Nicollet Mall,
Minneapolis, Minnesota 55402 and whose
telephone number is (612) 370-6948. See
"Description of the Underlying
Securities."
PRIORITY ............... According to the Prospectus relating to the
Underlying Securities, the Underlying
Securities are unsecured and
unsubordinated indebtedness of the
Underlying Securities Issuer.
SECURITY ............... None
UNDERLYING SECURITIES
ORIGINAL
ISSUE DATE ............ December 9, 1992
S-6
<PAGE>
ORIGINAL AMOUNT OF
UNDERLYING
SECURITIES ISSUED ..... $200,000,000
UNDERLYING SECURITIES
MATURITY DATE ......... December 1, 2022
AMORTIZATION ........... None
DENOMINATIONS AND
UNDERLYING
SECURITIES CURRENCY ... The Underlying Securities are denominated
and payable in U.S. dollars and are
available in minimum denominations of
$1,000 and integral multiples thereof.
UNDERLYING SECURITIES
INTEREST PAYMENT DATES
....................... June 1 and December 1
UNDERLYING SECURITIES
INTEREST RATE ......... 8.50% per annum
UNDERLYING SECURITIES
INTEREST
ACCRUAL PERIODS ....... Semi-annually
OPTIONAL REDEMPTION .... The Underlying Securities may be redeemed by
the Underlying Securities Issuer, in whole
or in part, on not less than 30 and not
more than 60 days written notice, at any
time on or after December 1, 2002 and
prior to maturity, at the following
redemption prices (expressed as a
percentage of the principal amount) plus
accrued interest to the redemption date:
If redeemed during the 12-month period
beginning December 1 of the years
indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
------ ----------------
<S> <C>
2002 . 103.750%
2003 . 103.375%
2004 . 103.000%
2005 . 102.625%
2006 . 102.250%
2007 . 101.875%
2008 . 101.500%
2009 . 101.125%
2010 . 100.750%
2011 . 100.375%
</TABLE>
and thereafter (beginning December 1, 2012)
at 100% of their principal amount.
FORM OF UNDERLYING
SECURITIES ............ Book-entry debt securities with DTC.
CUSIP NUMBER ........... 239753 BP 0
S-7
<PAGE>
UNDERLYING SECURITIES
RECORD DATES .......... 15th of the month immediately preceding the
month of Payment Date.
UNDERLYING SECURITIES
TRUSTEE ............... First Trust National Association (the
"Underlying Securities Trustee"). The
Underlying Securities have been issued
pursuant to an indenture dated as of
February 1, 1986 (the "Indenture"),
between the Underlying Securities Trustee
and the Underlying Securities Issuer.
RATINGS OF THE
UNDERLYING SECURITIES
AS OF THE CLOSING DATE
....................... "Baa1" by Moody's and "BBB+" by S&P.
INFORMATION WITH RESPECT
TO THE
UNDERLYING SECURITIES
ISSUER ................ Dayton Hudson Corporation is subject to the
informational requirements of the
Securities Exchange Act of 1934, as
amended, and in accordance therewith files
reports, including reports on Forms 10-K
and 10-Q, and other information with the
Securities and Exchange Commission (the
"SEC"). Such reports and other information
may be inspected and copied at the public
reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington,
D.C. 20549, and 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 W. Madison Street,
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 reports and other information
may also be inspected at the Information
Center of the New York Stock Exchange
Inc., 20 Broad Street, New York, New York
10005.
This Prospectus Supplement does not provide information with respect to
the Underlying Securities Issuer. No investigation of the Underlying
Securities Issuer (including, without limitation, no investigation as to its
financial condition or creditworthiness) or of the Underlying Securities
(including, without limitation, no investigation as to its rating) has been
made. Potential Certificateholders should obtain and evaluate the same
information concerning the Underlying Securities Issuer as it would obtain
and evaluate if it were investing directly in the Underlying Securities or in
other securities issued by the Underlying Securities Issuer. None of the
Depositor, the Trustee, the Underwriter, or any of their respective
affiliates, assume any responsibility for the accuracy or completeness of any
publicly available information of the Underlying Securities Issuer filed with
the Commission or otherwise made publicly available or considered by a
purchaser of the Certificates in making its investment decision in connection
therewith.
S-8
<PAGE>
RISK FACTORS
Prospective purchasers should consider, among other things, the following
factors (as well as the factors set forth under "Risk Factors" in the
Prospectus) in connection with an investment in the Certificates.
Limited Liquidity. There is currently no secondary market for the
Certificates. Lehman Brothers is under no obligation to make a market in the
Certificates. It is unlikely that a secondary market will develop and, if a
secondary market does develop, it is unlikely that it will provide
Certificateholders with liquidity of investment or will continue for the life
of the Certificates.
Maturity and Yield Considerations. The yield realized by a holder of a
Class A-1 Certificate is dependent upon a number of factors, including the
purchase price of the Class A-1 Certificates, the time of acquisition, and
whether on the Final Distribution Date, the Class A-1 Certificateholder
receives either (1) the Underlying Securities or (2) the proceeds from the
redemption of the Underlying Securities by the Underlying Securities Issuer.
If the Underlying Securities Issuer exercises its right to redeem Underlying
Securities prior to their maturity, an investor's investment in the Class A-1
Certificates and the Underlying Securities will have a shorter average
maturity than if such right were not exercised. Additionally, such right is
likely to be exercised, if at all, at a time when interest rates have
declined. In such an environment, the interest rates available on potential
reinvestment can be expected to be lower than the return that would have been
earned over the remaining life of the Underlying Securities if they had not
been called. See "Risk Factors" and "Maturity and Yield Considerations" in
the Prospectus.
Limited Assets. The Trust has no significant assets other than the
Underlying Securities. If the Underlying Securities are insufficient to make
payments or distributions on the Certificates, no other assets will be
available for payment of the deficiency.
No Management of Underlying Securities. Except as described herein, the
Trust will not dispose of any Underlying Security, regardless of adverse
events, financial or otherwise, which may affect the value of the Underlying
Security or the Underlying Securities Issuer. If there is a payment default
on any Underlying Security or any other default which may result in
acceleration of the Underlying Security, the Trust will only dispose of or
otherwise deal with the defaulted Underlying Security in the manner provided
in the Trust Agreement. If a payment default on or acceleration of the
Underlying Securities occurs, the Trust will sell the Underlying Securities
notwithstanding market conditions at the time, and the Trustee and the
Marketing Agent will have no discretion to do otherwise. Such sale may result
in greater losses than might occur if the Trust continued to hold the
Underlying Securities.
Credit Risk. The Certificates represent interests in obligations of a
single obligor. In particular, the Certificates will be subject to all the
risks associated with a direct investment in unsecured debt obligations of
Dayton Hudson Corporation.
No Investigation of Underlying Securities. None of the Depositor, the
Underwriter or the Trustee will (i) make any investigation of the business
condition, financial or otherwise, of the Underlying Securities Issuer, or
(ii) verify any reports or information filed by the Underlying Securities
Issuer with the Commission. Investors are encouraged to consider publicly
available financial and other information regarding Dayton Hudson
Corporation. The issuance of the Certificates should not be construed as an
endorsement by the Depositor, the Underwriter or the Trustee of the financial
condition or business prospects of Dayton Hudson Corporation.
Ratings of the Certificates. At the time of issuance, the Certificates
will have ratings assigned by Moody's and S&P equivalent to the ratings of
the Underlying Securities, which, as of the date of this Prospectus
Supplement were "Baa1" by Moody's and "BBB+" by S&P.
Any rating issued with respect to the Certificates is not a recommendation
to purchase, sell or hold a security inasmuch as such ratings do not comment
on the market price of the Certificates or their suitability for a particular
investor. There can be no assurance that the ratings will remain for any
given period of time or that the ratings will not be revised or withdrawn
entirely by the related rating agency if, in its judgment, circumstances
(including, without limitation, the rating of the Underlying Securities) so
warrant. A revision or withdrawal of such rating may have an adverse effect
on the market price of the Certificates.
S-9
<PAGE>
Unsecured Status of Underlying Securities. According to the Prospectus
relating to the Underlying Securities, the Underlying Securities are general
unsecured obligations of the Underlying Securities Issuer, which rank on a
parity with all other unsecured and unsubordinated indebtedness of the
Underlying Securities Issuer, but which are subordinate in right of payment
to the Underlying Securities Issuer's existing and future senior secured
indebtedness.
THE TRUST
The Trust will be formed pursuant to the Series Supplement, Series
1996-DHC-1 (the "Series Supplement"), which incorporates the Standard Terms
for Trust Agreements (the "Standard Terms"; together with the Series
Supplement, the "Trust Agreement") by and 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 Trustee, on behalf of the Trust, will accept such Underlying
Securities and will deliver the Certificates to or upon the order of the
Depositor.
The Underlying Securities will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor).
The Underlying Securities will not be acquired from the Underlying Securities
Issuer as part of any distribution by or pursuant to any agreement with the
Underlying Securities Issuer. The Underlying Securities Issuer is 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
Certificates. Neither the Depositor nor any of its affiliates participated in
the initial public offering of the Underlying Securities.
DESCRIPTION OF THE UNDERLYING SECURITIES
GENERAL
The Underlying Securities represent the sole assets of the Trust that are
available to make distributions in respect of the Certificates. The aggregate
principal amount of the Underlying Securities is $12,550,000. The primary
economic terms of the Underlying Securities are described in "Summary -- The
Underlying Securities" herein.
This Prospectus Supplement sets forth certain relevant terms with respect
to the Underlying Securities, but does not provide detailed information with
respect to the Underlying Securities or the Underlying Securities Issuer.
This Prospectus Supplement relates only to the Certificates offered hereby
and does not relate to the Underlying Securities. All disclosure contained
herein with respect to the Underlying Securities Issuer and Underlying
Securities is derived from publicly available documents.
The Underlying Securities Issuer is not participating in, and will not
receive any proceeds in connection with, the offering of the Certificates.
The Underlying Securities will be purchased by the Depositor in the secondary
market (either directly or through an affiliate of the Depositor) and will be
deposited into the Trust. The Underlying Securities will not be acquired
either from the Underlying Securities Issuer or pursuant to any distribution
by or agreement with the Underlying Securities Issuer.
According to Dayton Hudson Corporation's publicly available documents, its
principal executive offices are located at 777 Nicolett Mall, Minneapolis,
Minnesota 55402 and its telephone number is (612) 370-6948. The Underlying
Securities Issuer is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and other information may be inspected
and copied at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and 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 W. Madison Street, 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 reports and other information may also be inspected at the Information
Center of the New York Stock Exchange Inc., 20 Broad Street, New York, New
York 10005.
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Although the Depositor has no reason to believe the information
concerning the Underlying Securities, the Underlying Securities Issuer or
each Underlying Securities Prospectus related to the Underlying Securities is
not reliable, neither the Depositor nor the Underwriter has participated in
the preparation of such documents, or made any due diligence inquiry with
respect to the information provided therein. There can be no assurance that
events affecting the Underlying Securities or the Underlying Securities
Issuer have not occurred or have not yet been publicly disclosed which would
affect the accuracy or completeness of the publicly available documents
described above.
THE TRUST WILL HAVE NO OTHER SIGNIFICANT ASSETS FROM WHICH TO MAKE
DISTRIBUTIONS OF AMOUNTS DUE IN RESPECT OF THE CERTIFICATES. CONSEQUENTLY,
THE ABILITY OF CERTIFICATEHOLDERS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THE
CERTIFICATES WILL DEPEND ENTIRELY ON THE TRUST'S RECEIPT OF PAYMENTS ON THE
UNDERLYING SECURITIES. PROSPECTIVE PURCHASERS OF THE CERTIFICATES SHOULD
CONSIDER CAREFULLY THE UNDERLYING SECURITIES ISSUER'S FINANCIAL CONDITION AND
ITS ABILITY TO MAKE PAYMENTS IN RESPECT OF SUCH UNDERLYING SECURITIES. THIS
PROSPECTUS SUPPLEMENT RELATES ONLY TO THE CERTIFICATES BEING OFFERED HEREBY
AND DOES NOT RELATE TO THE UNDERLYING SECURITIES OR THE UNDERLYING SECURITIES
ISSUER. ALL INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT REGARDING THE
UNDERLYING SECURITIES ISSUER IS DERIVED FROM PUBLICLY AVAILABLE DOCUMENTS.
NONE OF THE DEPOSITOR, THE UNDERWRITER OR THE TRUSTEE PARTICIPATED IN THE
PREPARATION OF SUCH DOCUMENTS OR TAKES ANY RESPONSIBILITY FOR THE ACCURACY OR
COMPLETENESS OF THE INFORMATION PROVIDED THEREIN.
UNDERLYING SECURITIES INDENTURE
Dayton Hudson Corporation (the "Underlying Securities Issuer") from time
to time may offer its senior debt securities consisting of debentures, notes
and/or other unsecured evidences of indebtedness (the "Debt Securities") in a
principal amount and/or warrants to purchase Debt Securities.
The Underlying Securities have been issued pursuant to an agreement dated
as of February 1, 1986, as amended and supplemented from time to time
(collectively, the "Indenture"), between the Underlying Securities Issuer and
First Trust National Association, as Underlying Securities Trustee (the
"Underlying Securities Trustee"). The following summary describes certain
general terms of such Indenture and is based upon the Prospectus dated March
26, 1992 relating to Debt Securities, of which the Underlying Securities are
a series, of the Underlying Issuer, but investors should refer to the
Indenture and related Prospectus and Prospectus Supplements for all of the
terms governing the Underlying Securities. A copy of the Indenture is filed
as an exhibit to the Underlying Securities Registration Statement. The
following summaries of certain provisions of the Underlying Securities and
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definition therein of certain terms. Section numbers
below refer to provisions of the Indenture.
The Indenture does not limit the amount of debt securities that may be
issued thereunder from time to time in one or more series. The Underlying
Securities are limited to $200,000,000 aggregate principal amount and
represent one such series under the Indenture.
GENERAL
The Underlying Securities are unsecured obligations of the Underlying
Securities Issuer.
The covenants contained in the Indenture and the Underlying Securities
would not necessarily afford Holders of the Underlying Securities protection
in the event of a highly leveraged or other transaction involving the
Underlying Securities Issuer or a sudden and dramatic decline in credit
quality resulting from an acquisition of, or a recapitalization or similar
restructuring of, the Underlying Securities Issuer, that may adversely affect
Holders.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The various restrictive provisions of the Indenture applicable to the
Underlying Securities Issuer and its Restricted Subsidiaries do not apply to
Unrestricted Subsidiaries. The assets and indebtedness of Unrestricted
Subsidiaries are not consolidated with those of the Underlying Securities
Issuer and its
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Restricted Subsidiaries in calculating Consolidated Net Tangible Assets under
the Indenture and investments by the Underlying Securities Issuer or by its
Restricted Subsidiaries in Unrestricted Subsidiaries are excluded in
computing Consolidated Net Tangible Assets. "Unrestricted Subsidiaries" are
those Subsidiaries defined as such by the Indenture, i.e., Dayton Credit
Company and other finance Subsidiaries acquired or formed subsequent to the
date of the Indenture, Eighth Street Development Company, those Subsidiaries
which are designated as Unrestricted Subsidiaries by the Board of Directors
of the Underlying Securities Issuer from time to time pursuant to the
Indenture (in each case, unless and until designated as Restricted
Subsidiaries by the Board of Directors pursuant to the Indenture) and any
Subsidiary a majority of the voting stock of which is owned by Unrestricted
Subsidiaries. "Restricted Subsidiaries" are all Subsidiaries other than
Unrestricted Subsidiaries. A "Wholly-owned Restricted Subsidiary" is a
Restricted Subsidiary all of the outstanding Funded Debt and capital stock of
which (except directors' qualifying shares) is owned by the Underlying
Securities Issuer and its other Wholly-owned Restricted Subsidiaries.
(Section 101)
As Unrestricted Subsidiary may not be designated a Restricted Subsidiary
unless the Underlying Securities Issuer would be permitted immediately
thereafter to incur additional Secured Funded Debt and Attributable Debt
under the terms of the Indenture. (Section 1009(a))
RESTRICTIONS ON SECURED FUNDED DEBT
The Underlying Securities Issuer may not, and may not permit any
Restricted Subsidiary to, issue, assume, guarantee, incur or create any
Secured Funded Debt without first making effective provision whereby the
Underlying Securities shall be secured equally and ratably with (or prior to)
such Secured Funded Debt, unless immediately thereafter the sum of the
aggregate amount of all outstanding Secured Funded Debt of the Underlying
Securities Issuer and its Restricted Subsidiaries together with all
Attributable Debt of the Underlying Securities Issuer and its Restricted
Subsidiaries in respect of sale and leaseback transactions does not exceed 5%
of Consolidated Net Tangible Assets. The foregoing restrictions does not
prevent (i) Secured Funded Debt of a Restricted Subsidiary owing to the
Underlying Securities Issuer or a Wholly-owned Restricted Subsidiary, (ii)
Secured Funded Debt resulting from the Mortgage of property of the Underlying
Securities Issuer or any Restricted Subsidiary in favor of the United States
or any instrumentality thereof to secure partial, progress, advance or other
payments, (iii) Secured Funded Debt secured by a Mortgage on property of, or
on any shares of stock or Indebtedness of, any corporation existing at the
time such corporation becomes a Subsidiary, (iv) Secured Funded Debt assured
by a Mortgage on property, shares of stock or Indebtedness existing at or
incurred within 120 days of the time of acquisition thereof (including
acquisition through merger or consolidation), purchase money Mortgages and
construction Mortgages, (v) Secured Funded Debt secured by a Mortgage
incurred or assumed in connection with an issuance of revenue bonds the
interest on which is exempt from federal income tax pursuant to Section
103(a) and related Sections of the Internal Revenue Code of 1986, as amended,
or (vi) any extension, renewal or refunding, in whole or in part, of any
Secured Funded Debt permitted under the restrictions described in the first
sentence of this paragraph or of any Secured Funded Debt of any Restricted
Subsidiary outstanding at February 2, 1985 or of any corporation outstanding
at the time such corporation became a Restricted Subsidiary. (Section 1007)
"Secured Funded Debt" means Funded Debt which is secured by a Mortgage
upon any assets of the Underlying Securities Issuer or a Restricted
Subsidiary. (Section 101)
"Funded Debt" means Indebtedness maturing more than 12 months after the
time of computation thereof, guarantees of Funded Debt or of dividends of
others (except guarantees in connection with the sale or discount of accounts
receivable, trade acceptances and other paper arising in the ordinary course
of business) and Funded Debt secured by a Mortgage on property of the
Underlying Securities Issuer or any Restricted Subsidiary, whether or not
assessed, and in the case of any Subsidiary all Preferred Stock of such
Subsidiary. Funded Debt does not include any amount in respect of obligations
under leases (or guarantees thereof), whether or not such obligations would
be included as liabilities on a consolidated balance sheet of the Underlying
Securities Issuer and its Restricted Subsidiaries. (Section 101)
"Attributable Debt" means (i) the balance sheet liability amount of
capital leases (capital lease obligations and current portion thereof)
determined under generally accepted accounting principles, plus
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(ii) the amount of future minimum lease payments under operating leases
required to be disclosed by generally accepted accounting principles, less
any amounts required to be paid on account of maintenance and repairs,
insurance, taxes, assessments, water rates and similar charges, discounted at
the average interest rate per annum used to calculate the present value of
operating lease payments for the most recent year in the Underlying
Securities Issuer's most recent Annual Report to Shareholders. (Section 101)
"Consolidated Net Tangible Assets" means the total amount of assets on a
consolidated balance sheet of the Underlying Securities Issuer and its
Restricted Subsidiaries (less applicable reserves and other properly
deductible items and after excluding any investments made in Unrestricted
Subsidiaries or in corporations while they were Unrestricted Subsidiaries but
which are not Subsidiaries at the time of computation) after deducting (i)
all liabilities and liability items, including amounts in respect of
obligations under leases (or guarantees thereof) which under generally
accepted accounting principles would be included on such balance sheet,
except Funded Debt, capital stock and surplus, surplus reserves and
provisions for deferred income taxes and (ii) goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles. (Section 101)
RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS
Neither the Underlying Securities Issuer nor any Restricted Subsidiary may
enter into any sale and leaseback transaction involving any Operating
Property which has been or is to be sold or transferred more than 120 days
after the acquisition thereof or the completion of construction and
commencement of full operations thereof, unless (a) the Underlying Securities
Issuer or such Restricted Subsidiary could create Secured Funded Debt on such
property pursuant to Section 1007 (see "Restrictions on Secured Funded Debt"
above) in an amount equal to the Attributable Debt with respect to the sale
and leaseback transaction without equally and ratably securing the Underlying
Securities or (b) the Underlying Securities Issuer, within 120 days, applies
to the retirement of its Secured Funded Debt as amount equal to the greater
of (i) the net proceeds of the sale of an Operating Property leased pursuant
to such arrangement or (ii) the fair value of the Operating Property so
leased (subject to credits for certain voluntary retirements of Funded Debt).
This restriction will not apply to any sale and leaseback transaction (a)
between the Underlying Securities Issuer and a Restricted Subsidiary or
between Restricted Subsidiaries, or (b) involving the taking back of a lease
for a period of three years or less. (Section 1008) "Operating Property" is
defined as any retail store, warehouse or other property related to the
general retail business of the Underlying Securities Issuer or any
Subsidiary, parking facilities, and any equipment located at or comprising a
part of any such property having a net book value in excess of .35% of
Consolidated Net Tangible Assets (which has been owned and operated by the
Underlying Securities Issuer or any Restricted Subsidiary for more than 90
days). (Section 101)
RESTRICTIONS ON MERGER AND SALE OF ASSETS
The Underlying Securities Issuer may consolidate with or merge into any
other corporation, or transfer substantially, all its properties and assets
to any Person, and any other Person may consolidate with or merge into the
Underlying Securities Issuer, or transfer substantially all its properties
and assets to the Underlying Securities Issuer, provided that (i) the Person
(if other than the Underlying Securities Issuer) formed by or resulting from
any such consolidation or merger or which shall have received the transfer of
such property and assets shall assume payment of the principal of, premium,
if any, and interest on the Underlying Securities and the performance and
observance of the covenants of the Indenture, and (ii) except in the case of
a merger or consolidation of the Underlying Securities Issuer and a
Restricted Subsidiary, either (a) the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series (including
the holders of the Underlying Securities) shall have consented thereto or (b)
immediately thereafter under the terms of the Indenture the successor
corporation would be permitted to become liable for an additional amount of
Secured Funded Debt. (Section 801) Notwithstanding the provisions summarized
in this paragraph, the Underlying Securities Issuer may, without complying
with such provisions, sell all of its property and assets to another
corporation if, immediately after giving effect to such sale, such
corporation is a Wholly-owned Restricted Subsidiary of the
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Underlying Securities Issuer and the Underlying Securities Issuer would be
permitted to become liable for an additional amount of Secured Funded Debt.
(Section 803)
MODIFICATION AND WAIVER
Certain modifications and amendments of the Indenture may be made by the
Underlying Securities Issuer and the Underlying Securities Trustee only with
the consent of the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of each series (including the holders of the
Underlying Securities) affected by the modification or amendment. With
respect to the Underlying Securities, no such modification or amendment of
the Indenture may, without the consent of all holders of the outstanding
Underlying Securities: (i) change the stated maturity date of the principal
of, or any installment of principal of or interest on, any such Underlying
Security; (ii) reduce the principal amount of, or the interest (or premium,
if any) on, the Underlying Securities (including in the case of an Original
Issue Discount Security the amount payable upon acceleration of the Maturity
thereof); (iii) change the Place of Payment where, or the coin or currency in
which, any principal or interest (or premium, if any) on the Underlying
Securities is payable; (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to the Underlying Securities;
(v) reduce the above-stated percentage of Outstanding Debt Securities of any
series (including the Underlying Securities) the consent of the Holders of
which is necessary to modify or amend the Indenture; or (vi) modify the
foregoing requirements or reduce the percentage of aggregate principal amount
of Outstanding Debt Securities of any series necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults. (Section 902)
The Holders of a majority in aggregate principal amount of the outstanding
Underlying Securities may on behalf of the Holders of all Underlying
Securities waive compliance by the Underlying Securities Issuer with certain
restrictive provisions of the Indenture. (Section 1012) The Holders of a
majority in aggregate principal amount of the outstanding Underlying
Securities may on behalf of the Holders of all Underlying Securities waive
any past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Underlying Security or
in respect of a provision which under the Indenture cannot be modified or
amended without the consent of the Holder of each outstanding Underlying
Security. (Section 513)
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to the Underlying
Securities as being any one of the following events: (1) default for 30 days
in any payment of interest; (ii) default in any payment of principal of (or
premium, if any, on) when due; (iii) default for 60 days after appropriate
notice in performance of any other covenant or warranty in the Indenture
(other than a covenant or warranty included in the Indenture solely for the
benefit of any series of debt securities other than the Underlying
Securities); (iv) default under any evidence of Indebtedness for money
borrowed (including a default with respect to Debt Securities other than the
Underlying Securities) or under any Mortgage, indenture or instrument under
which any such Indebtedness is issued or secured (including the Indenture),
which results in acceleration of the maturity of such Indebtedness, if such
acceleration is not annulled (or if such Indebtedness is not discharged)
within 10 days after written notice as provided in the Indenture; (v) certain
events in bankruptcy, insolvency or reorganization; or (vi) any other Event
of Default provided with respect to the Underlying Securities. In case an
Event of Default shall occur and be continuing with respect to the Underlying
Securities, the Underlying Securities Trustee or the Holders of not less than
25% in aggregate principal amount of the outstanding Underlying Securities
may declare the principal to be due and payable. Any Event of Default with
respect to the Underlying Securities may be waived by the Holders of a
majority in aggregate principal amount of the outstanding Underlying
Securities, except in each case a failure to pay principal of (or premium, if
any) or interest on the Underlying Securities or in respect of a provision
which under the Indenture cannot be modified or amended without the consent
of the Holder of each outstanding Underlying Security. (Sections 501, 502,
513)
The Indenture requires the Underlying Securities Issuer to file annually
with the Underlying Securities Trustee an Officers' Certificate as to the
absence of certain defaults under the terms of the
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Indenture. (Section 1011) The Indenture provides that the Underlying
Securities Trustee may withhold notice to the Holders of the Underlying
Securities of any default (except in payment of principal (or premium, if
any) or interest) if it considers it in the interest of the Holders of the
Underlying Securities to do so. (Section 602)
Subject to the provisions of the Indenture relating to the duties of the
Underlying Securities Trustee in case an Event of Default shall occur and be
continuing, the Indenture provides that the Underlying Securities Trustee
shall be under no obligation to exercise any of its rights or powers under
the Indenture at the request, order or direction of the Holders of the
Underlying Securities unless such Holders shall have offered to the
Underlying Securities Trustee reasonable indemnity. (Sections 601, 603)
Subject to such provisions for indemnification and certain other rights of
the Underlying Securities Trustee, the Indenture provides that the Holders of
a majority in aggregate principal amount of the outstanding Underlying
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Underlying
Securities Trustee or exercising any trust or power conferred on the
Underlying Securities Trustee with respect to the Underlying Securities.
(Sections 512, 603)
No Holder of an Underlying Security has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Underlying Securities Trustee
written notice of a continuing Event of Default with respect to Underlying
Securities and unless also the Holders of at least 25% in aggregate principal
amount of the outstanding Underlying Securities shall have made written
request, and offered reasonable indemnity, to the Underlying Securities
Trustee to institute such proceeding as trustee, and the Underlying
Securities Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the outstanding Underlying Securities a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Section 507) However, the Holder of any
Underlying Security will have an absolute right to receive payment of the
principal of (and premium, if any) and interest on the Underlying Security on
or after the due dates expressed in the Underlying Security and to institute
suit for the enforcement of any such payment. (Section 508)
DEFEASANCE
Defeasance and Discharge. If the Underlying Securities Issuer deposits or
causes to be deposited with the Underlying Securities Trustee as trust funds,
in trust, of money and/or Government Obligations, as hereinafter defined,
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
and discharge the principal of (and premium, if any) and each instalment of
principal (and premium, if any) and interest on the outstanding Underlying
Securities on the Stated Maturity of such principal or instalment of
principal or interest (or on the Redemption Date of the outstanding
Underlying Securities if the Underlying Securities Issuer has elected to
redeem such outstanding Underlying Securities in accordance with Section 1102
of the Indenture), then the Indenture will cease to be of further effect with
respect to the Underlying Securities (except for certain obligations to
compensate, reimburse and indemnify the Underlying Securities Trustee, to
register the transfer or exchange of Underlying Securities, to replace
stolen, lost or mutilated Underlying Securities, to maintain paying agencies
and to hold monies or payment in trust), and the Underlying Securities Issuer
will be deemed to have satisfied and discharged the Indenture with respect to
the Underlying Securities. (Section 403) In the event of any such defeasance,
holders of Underlying Securities would be able to look only to such trust
fund for payment of principal (and premium, if any) and interest, if any on
their Underlying Securities. The term "Government Obligations" as used herein
shall mean securities of the government which issued the currency in which
the Underlying Securities of the Underlying Securities are denominated and/or
in which interest is payable or of government agencies backed by the full
faith and credit of such government. (Section 101)
Under current federal income tax law, such defeasance will be treated as a
taxable exchange of the related Underlying Securities for an interest in the
trust. As a consequence, each holder of the Underlying Securities will
recognize gain or loss equal to the difference between the holder's cost or
other tax basis for the Underlying Securities and the value of the holder's
interest in the trust, and thereafter will be
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required to include in income a share of the income, gain and loss of the
trust, including gain or loss recognized in connection with any substitution
of collateral, as described below. Prospective investors are urged to consult
their own tax advisors as to the specific consequences of such a defeasance.
Defeasance of Certain Covenants and Certain Events of Default. The
Underlying Securities Issuer may omit to comply with certain restrictive
covenants in Sections 801, 803 and 804 (Consolidation, Merger, Conveyance,
Transfer or Lease), and Sections 1005 (Maintenance of Properties), 1006
(Payments of Taxes and Other Claims), 1007 (Restriction on the Creation of
Secured Funded Debt), 1008 (Restriction on Sale and Lease-Back Transactions)
and 1009 (Restriction on Permitting Unrestricted Subsidiaries to become
Restricted Subsidiaries), and Sections 501(4), 501(5), 501(6), 501(7) and
501(8) (if Section 501(8) is specified in the Prospectus Supplement or
Prospectus Supplements relating to such Underlying Securities), as described
in clauses (iii) through (vi) under "Events of Default" above, and such
noncompliance shall not be deemed to be Events of Default under the Indenture
with respect to the Underlying Securities, upon the deposit with the
Underlying Securities Trustee, in trust, of money and/or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay and discharge the principal of (and premium, if any) and
each instalment of principal (and premium, if any) and interest on the
outstanding Underlying Securities on the Stated Maturity of such principal or
instalment of principal or interest (or on the Redemption Date of the
outstanding Underlying Securities if the Underlying Securities Issuer has
elected to redeem such outstanding Underlying Securities in accordance with
Section 1102 of the Indenture). The obligations of the Underlying Securities
Issuer under the Indenture and the Underlying Securities other than with
respect to the covenants referred to above and the Events of Default other
than the Events of Default referred to above shall remain in full force and
effect. (Section 1010)
In the event the Underlying Securities Issuer exercises its option to omit
compliance with certain covenants of the Indenture with respect to the
Underlying Securities as described above and the Underlying Securities are
declared due and payable because of the occurrence of any Event of Default
other than Events of Default described in clauses (iii) through (vi) under
"Events of Default" above, the amount of money and/or Government Obligations
on deposit with the Underlying Securities Trustee will be sufficient to pay
amounts due on the Underlying Securities of their Stated Maturity or
Redemption Date, but may not be sufficient to pay amounts due on such
Underlying Securities at the time of the acceleration resulting from such
Event of Default. However, the Underlying Securities Issuer shall remain
liable for such payments. (Section 1010)
Substitution of Collateral. The Underlying Securities Issuer will be
permitted at any time to withdraw any money or Government Obligations
deposited pursuant to the foregoing defeasance provisions, provided that the
Underlying Securities Issuer in substitution therefor simultaneously deposits
money and/or Government Obligations which would then be sufficient to satisfy
the Underlying Securities Issuer's payment obligations in respect of the
Securities in the manner contemplated by such defeasance provisions.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be denominated and distributions with respect
thereto will be payable in U.S. dollars (the "Specified Currency"). The Class
A-1 Certificates have in the aggregate an initial aggregate principal balance
of $12,550,000. The Class A-2 Certificates have in the aggregate an initial
aggregate notional amount of $12,550,000.
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC
and its Participants in minimum denominations of $1,000 and integral
multiples thereof in the case of the Class A-1 Certificates, and in minimum
notional amounts of $1,000,000 and integral multiples of $1,000 in excess
thereof, in the case of the Class A-2 Certificates. Each class of
Certificates will each initially be represented by one or more global
certificates registered
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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
& Co. ("CEDE"). No holder of any such 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 Certificateholders with respect to any such Certificates shall
refer to actions taken by DTC upon instructions from its Participants. See
"--Definitive Certificates" below and "Description of 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
Certificateholder under the Trust Agreement only at the direction of one or
more Participants to whose DTC account such Certificates are credited.
Additionally, DTC will take such actions with respect to specified Voting
Rights only at the direction and on behalf of Participants whose holdings of
such Certificates evidence such specified Voting Rights. DTC may take
conflicting actions with respect to Voting Rights, to the extent that
Participants whose holdings of Certificates evidence such Voting Rights,
authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Certificateholders 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 the Certificates 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 Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and receipt of
instructions for re-registration, the Trustee will reissue such Certificates
as Definitive Certificates issued in the respective principal amounts owned
by the individual owners of such Certificates, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as
Certificateholders under the Trust Agreement.
LISTING ON THE NEW YORK STOCK EXCHANGE
The Class A-1 Certificates have been authorized for listing, upon official
notice of issuance, with the NYSE. There can be no assurance that the
Certificates, once listed, will continue to be eligible for trading on the
NYSE.
COLLECTIONS AND DISTRIBUTIONS
Collections on the Underlying Securities that are received by the Trustee
for a given Collection Period pursuant to the collection procedures described
herein and in the Prospectus and deposited from time to time into the
Certificate Account 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:
(a) to the holders of the Class A-2 Certificates, interest distributions
at the rate of 8.50% per annum on the principal amount of the Underlying
Securities; and
(b) to the holders of the Class A-1 Certificates, on the Final Scheduled
Distribution Date only, a distribution of: (i) all Underlying Securities
held by the Trust as of such date and/or, if applicable, (ii) the proceeds
of a redemption of such Underlying Securities by the Underlying Security
Issuer on such date.
If the Trustee has not received payment on the Underlying Securities on or
prior to a Distribution Date, such distribution will be made upon receipt of
payment on the Underlying Securities. No additional amounts will accrue on
the Certificates or be owed to Certificateholders as a result of any such
delay; provided, however, that any additional interest owed and paid by the
Underlying Securities Issuer as a
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result of such delay shall be paid to the Class A-2 Certificateholder. In the
event of a payment default on the Underlying Securities, approved
Extraordinary Expenses (see "Description of the Trust Agreement -- The
Trustee" herein) of the Trustee may be reimbursed to the Trustee out of
Available Funds before any distributions to Certificateholders are made.
All amounts received on or with respect to the Underlying Securities,
which are not distributed to Certificateholders on the date of receipt, shall
be invested by the Trustee in Eligible Investments. Income on such
investments will not constitute property of the Trust and will not be
available to Certificate holders.
There can be no assurance that collections received from the Underlying
Securities over a specified period will be sufficient to make all required
distributions to the Certificateholders. To the extent Available Funds are
insufficient to make any such distributions due to any Class of Certificate,
any shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls. The
Depositor will pay the Ordinary Expenses of the Trustee.
For purposes hereof, the following terms have the following meanings:
"Available Funds" for any Distribution Date means the sum of all amounts
received on or with respect to the Underlying Securities during the
preceding Collection Period.
"Eligible Investments" means, with respect to the Certificates, those
investments consistent with the Trust's status as a grantor trust for
federal income tax purposes and acceptable to the Rating Agencies as being
consistent with the rating of such Certificates, as specified in the Trust
Agreement. Generally, Eligible Investments must be limited to obligations
or securities that mature not later than the business day prior to the
next succeeding Distribution Date.
EXCHANGE OF CERTIFICATES
On each Distribution Date, or the next succeeding Business Day if such
Distribution Date is not a Business Day, the Depositor or any affiliate of
the Depositor may, if its holds Class A-1 Certificates of a certain principal
amount and Class A-2 Certificates representing interest payments of a like
principal amount, notify the Trustee, not less than at least 30 (or such
shorter period acceptable to the Trustee) but not more than 45 days prior to
such Distribution Date, that it intends to tender such Certificates to the
Trustee on such Distribution Date; provided, that such distribution will not
be made if it would cause the Trustee or Depositor to fail to satisfy the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940. See "Optional Exchange" in the Prospectus. Upon such
tender, the Trustee will deliver Underlying Securities having a principal
amount equal to the principal amount of the Class A-1 Certificates being
tendered to such Certificateholder. The Trustee will only deliver such
Underlying Securities to the extent that it has received a tender of Class
A-2 Certificates representing all interest payments due through and including
December 1, 2002 on the principal amount of Underlying Securities represented
by any Class A-1 Certificates tendered.
DEFAULT ON UNDERLYING SECURITIES
In the event of the occurrence of a payment default on the Underlying
Securities or an acceleration of the maturity of the Underlying Securities,
the Trustee will instruct the Market Agent to sell the Underlying Securities
in accordance with the Sale Procedures (See "The Market Agent Agreement --
Sale of the Underlying Securities"). The proceeds of sale of the Underlying
Securities will be allocated between the Class A-1 Certificates and the Class
A-2 Certificates in accordance with the Allocation Ratio. As used herein,
"Allocation Ratio" means the ratio of (a) in the case of the Class A-1
Certificates, the sum of the present values (discounted at the rate of 8% per
annum) of (i) the unpaid interest coupons due or to become due on the
Underlying Securities after the Final Scheduled Distribution Date and (ii)
the principal amount 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) to (b) in the case of the Class A-2 Certificates, the
present value (discounted at the rate of 8% per annum) of the unpaid interest
coupons due or to become due on the Underlying Securities on or prior to the
Final Scheduled Distribution Date.
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THE DEPOSITOR
Lehman ABS Corporation (the "Depositor") was incorporated in the State of
Delaware on January 29, 1988. The Depositor is a wholly owned, special
purpose subsidiary of Lehman Commercial Paper Inc. ("LCPI"), which is itself
a wholly owned subsidiary of Lehman Brothers Inc. ("Lehman Brothers"), which
is a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
None of Lehman Brothers, LCPI, Holdings or the Depositor, nor any affiliate
of the foregoing, has guaranteed or is otherwise obligated with respect to
the Certificates.
The principal executive offices of the Depositor are located at Three
World Financial Center, New York, New York 10285 (Telephone: (212) 526-7000).
See "The Depositor" in the Prospectus.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The 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 Certificates containing a copy of the Trust
Agreement as executed will be filed by the Depositor with the Commission
following the issuance and sale of the Certificates. The Trust created under
the Trust Agreement (including the Series 1996-DHC-1 Supplement) will consist
of (i) the Underlying Securities and (ii) all payments on or collections in
respect of the Underlying Securities due after the Closing Date. 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 Certificates. The following summaries of certain provisions
of the Trust Agreement 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 discussions in the Prospectus under "Description of the Trust
Agreement -- Advances in Respect of Delinquencies", "--Certain Matters
Regarding the Administrative Agent and the Depositor" (to the extent the
discussion relates to the Administrative Agent), "--Administrative Agent
Termination Events; Rights Upon Administrative Agent Termination Event", and
"--Evidence as to Compliance" are not applicable to the Certificates.
THE TRUSTEE
The Bank of New York, a New York banking corporation, will act as trustee
(the "Trustee") for the Certificates and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at 101 Barclay Street, New York,
New York 10286 and its telephone number is (212) 815-5098.
Pursuant to the Trust Agreement, the Trustee shall receive compensation
for Ordinary Expenses, payable by the Depositor.
"Ordinary Expenses" are defined in the Trust Agreement and are generally
described as the Trustee's customary fee for its services as Trustee,
including (i) the costs and expenses of preparing, sending and receiving all
reports, statements, notices, returns, filings, solicitation of consent or
instructions, or other communications required by the Trust Agreement, (ii)
the costs and expenses of holding and making ordinary collection or payments
on the assets of the Trust and of determining and making payments of interest
or principal, (iii) the costs and expenses of the Trust's or Trustee's
counsel, accountants and other experts for ordinary or routine consultation
or advice in connection with the establishment, administration and
termination of the Trust, and (iv) any other costs and expenses that are or
reasonably should have been expected to be incurred in the ordinary course of
administration of the Trust.
"Extraordinary Expenses" are defined in the Trust Agreement as any and all
costs, expenses or liabilities arising out of the establishment, existence or
administration of the Trust, other than (i) Ordinary Expenses and (ii) costs
and expenses payable by a particular Certificateholder, the Trustee or the
Depositor pursuant to the Trust Agreement.
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The Trust Agreement provides that the Trustee may not take any action
which, in the Trustee's opinion, would or might cause it to incur
Extraordinary Expenses, unless (i) the Trustee is satisfied that it will have
adequate security or indemnity in respect of such costs, expenses and
liabilities and (ii) the Trustee has been instructed to do so by
Certificateholders representing not less than 100% of the aggregate voting
rights of each class of Certificates then outstanding; provided, however,
that for purposes of clause (ii) of this sentence, in the event of a payment
default on the Underlying Securities, a vote of not less than 66 2/3% of the
aggregate voting rights of each class, voting separately, of Certificates
then outstanding shall suffice to instruct the Trustee to incur such
Extraordinary Expenses. Extraordinary Expenses so incurred may be reimbursed
to the Trustee out of Available Funds on any Distribution Date before any
distributions to Certificateholders on such Distribution Date are made,
unless the Certificateholders voting to incur such Extraordinary Expenses
shall have agreed to bear the entire amount of such Extraordinary Expenses.
EVENTS OF DEFAULT
An event of default with respect to the Certificates under the Trust
Agreement (an "Event of Default") will consist of (i) a default in the
payment of any interest on any Underlying Security after the same becomes due
and payable (subject to any applicable grace period); (ii) a default in the
payment of the principal of or any installment of principal of any Underlying
Security when the same becomes due and payable; and (iii) the occurrence and
continuance of such other events specified in the applicable Series
Supplement.
The Trust Agreement will provide that, within 30 days after the occurrence
of an Event of Default in respect of the Certificates, the Trustee will give
notice to the Certificateholders, transmitted by mail, of all such uncured or
unwaived Events of Default known to it. However, except in the case of an
Event of Default relating to the payment of principal of or interest on any
of the Underlying Securities, the Trustee will be protected in withholding
such notice if in good faith it determines that the withholding of such
notice is in the interest of the Certificateholders.
No Certificateholder will have the right to institute any proceeding with
respect to the Trust Agreement, unless (i) such Certificateholder previously
has given to the Trustee written notice of a continuing breach, (ii)
Certificateholders evidencing not less than the Required Percentage-Remedies
of the aggregate Voting Rights have requested in writing that the Trustee
institute such proceeding in its own name as Trustee, (iii) such
Certificateholder or Certificateholders have offered the Trustee reasonable
indemnity, (iv) the Trustee has for 15 days failed to institute such
proceeding and (v) no direction inconsistent with such written request has
been given to the Trustee during such 15-day period by Certificateholders
evidencing not less than the Required Percentage-Remedies of the aggregate
Voting Rights. "Required Percentage-Remedies" shall mean 66 2/3% of each
class of Certificates.
VOTING RIGHTS
At all times, 100% of all Voting Rights will be allocated among the Class
A-1 Certificateholders, in proportion to the then Outstanding principal
balances of their respective Certificates. The "Required
Percentage-Amendment" of Voting Rights of those Class A-1 Certificates that
are materially adversely affected by any modification or amendment of the
Trust Agreement necessary to consent to such modification or amendment shall
be 66 2/3%. In addition to the other restrictions on modification and
amendment, the Trustee will not enter into any amendment or modification of
the Trust Agreement which would adversely affect in any material respect the
interests of the holders of the Class A-2 Certificates without the consent of
the holders of 100% of the Class A-2 Certificates; provided, however, that no
such amendment or modification will be permitted which would alter the status
of the Trust as a grantor trust for Federal Income tax purposes. See
"Description of the Trust Agreement -- Modification and Waiver" in the
Prospectus. Further, no amendment to the Class A-2 Certificates will be
permitted which would adversely affect in any material respect the interests
of the Certificateholders without the consent of Certificateholders
representing 100% of the aggregate Voting Rights of those Certificates that
are materially adversely affected by such modification or amendment and
without confirmation by each Rating Agency that such amendment will not
result in a downgrading or withdrawal of its rating of such Certificates.
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VOTING OF UNDERLYING SECURITIES, MODIFICATION OF INDENTURE
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 DTC and except as otherwise limited by the Trust Agreement. In
the event that the Trustee receives a request from DTC, the Underlying
Securities Trustee or the Underlying Securities Issuer for its consent to any
amendment, modification or waiver of the Underlying Securities, the Indenture
or any other document thereunder or relating thereto, or receives any other
solicitation for any action with respect to the Underlying Securities, the
Trustee shall mail a notice of such proposed amendment, modification, waiver
or solicitation to each Class A-1 Certificateholder of record as of such
date. The Trustee shall request instructions from the Class A-1
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 outstanding principal balances of the Class A-1 Certificates) as
the Class A-1 Certificates of the Trust were actually voted or not voted by
the Certificateholders thereof as of a date determined by the Trustee prior
to the date on which such consent or vote is required; 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 as a grantor
trust for Federal income tax purposes, (ii) which would alter the timing or
amount of any payment on the Underlying Securities, including, without
limitation, any demand to accelerate the Underlying Securities, except in the
event of an Underlying Security Event of Default or an event which with the
passage of time would become a Underlying Security Event of Default and with
the unanimous consent of all outstanding Class A-1 and Class A-2
Certificateholders, 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 except in
the event of a default under the Indenture and only with the consent of
Certificateholders representing 100% of the aggregate voting rights of the
outstanding Class A-1 and Class A-2 Certificates. The Trustee shall have no
liability for any failure to act resulting from Certificateholders' late
return of, or failure to return, directions requested by the Trustee from the
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
outstanding Underlying Securities or any other offer is made for the
Underlying Securities, the Trustee shall notify the Class A-1 and Class A-2
Certificateholders of such offer as promptly as practicable. The Trustee must
reject any such offer unless the Trustee is directed by the affirmative vote
of all of the holders of the Class A-1 and Class A-2 Certificates to accept
such offer and the Trustee has received the tax opinion described above.
If an event of default under the Indenture occurs and is continuing and if
directed by all of the outstanding Class A-1 and Class A-2
Certificateholders, the Trustee shall vote the Underlying Securities in favor
of directing, or take such other action as may be appropriate to direct, the
Underlying Securities Trustee 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
Certificateholders may differ from each other and from those of other holders
of outstanding Underlying Securities.
TERMINATION OF THE TRUST
The Trust shall terminate upon the earliest to occur of the payment in
full at maturity or sale by the Trust after a payment default on or an
acceleration of the Underlying Securities and the distribution in full of all
amounts due to the Class A-1 and Class A-2 Certificateholders. See
"Description of the Trust Agreement -- Termination" in the Prospectus. In
addition, under certain circumstances, the Trust will terminate upon the
bankruptcy of the Depositor. In the event of such termination, the Trustee
will instruct the Marketing Agent to sell the Underlying Securities in the
same manner as would apply in the event of a payment default on those
securities, unless certain Treasury regulations are adopted which shall cause
such procedure to be no longer necessary to maintain the tax status of the
Trust.
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THE MARKET AGENT AGREEMENT
MARKET AGENT
Pursuant to the Market Agent Agreement, dated as of the Closing Date
between Lehman Brothers Inc., solely in its capacity as Market Agent, and the
Trust (the "Market Agent Agreement"), the Market Agent shall: (a) act on
behalf of the Trust in connection with the sale of the Underlying Securities
after a payment default on or an acceleration of the Underlying Securities as
provided in the Trust Agreement; and (b) perform its other duties and comply
with the provisions set forth in the Market Agent Agreement.
The Market Agent Agreement provides that the Market Agent has no liability
for any act or omission except as results from the Market Agent's negligence
or willful misconduct. The Market Agent may assign any and all of its duties,
obligations and rights as Market Agent to any organization controlled by or
under common control with Lehman Brothers Inc. The Market Agent may at any
time resign and be discharged of the duties and obligations created by the
Market Agent Agreement by providing at least 30 days notice to the Trustee.
SALE OF THE UNDERLYING SECURITIES
Upon receiving notice of a payment default on or an acceleration of the
Underlying Securities, the Trustee will immediately direct the Market Agent
to sell the Underlying Securities in compliance with the Sale Procedures. The
settlement of the liquidation of the Underlying Securities will occur as soon
as practicable after the date of receipt of such notice by the Trustee, and
the liquidation proceeds will be deposited into the Certificate Account
maintained by the Trustee. Deliveries of the Underlying Securities by the
Trust to the Purchaser of such Underlying Securities will only be made
against payment in same day funds.
"Sale Procedures" means, in connection with any sale of some or all of the
Underlying Securities, the sale of such Underlying Securities to the highest
of not less than three solicited bidders for such Underlying Securities
(which bidders may include Lehman Brothers Inc. or any of its affiliates;
provided, however, that neither Lehman Brothers Inc. nor any of its
affiliates are obligated to bid, and that such bidders need not be limited to
recognized broker dealers). In the sole judgment of the Market Agent, bids
may be evaluated on the basis of bids for all or a portion of the Underlying
Securities being sold or any other basis selected in good faith by the Market
Agent. No assurance can be given as to whether the Market Agent will be
successful in soliciting bids to purchase the Underlying Securities. The
Market Agent shall, prior to any sale of Underlying Securities to Lehman
Brothers, Inc. or any of its affiliates, certify in writing to the Trustee
that any such purchaser submitted the highest of at least three bids and
shall identify the other bidders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of certain of the material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates.
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"), and who do not hold
their Certificates as part of a "straddle," a "hedge" or a "conversion
transaction." Furthermore, no authority exists concerning the tax treatment
of some aspects of the Certificates, and there can be no assurance that the
Treasury Department will not issue regulations under Section 1286 of the Code
which would modify the treatment described below. Accordingly, the ultimate
Federal income tax treatment of the Certificates may differ substantially
from that described below. Investors should consult their own tax advisors to
determine the Federal, state, local and other tax consequences of the
purchase, ownership and disposition of the Certificates.
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The Trust will be provided with an opinion of Weil, Gotshal & Manges LLP
(a limited liability partnership including professional corporations),
special Federal tax counsel to the Depositor ("Federal Tax Counsel"),
regarding certain Federal income tax matters discussed below. An opinion of
Federal Tax Counsel, however, is not binding on the Internal Revenue Service
(the "Service") or the courts. Prospective investors should note that no
rulings have been or will be sought from the Service with respect to any of
the Federal income tax consequences discussed below, and no assurance can be
given that the Service will not take contrary positions.
THE TAX DISCUSSION CONTAINED HEREIN ASSUMES THAT THE AGGREGATE DEEMED
PURCHASE PRICE OF THE CERTIFICATES (AS DESCRIBED HEREIN) WILL AT LEAST EQUAL
THE STATED PRINCIPAL AMOUNT OF THE UNDERLYING SECURITIES.
TAX STATUS OF TRUST
In the opinion of Federal Tax Counsel, the Trust will be classified as a
grantor trust and not as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes. Accordingly, each
owner of a Certificate (a "Certificateholder") will be subject to Federal
income taxation as if it owned directly the portion of the Underlying
Securities allocable to such Certificates and as if it paid directly its
share of reasonable expenses paid by the Trust.
INCOME OF CERTIFICATEHOLDERS
In General. Under Code Section 1286, on the date a Certificate is
purchased, the security backing the Certificate will be treated as newly
issued. With respect to the Class A-1 Certificate, such newly-issued
Underlying Security will be issued with original issue discount ("OID") equal
to the difference between (i) its stated redemption price at maturity
(generally all payments made with respect to the Underlying Securities to the
Class A-1 Certificate) and (ii) the Certificate's purchase price (less
accrued interest, if any, on the Underlying Security on the Closing Date to
which the Class A-1 Certificateholder may be entitled). Each Class A-1
Certificateholder, regardless of its normal method of accounting, will accrue
income, prior to the receipt of cash, in respect of its interest in the
Underlying Securities under the rules relating to original issue discount
under a method described below that takes account of the compounding of
interest, based on the particular Certificateholder's expected yield to
maturity.
The proper Federal income tax treatment of the Class A-2 Certificate is
unclear. The Trust intends to take the position that the Class A-2
Certificates represent interests in a newly-issued self amortizing debt
obligation maturing on the Final Scheduled Distribution Date. Payments on the
Certificates made on each Distribution Date will partially represent a return
of principal and partially represent interest on the principal amount of such
instrument. Certificateholders under the cash method of accounting would
include in income upon receipt that portion of the payment representing
interest calculated based upon the Certificate's yield to maturity. The
Service, however, could take the position that the Class A-2 Certificate
represents an interest in twelve separate newly-issued debt instruments, each
consisting of an interest payment stripped from the Underlying Securities and
maturing on its respective Distribution Date. Were the Service to take this
position, the debt instruments represented by the Class A-2 Certificates
would be issued with OID and the holders would be required to accrue income
based upon constant yield method without respect to the receipt of cash.
Class A-2 Certificateholders are urged to seek advice of their own tax
counsel regarding the effect on them of the purchase of Certificates.
OID. A holder of a Class A-1 Certificate (or of the Underlying Securities
after the Final Scheduled Maturity Date or redemption of the Certificates),
whether using the cash or accrual method of accounting, generally will be
required to include OID in income in advance of the receipt of some or all of
the related cash payments. The amount of OID includable in income by such
holder is the sum of the "daily portions" of OID with respect to each day
during the taxable year or portion of the taxable year in which such holder
held such obligation ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to the accrual period. Under the Treasury Regulations, the "accrual
period" for each obligation may be of any length and may vary in length over
the term of the obligation, provided that each accrual period is no longer
than one year and each
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scheduled payment occurs on either the first or last day of an accrual
period. The amount of OID allocable to any accrual period is an amount equal
to the product of each obligation's adjusted issue price at the beginning of
such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period). If all accrual periods are of equal length
except for either an initial short period or an initial and final short
period, the amount of OID allocable to the initial short accrual period may
be computed under any reasonable method. The "adjusted issue price" of an
interest in an Underlying Security at the start of any accrual period is
equal to its purchase price (generally, the purchase price of the
Certificate, less any purchased accrued interest) increased by the accrued
OID for each prior accrual period and reduced by the amount of any cash
payments.
Because the purchase of a Certificate would be treated as the original
issuance on the purchase date of an obligation to make the distributions of
the amounts collected on the Underlying Securities, such purchase should not
result in acquisition premium, bond premium or market discount.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the
Underlying Securities, or a substitution of other assets for the Underlying
Securities following a default on the Underlying Securities, would be a
taxable event to Certificateholders on which they would recognize gain or
loss.
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Class A-2
Certificateholder will be entitled to deduct, consistent with its method of
accounting, its share of reasonable administrative fees, trustee fees and
other fees paid or incurred by the Trust as provided in Section 162 or 212 of
the Code and any allowable amortization deductions with respect to certain
other assets of the Trust. If a Class A-2 Certificateholder is an individual,
estate or trust, the deduction for his share of fees will be a miscellaneous
itemized deduction that may be disallowed in whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
A Certificateholder's tax basis in a Certificate generally will equal the
cost of such Certificate (A) increased by the any amounts of OID and (B)
reduced by any payments other than of qualified stated interest on the
Underlying Securities made on such Certificate.
If a Certificate or Underlying Security is sold, gain or loss will be
recognized equal to the difference between the proceeds of sale allocable to
the Certificateholder and the Certificateholder's adjusted basis in its
Certificate or its portion thereof representing its interest in the
foregoing. Any gain or loss will be a capital gain or loss if the Certificate
was held as a capital asset.
DISTRIBUTIONS ON CLASS A-1 CERTIFICATES
The distribution of the Underlying Securities to the Class A-1
Certificateholders on the Final Scheduled Distribution Date should not
constitute a taxable transaction to the recipients. Similarly, a redemption
by the Trust of Certificates in exchange for the Underlying Securities upon
the tender by a Certificateholder of Class A-1 Certificates of a certain
principal amount and Class A-2 Certificates representing interest payments on
a like principal amount should not constitute a taxable transaction to the
Certificateholder.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless,
in general, the Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CERTIFICATEHOLDERS
To the extent that amounts paid to Certificateholder that are not United
States persons ("Foreign Certificateholders") are treated as interest with
respect to Underlying Securities originated after July 18,
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1984, such amounts generally will not be subject to the annual 30%
withholding tax, provided that such Foreign Certificateholder fulfills
certain certification requirements. Under such requirements, the holder must
certify, under penalties of perjury, that it is not a "United States person"
and provide its name and address.
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or any political subdivision thereof, or an estate or trust
the income of which is includable in gross income for U.S. Federal income tax
purposes, regardless of its source.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and 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)(i)
of the Code or (c) any entity whose underlying assets include plan assets by
reason of any such plan's investment in the entity (each, a "Plan").
In accordance with ERISA's general fiduciary standards, before investing
in a Certificate, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments and appropriate
for the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and the Code
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan ("parties in interest"
within the meaning of ERISA or "disqualified persons" within the meaning of
the Code). Thus, a Plan fiduciary considering an investment in Certificates
should also consider whether such an investment might constitute or give rise
to a non-exempt prohibited transaction under ERISA or the Code.
Under a "look-through rule" set forth in Section 2510.3-101 of the United
States Department of Labor ("DOL") regulations (the "Regulation"), a Plan's
assets may include an interest in the underlying assets of an entity (such as
a trust) for certain purposes under ERISA if the Plan acquires an equity
interest in such entity. Thus, unless an exception to the look-through rule
applies, an investment in Certificates by a Plan might result in the assets
of the Trust being deemed to constitute Plan assets, which in turn might mean
that certain aspects of such investment, including the operation of the
Trust, might be subject to the prohibited transaction provisions under ERISA
and the Code.
If the assets of the Trust were deemed to be Plan assets, transactions
involving the Depositor, Underwriter, Trustee, Market Agent, Underlying
Securities Trustee and Dayton Hudson Corporation might constitute prohibited
transactions with respect to a Plan holding a Certificate unless (i) one or
more prohibited transaction exemptions ("PTEs") applies or (ii) in the case
of Dayton Hudson Corporation, it is not a disqualified person or party in
interest with respect to such Plan. Plans maintained or contributed to by the
Depositor, Underwriter, Trustee, Market Agent, Underlying Securities Trustee
and Dayton Hudson Corporation, or any of their affiliates ("Excluded Plans"),
should not acquire or hold any Certificate.
If the Trust is deemed to hold Plan assets, the Underlying Securities
would appear to be an indirect loan between Dayton Hudson Corporation and any
Plan owning Certificates; however, such loan, by itself, would not constitute
a prohibited transaction unless Dayton Hudson Corporation is a party in
interest or disqualified person with respect to such Plan.
The Underwriter is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and customarily purchases and sells
securities for its own account in the ordinary course of its business as a
broker-dealer. Accordingly, the sale of Certificates by the Underwriter to
Plans may be exempt under PTE 75-1 if the following conditions are satisfied:
(i) the Underwriter is not a fiduciary with respect to the Plan and is a
party in interest or disqualified person solely by reason of Section 3(14)(B)
of ERISA or Section 4975(e)(2)(B) of the Code or a relationship to a person
described in such Sections, (ii) the transaction is at least as favorable to
the Plan as an arm's-length transaction with an unrelated party and is not a
prohibited transaction within the meaning of Section 503(b) of the Code, and
(iii) the Plan maintains for at least six years such records as are necessary
to determine whether the conditions of PTE 75-1 have been met.
S-25
<PAGE>
The custodial and other services rendered by the Trustee, Market Agent
and Underlying Securities Trustee might be exempt pursuant to Section
408(b)(2) of ERISA and Section 4975(d)(2) of the Code, which exempt services
necessary for the establishment or operation of a Plan under a reasonable
contract or arrangement and for which no more than reasonable compensation is
paid. An arrangement would not be treated as reasonable unless it can be
terminated upon reasonably short notice under the circumstances without
penalty. The Trustee and the Market Agent may each be terminated upon 60 days
prior notice and the approval of Certificate holders owning more than 66 2/3%
of the aggregate beneficial interest of Certificates. The Depositor believes
the compensation of the Trustee and Market Agent is reasonable under the
circumstances. The statutory exemption for services noted above does not
provide exemptive relief from prohibited transactions described in Section
406(b) of ERISA or Section 4975(c)(1)(E) or (F) of the Code. In that regard,
a fiduciary with respect to a Plan should consider whether a sale of the
Underlying Securities by the Market Agent to Lehman Brothers Inc. or its
affiliates might constitute a non-exempt prohibited transaction by reason of
the relationship between the Market Agent and any such purchaser,
notwithstanding the sale procedure to accept the highest bid submitted and
the certification of the highest bid and identity of bidders to the Trustee,
or the possibility that the Market Agent may not solicit Lehman Brothers Inc.
and its affiliates to avoid the possibility of a non-exempt prohibited
transaction. The Market Agent shall, prior to any sale of Underlying
Securities to Lehman Brothers Inc. or any of its affiliates, certify in
writing to the Trustee that any such purchaser submitted the highest of at
least three bids and shall identify the other bidders.
Other prohibited transaction exemptions could apply to the acquisition and
holding of Certificates by Plans, and the operation of the Trust, including,
but not limited to: PTE 84-14 (an exemption for certain transaction
determined by an independent qualified professional asset manager), PTE 91-38
(an exemption for certain transactions involving bank collective investment
funds), PTE 90-1 (an exemption for certain transactions involving insurance
company pooled separate accounts) or PTE 95-60 (an exemption for certain
transactions involving insurance company general accounts).
The look-through rule does not apply to a publicly offered security (as
defined in the Regulation), which includes a security that is (1) freely
transferable, (2) 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 (3) 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 Commission)
after the end of the fiscal year of the issuer during which the offering of
such securities to the public occurred. The Depositor believes the
Certificates satisfy the first and third conditions in this paragraph above.
The Underwriter will confirm to the Trustee at the conclusion of the offering
if Certificates were sold to at least 100 persons who are unrelated to the
Underwriter, Depositor and Trustee.
By acquiring and holding a Certificate, a Plan shall be deemed to have
represented and warranted to the Depositor, Trustee, Market Agent and
Underwriter that such acquisition and holding of a Certificate does not
involve a non-exempt prohibited transaction with respect to such Plan,
including with respect to the activities of the Trust.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of November 27, 1996 (the "Underwriting Agreement"), the
Depositor has agreed to sell to Lehman Brothers Inc., (an affiliate of the
Depositor) (the "Underwriter"), and the Underwriter has agreed to purchase,
the Certificates.
The Depositor has been advised by the Underwriter that the Underwriter
proposes to offer the Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter may effect such transactions by selling Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter and
any purchasers of Certificates for whom they may act as agents.
S-26
<PAGE>
The Underwriter and any dealers that participate with the Underwriter in the
distribution of Certificates may be deemed to be underwriters, and any profit
on the resale of Certificates by them may be deemed to be underwriting
discounts, or commissions under the Securities Act. Discounts and concessions
to dealers will vary but will not exceed 2.5% of the face amount of the
Certificates.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter against certain civil liabilities, including liabilities under
the Securities Act, or will contribute to payments the Underwriter may be
required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and the Underwriter by Weil, Gotshal & Manges LLP, New York,
New York.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates have ratings assigned by Moody's Investors Service, Inc.
("Moody's") and by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P") equivalent to the ratings of the Underlying
Securities, which, as of the date of this Prospectus Supplement were "Baa1"
by Moody's and "BBB+" by S&P.
The rating of the Certificates by Moody's addresses the likelihood of the
ultimate payment of principal of and interest on the Certificates or any
Underlying Securities distributed in respect thereof. The rating of the
Certificates by S&P addresses the likelihood of timely receipt of interest on
the Class A-2 Certificates or any Underlying Securities distributed in
respect of the Class A-1 Certificates and ultimate receipt of principal on
any Underlying Securities distributed in respect of the Class A-1
Certificates. The ratings address the likelihood of the receipt by
Certificateholders of payments required under the Trust Agreement, and are
based primarily on the credit quality of the Underlying Securities. The
rating on the Certificates does 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 Depositor has not requested a rating on the Certificates by any rating
agency other than the Rating Agencies. However, there can be no assurance as
to whether any other rating agency will rate the Certificates, or, if it
does, what rating would be assigned by any such other rating agency. A rating
on the Certificates by another rating agency, if assigned at all, may be
lower than the ratings assigned to the Certificates by the Rating Agencies.
S-27
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Available Funds S-18
CEDE S-17
Certificates S-1, S-3
Clearing Agency S-17
Closing Date S-1
Code S-22
S-1,
S-3,
Depositor S-19
Distribution Date S-1, S-4
DOL S-25
DTC S-2, S-5
Eligible Investments S-18
S-6,
ERISA S-25
Event of Default S-20
Extraordinary Expenses S-19
Federal Tax Counsel S-23
Final Scheduled Distribution Date S-1
Foreign Certificateholders S-24
S-8,
Indenture S-11
IRA S-6
Keogh S-6
LCPI S-19
Lehman Brothers S-19
Market Agent Agreement S-22
S-1,
S-5,
Moody's S-27
Notional Amount S-1
NYSE S-1
OID S-23
Ordinary Expenses S-19
Participants S-2
S-6,
Plan S-25
Regulation S-25
Required Percentage-Amendment S-20
Required Percentage-Remedies S-20
Sale Procedures S-22
S-8,
SEC S-10
S-3,
Series Supplement S-10
Service S-23
S-1,
S-5,
S&P S-27
S-5,
Specified Currency S-16
Trust S-1, S-3
S-3,
Trust Agreement S-10
S-1,
Trustee S-19
Underlying Securities S-1, S-3
S-1,
S-3,
Underlying Securities Issuer S-11
S-8,
Underlying Securities Trustee S-11
S-1,
Underwriter S-26
Underwriting Agreement S-26
United States person
</TABLE>
S-28
<PAGE>
PROSPECTUS
Trust Certificates
(Issuable in Series)
Lehman ABS Corporation
Depositor
The Trust Certificates (the "Certificates") offered hereby and by
supplements (each a "Prospectus Supplement") to this Prospectus will be
offered from time to time in one or more series (each a "Series") and in one
or more classes within each such Series (each a "Class"), denominated in
dollars or in one or more foreign or composite currencies, including the
European Currency Unit ("ECU"). Certificates of each respective Series and
Class will be offered on terms to be determined at the time of sale as
described in the related Prospectus Supplement accompanying the delivery of
this Prospectus. Certificates may be sold for United States dollars or for
one or more foreign or composite currencies, and the principal of, premium,
if any, and any interest to be distributed in respect of Certificates may be
payable in United States dollars or in one or more foreign or composite
currencies. Each Series and Class of Certificates may be issuable as
individual securities in registered form without coupons ("Registered
Certificates") or in bearer form with or without coupons attached ("Bearer
Certificates") or as one or more global securities in registered or bearer
form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt
security or a pool of such debt securities (the "Underlying Securities"),
together with certain other assets described herein and in the related
Prospectus Supplement (such assets, together with the Underlying Securities,
the "Deposited Assets"), to be deposited in a trust (the "Trust") for the
benefit of holders of Certificates of such Series ("Certificateholders") by
Lehman ABS Corporation (the "Depositor") pursuant to a Trust Agreement and a
series supplement thereto with respect to any given Series (collectively, the
"Trust Agreement") among the Depositor, the administrative agent, if any (the
"Administrative Agent") and the trustee (the "Trustee") named in the related
Prospectus Supplement. The Underlying Securities will be purchased by the
Depositor in the secondary market (either directly or through an affiliate of
the Depositor), and will not be acquired from the issuer thereof as part of
any distribution by or pursuant to any agreement with such issuer. The
Underlying Securities discussed herein and in the related Prospectus
Supplement represent the obligation of one or more corporations, banking
organizations or insurance companies organized under the laws of the United
States or any State, which are subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and which, in accordance
therewith, file reports and other information with the Securities Exchange
Commission. If so specified in the related Prospectus Supplement, the Trust
for a Series of Certificates may also include, or the Certificateholders of
such Certificates may have the benefit of, any combination of insurance
policies, letters of credit, reserve accounts and other types of rights or
assets designed to support or ensure the servicing and distribution of
amounts due in respect of the Deposited Assets (collectively, "Credit
Support"). See "Description of Certificates" and "Description of Deposited
Assets and Credit Support."
Each Class of Certificates of any Series will represent the right, which
may be senior to those of one or more of the other Classes of such Series, to
receive specified portions of payments of principal, interest and certain
other amounts on the Deposited Assets in the manner described herein and in
the related Prospectus Supplement. A Series may include two or more Classes
differing as to the timing, sequential order or amount of distributions of
principal, interest or premium and one or more Classes within such Series may
be subordinated in certain respects to other Classes of such Series.
Except as otherwise provided herein and in the applicable Prospectus
Supplement, the Depositor's only obligations with respect to each Series of
Certificates will be, pursuant to certain representations and warranties
concerning the Deposited Assets, to assign and deliver the Deposited Assets
and certain related documents to the applicable Trustee and, in certain
cases, to provide for the Credit Support, if any. The principal obligations
of an Administrative Agent, if any is named in the applicable Prospectus
Supplement, with respect to a Series of Certificates will be pursuant to its
contractual administrative obligations and, only as and to the extent
provided in the related Prospectus Supplement, its obligation to make certain
cash advances in the event of payment delinquencies on the Deposited Assets.
See "Description of the Certificates -- Advances in Respect of
Delinquencies."
The Certificates of each Series will not represent an obligation of or
interest in the Depositor, any Administrative Agent or any of their
respective affiliates, except to the limited extent described herein and in
the related Prospectus Supplement. Neither the Certificates nor the Deposited
Assets (unless otherwise specified in such Prospectus Supplement) will be
guaranteed or insured by any governmental agency or instrumentality, or by
the Depositor, any Administrative Agent or their respective affiliates.
Prospective investors should consider the factors set forth herein under
"Risk Factors," beginning on page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters,
dealers or agents or directly to purchasers, as more fully described under
"Plan of Distribution" and in the related Prospectus Supplement. This
Prospectus may not be used to consummate sales of Certificates offered hereby
unless accompanied by a Prospectus Supplement.
LEHMAN BROTHERS
November 15, 1995
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount, (b) the currency or currencies in which the principal (the
"Specified Principal Currency"), premium, if any (the "Specified Premium
Currency"), and any interest (the "Specified Interest Currency") are
distributable (the Specified Principal Currency, the Specified Premium
Currency and the Specified Interest Currency being collectively referred to
as the "Specified Currency"), (c) the number of Classes of such Series and,
with respect to each Class of such Series, its designation, aggregate
principal amount or, if applicable, notional amount and authorized
denominations, (d) certain information concerning the type, characteristics
and specifications of the Deposited Assets and any Credit Support for such
Series or Class, (e) the relative rights and priorities of each such Class
(including the method for allocating collections from the Deposited Assets to
the Certificateholders of each Class and the relative ranking of the claims
of the Certificateholders of each Class to such Deposited Assets), (f) the
name of the Trustee and the Administrative Agent, if any, for such Series,
(g) the Pass Through Rate (as defined below) or the terms relating to the
applicable method of calculation thereof, (h) the time and place of
distribution (each such date, a "Distribution Date") of any interest, premium
(if any) and/or principal, (i) the date of issue, (j) the scheduled final
Distribution Date, if applicable, (k) the offering price, (l) any exchange,
whether mandatory or optional, the redemption terms and any other specific
terms of Certificates of each such Series or Class. See "Description of
Certificates -- General" for a listing of other items that may be specified
in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Depositor is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and other information
concerning the Depositor can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Depositor does not intend to send any financial reports
to Certificateholders.
The Depositor has filed with the 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 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 Commission.
For further information, reference is hereby made to the Registration
Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor 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 Certificates shall be deemed
to be incorporated by reference in this Prospectus. 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 for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The 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
2
<PAGE>
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to the Secretary of Lehman ABS
Corporation, 3 World Financial Center, New York, New York 10285. Telephone
requests for such copies should be directed to the Secretary of Lehman ABS
Corporation at (212) 526-5594.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus Supplement,
unless and until Definitive Certificates are issued, on each Distribution
Date unaudited reports containing information concerning the related Trust
will be prepared by the related Trustee and sent on behalf of each Trust only
to Cede & Co. ("Cede"), as nominee of DTC and registered holder of the
Certificates. See "Description of Certificates -- Global Securities" and
"Description of the Trust Agreement -- Reports to Certificateholders;
Notice." 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 Commission such
periodic reports as are required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited
facilities in the United States for conversion of U.S. dollars into foreign
currencies and vice versa, and banks do not currently offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of a Certificate having a Specified
Principal Currency other than U.S. dollars, Lehman Brothers Inc. (the
"Offering Agent") will arrange for the exchange of U.S. dollars into such
Specified Principal Currency to enable the purchaser to pay for such
Certificate. Such request must be made on or before the fifth Business Day
(as defined below) preceding the date of delivery of such Certificate or by
such later date as is determined by the Offering Agent. Each such exchange
will be made by the Offering Agent on such terms and subject to such
conditions, limitations and charges as the Offering Agent may from time to
time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$," "USD," "dollar" or "$" are
to the lawful currency of the United States.
3
<PAGE>
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class within
such Series) of Certificates prior to the issuance thereof, and there can be
no assurance that a secondary market will develop or, if it does develop,
that it will provide Certificateholders with liquidity of investment or will
continue for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement may set forth
certain legal considerations that are applicable to a specific Series (or
Class or Classes within such Series) of Certificates being offered in
connection with that Prospectus Supplement or the assets deposited in or
assigned to the related Trust.
Limited Obligations and Interest. The Certificates will not represent a
recourse obligation of or interest in the Depositor or any of its affiliates.
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of each Series will not be insured or guaranteed by any
government agency or instrumentality, the Depositor, any Person affiliated
with the Depositor or the Issuer, or any other Person. The obligations, if
any, of the Depositor with respect to the Certificates of any Series will
only be pursuant to certain limited representations and warranties. The
Depositor does not have, and is not expected in the future to have, any
significant assets with which to satisfy any claims arising from a breach of
any representation or warranty. If, for example, the Depositor were required
to repurchase a Underlying Security with respect to which the Depositor has
breached a representation or warranty, its only sources of funds to make such
repurchase would be from funds obtained from the enforcement of a
corresponding obligation, if any, on the part of the seller of such
Underlying Security to the Depositor, or from a reserve fund established to
provide funds for such repurchases. The Depositor has no obligation to
establish or maintain any such reserve fund.
Credit Support; Limited Assets. Although the Trust for any Series (or
Class of such Series) of Certificates may include, or the Certificateholders
of such Certificates may have the benefit of, certain assets which are
designed to support the payment upon, or otherwise ensure the servicing or
distribution with respect to, the Deposited Asset related to such Series or
Class as described in the related Prospectus Supplement, the Certificates do
not represent obligations of the Depositor, any Administrative Agent or any
of their affiliates and, unless otherwise specified in the applicable
Prospectus Supplement, are not insured or guaranteed by the Depositor, any
Administrative Agent, any of their affiliates or any other person or entity.
Accordingly, Certificateholders' receipt of distributions in respect of the
Certificates will depend entirely on the performance of and the Trust's
receipt of payments with respect to the Deposited Assets and any Credit
Support identified in the related Prospectus Supplement. See "Description of
Deposited Assets and Credit Support."
Maturity and Redemption Considerations. The timing of distributions of
interest, premium (if any) and principal of any Series (or of any Class
within such Series) of Certificates is affected by a number of factors,
including the performance of the related Deposited Assets, the extent of any
early redemption, repayment or extension of maturity with respect to the
related Underlying Securities (including acceleration resulting from any
default or rescheduling resulting from the bankruptcy or similar proceeding
with respect to a Underlying Securities Issuer) and the manner and priority
in which collections from such Underlying Securities and any other Deposited
Assets are allocated to each Class of such Series. Certain of these factors
may be influenced by a variety of accounting, tax, economic, social and other
factors. The related Prospectus Supplement will discuss any calls, puts or
other redemption options, any extension of maturity provisions and certain
other terms applicable to such Underlying Securities and any other Deposited
Assets. See "Maturity and Yield Considerations."
Tax Considerations. The Federal income tax consequences of the purchase,
ownership and disposition of the Certificates and the tax treatment of the
Trust will depend on the specific terms of the Certificates, the Trust, any
Credit Support and the Deposited Assets. See the description under "Certain
Federal Income Tax Considerations" in the related Prospectus Supplement.
Ratings of the Certificates. At the time of issue, the Certificates of any
given Series (or each Class of such Series that is offered hereby) will be
rated in one of the investment grade categories recognized
4
<PAGE>
by one or more nationally recognized rating agencies (a "Rating Agency").
Unless otherwise specified in the applicable Prospectus Supplement, the
rating of any Series or Class of Certificates is based primarily on the
related Deposited Assets and any Credit Support and the relative priorities
of the Certificateholders of such Series or Class to receive collections
from, and to assert claims against, the Trust with respect to such Deposited
Assets and any Credit Support. The rating is not a recommendation to
purchase, hold or sell Certificates, inasmuch as such rating does not comment
as to market price or suitability for a particular investor. There can be no
assurance that the rating will remain for any given period of time or that
the rating will not be lowered or withdrawn entirely by the Rating Agency if
in its judgment circumstances in the future so warrant. Any Class or Classes
of a given Series of Certificates may not be offered pursuant to this
Prospectus, in which case such Class or Classes may or may not be rated in an
investment grade category by a Rating Agency.
Global Securities. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series (or, if more than one Class
exists, each Class of such Series) will initially be represented by one or
more Global Securities deposited with, or on behalf of, a Depository (as
defined below) and will not be issued as individual definitive Certificates
to the purchasers of such Certificates. Consequently, unless and until such
individual definitive Certificates of a particular Series or Class are
issued, such purchasers will not be recognized as Certificateholders under
the Trust Agreement. Hence, until such time, such purchasers will only be
able to exercise the rights of Certificateholders indirectly through the
Depository and its respective participating organizations and, as a result,
the ability of any such purchaser to pledge that Certificate to persons or
entities that do not participate in the Depository's system, or otherwise to
act with respect to such Certificate, may be limited. See "Description of
Certificates -- Global Securities" and "Limitations on Issuance of Bearer
Certificates" and any further description contained in the related Prospectus
Supplement.
Currency Risks. The Certificates of any given Series (or Class within such
Series) may be denominated in a currency other than U.S. dollars to the
extent specified in the applicable Prospectus Supplement. This Prospectus
does not describe all the risks of an investment in such Certificates, and
the Depositor disclaims any responsibility to advise prospective purchasers
of such risks as they exist from time to time. Prospective purchasers of such
Certificates should consult their own financial and legal advisors as to the
risks entailed by an investment in such Certificates denominated in a
currency other than U.S. dollars. See "Currency Risks."
Passive Nature of the Trust. The Trustee with respect to any Series of
Certificates will hold the Deposited Assets for the benefit of the
Certificateholders. Each Trust will generally hold the related Deposited
Assets to maturity and not dispose of them, regardless of adverse events,
financial or otherwise, which may affect any Underlying Securities Issuer or
the value of the Deposited Assets. Under certain circumstances the holders of
the Certificates may direct the Trustee to dispose of the Underlying
Securities or take certain other actions in respect of the Deposited Assets.
The Prospectus Supplement for each Series of Certificates will set forth
information regarding additional risk factors, if any, applicable to such
Series (and each Class within such Series).
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on January 29,
1988, as an indirect, wholly owned, limited-purpose subsidiary of Lehman
Brothers Inc. The principal office of the Depositor is located at 3 World
Financial Center, New York, New York 10285. Its telephone number is (212)
526-5594.
The Certificate of Incorporation of the Depositor provides that the
Depositor may conduct any lawful activities necessary or incidental to
serving as depositor of one or more trusts that may issue and sell
Certificates. The Certificate of Incorporation of the Depositor provides that
any securities, except for subordinated securities, issued by the Depositor
must be rated in one of the four highest categories available by any Rating
Agency rating the Series. Formation of a grantor trust will not relieve the
Depositor of its obligation to issue only securities, except for subordinated
securities, rated in one of the four highest rating categories. Pursuant to
the terms of the Trust Agreement, the Depositor may not issue any securities
which would result in the lowering of the then current ratings of the
outstanding Certificates of any Series.
5
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
net proceeds to be received from the sale of each Series or Class of
Certificates (whether or not offered hereby) will be used by the Depositor to
purchase the related Deposited Assets and arrange certain Credit Support,
including, if specified in the related Prospectus Supplement, making required
deposits into any reserve account or the applicable Certificate Account (as
defined below) for the benefit of the Certificateholders of such Series or
Class. Any remaining net proceeds, if any, will be used by the Depositor for
general corporate purposes.
FORMATION OF THE TRUST
The Depositor will assign the Deposited Assets for each Series of
Certificates to the Trustee named in the applicable Prospectus Supplement, in
its capacity as Trustee, for the benefit of the Certificateholders of such
Series. See "Description of the Trust Agreement -- Assignment of Deposited
Assets." The Trustee named in the applicable Prospectus Supplement will
administer the Deposited Assets pursuant to the Trust Agreement and will
receive a fee for such services (the "Trustee's Fee"). Any Administrative
Agent named in the applicable Prospectus Supplement will perform such tasks
as are specified therein and in the Trust Agreement and will receive a fee
for such services (the "Administration Fee") as specified in the Prospectus
Supplement. See "Description of the Trust Agreement -- Collection and Other
Administrative Procedures" and "--Retained Interest; Administrative Agent
Compensation and Payment of Expenses." The Trustee or an Administrative
Agent, if applicable, will either cause the assignment of the Deposited
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 Deposited Assets.
Unless otherwise stated in the Prospectus Supplement, the Depositor's
assignment of the Deposited Assets to the Trustee will be without recourse.
To the extent provided in the applicable Prospectus Supplement, the
obligations of an Administrative Agent so named therein with respect to the
Deposited Assets will consist primarily of its contractual -administrative
obligations, if any, under the Trust Agreement, its obligation, if any, to
make certain cash advances in the event of delinquencies in payments on or
with respect to any Deposited Assets in amounts described under "Description
of the Trust Agreement -- Advances in Respect of Delinquencies," and its
obligations, if any, to purchase Deposited Assets as to which there has been
a breach of certain representations and warranties or as to which the
documentation is materially defective. The obligations of an Administrative
Agent, if any, named in the applicable Prospectus Supplement to make advances
will be limited to amounts which any such Administrative Agent believes
ultimately would be recoverable under any Credit Support, insurance coverage,
the proceeds of liquidation of the Deposited Assets or from other sources
available for such purposes. See "Description of the Trust Agreement --
Advances in Respect of Delinquencies."
Unless otherwise provided in the related Prospectus Supplement, each Trust
will consist of (i) such Deposited Assets, or interests therein, exclusive of
any interest in such assets (the "Retained Interest") retained by the
Depositor or any previous owner thereof, 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 Certificate Account; (iii) property, if any,
acquired on behalf of Certificateholders by foreclosure or repossession and
any revenues received thereon; (iv) those elements of Credit Support, if any,
provided with respect to any 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 Deposited Assets and Credit
Support -- Credit Support"; (v) the rights of the Depositor under the
agreement or agreements entered into by the Trustee on behalf of the
Certificateholders which constitute, or pursuant to which the Trustee has
acquired, such Deposited Assets; and (vi) the rights of the Trustee in any
cash advances, reserve fund or surety bond, if any, as described under
"Description of the Trust Agreement -- Advances in Respect of Delinquencies."
In addition, to the extent provided in the applicable Prospectus
Supplement, the Depositor will obtain Credit Support for the benefit of the
Certificateholders of any related Series (or Class within such Series) of
Certificates.
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MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Underlying
Securities and the terms, if any, upon which such Underlying Securities may
be subject to early redemption (either by the applicable obligor or pursuant
to a third-party call option), repayment (at the option of the holders
thereof) or extension of maturity. The provisions of the Underlying
Securities with respect to the foregoing will, unless otherwise specified in
the applicable Prospectus Supplement, affect the weighted average life of the
related Series of Certificates.
The effective yield to holders of the Certificates of any Series (and
Class within such Series) may be affected by certain aspects of the Deposited
Assets or any Credit Support or the manner and priorities of allocations of
collections with respect to such Deposited Assets between the Classes of a
given Series. With respect to any Series of Certificates the Underlying
Securities of which consist of one or more redeemable securities, extendable
securities or securities subject to a third-party call option, the yield to
maturity of such Series (or Class within such Series) may be affected by any
optional or mandatory redemption or repayment or extension of the related
Underlying Securities prior to the stated maturity thereof. A variety of tax,
accounting, economic, and other factors will influence whether a corporate
issuer exercises any right of redemption in respect of its securities. All
else remaining equal, if prevailing interest rates fall significantly below
the interest rates on the related Underlying Securities, the likelihood of
redemption would be expected to increase. There can be no certainty as to
whether any Underlying Security redeemable at the option of the Underlying
Security Issuer will be repaid prior to its stated maturity.
Unless otherwise specified in the related Prospectus Supplement, each of
the Underlying Securities will be subject to acceleration upon the occurrence
of certain Underlying Security Events of Default (as defined below). The
maturity and yield on the Certificates will be affected by any early
repayment of the Underlying Securities as a result of the acceleration of the
Outstanding Debt Securities by the holders thereof. See "Description of the
Deposited Assets -- Underlying Securities Indenture." If an Underlying
Securities Issuer becomes subject to a bankruptcy proceeding, the timing and
amount of payments with respect to both interest and principal may be
materially and adversely affected. A variety of factors influence the
performance of private debt issuers and correspondingly 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 social, geographic, legal and economic factors.
The extent to which the yield to maturity of such Certificates may vary
from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they 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 Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates will also
be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that
the Pass-Through Rate for such Series (or Class) is based on variable or
adjustable interest rates. With respect to any Series of Certificates
representing an interest in a pool of corporate debt 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 Pass-Through Rates applicable to such
Certificates may affect the yield thereon.
The Prospectus Supplement for each Series of Certificates will set forth
additional information regarding yield and maturity considerations applicable
to such Series (and each Class within such Series) and the related Deposited
Assets, including the applicable Underlying Securities.
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DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates will be issued pursuant to a Trust Agreement and a
separate series supplement thereto among the Depositor, the Administrative
Agent, if any, and the Trustee named in the related Prospectus Supplement, a
form of which Trust Agreement is attached as an exhibit to the Registration
Statement. The provisions of the Trust Agreement (as so supplemented) may
vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the Deposited Assets, Credit Support and related Trust. The
following summaries describe certain provisions of the Trust Agreement which
may be applicable to each Series of Certificates. The applicable Prospectus
Supplement for a Series of Certificates will describe any provision of the
Trust Agreement that materially differs from the description thereof
contained in this Prospectus. 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 Certificates. Article and section references in
parentheses below are to articles and sections in the Trust Agreement.
Wherever particular sections or defined terms of the Trust Agreement are
referred to, such sections or defined terms are incorporated herein by
reference as part of the statement made, and the statement is qualified in
its entirety by such reference. As used herein with respect to any Series,
the term "Certificate" refers to all the Certificates of that Series, whether
or not offered hereby and by the related Prospectus Supplement, unless the
context otherwise requires.
A copy of the applicable series supplement to the Trust Agreement relating
to each Series of Certificates issued from time to time will be filed by the
Depositor as an exhibit to a Current Report on Form 8K to be filed with the
Commission following the issuance of such Series.
GENERAL
There is no limit on the amount of Certificates that may be issued under
the Trust Agreement, and the Trust Agreement will provide that Certificates
of the applicable Series may be issued in multiple Classes (Section 5.01).
Each Series (or Classes within such Series) of Certificates to be issued
under the Trust Agreement will represent the entire beneficial ownership
interest in the Trust for such Series created pursuant to the Trust Agreement
and 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 Deposited Assets and
Credit Support -- Collections."
Reference is made to the related Prospectus Supplement for a description
of the following terms of the Series (and if applicable, Classes within such
Series) of Certificates in respect of which this Prospectus and such
Prospectus Supplement are being delivered: (i) the title of such
Certificates; (ii) the Series of such Certificates and, if applicable, the
number and designation of Classes of such Series; (iii) certain information
concerning the type, characteristics and specifications of the Deposited
Assets being deposited into the related Trust by the Depositor (and, with
respect to any Underlying Security which at the time of such deposit
represents a significant portion of all such Deposited Assets and any related
Credit Support, certain information concerning the terms of each such
Underlying Security, the identity of the issuer thereof and where publicly
available information regarding such issuer may be obtained); (iv) the limit,
if any, upon the aggregate principal amount or notional amount, as
applicable, of each Class thereof; (v) the dates on which or periods during
which such Series or Classes within such Series may be issued (each, an
"Original Issue Date"), the offering price thereof and the applicable
Distribution Dates on which the principal, if any, of (and premium, if any,
on) such Series or Classes within such Series will be distributable; (vi) if
applicable, the relative rights and priorities of each such Class (including
the method for allocating collections from and defaults or losses on the
Deposited Assets to the Certificateholders of each such Class); (vii) whether
the Certificates of such Series or each Class within such Series are Fixed
Rate Certificates or Floating Rate Certificates (each as defined below) and
the applicable interest rate (the "Pass-Through Rate"), or the terms relating
to the particular method of calculation thereof applicable to such Series or
each Class within such Series, if variable (a "Variable Pass-Through
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Rate"); the date or dates from which such interest will accrue; the
applicable Distribution Dates on which interest, principal and premium, in
each case as applicable, on such Series or Class will be distributable and
the related Record Dates, if any; (viii) the option, if any, of any
Certificateholder of such Series or Class to withdraw a portion of the assets
of the Trust in exchange for surrendering such Certificateholder's
Certificate or of the Depositor or Administrative Agent, if any, or another
third party to purchase or repurchase any Deposited Assets (in each case to
the extent not inconsistent with the Depositor's continued satisfaction 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) and the periods within which or the dates on
which, and the terms and conditions upon which any such option may be
exercised, in whole or in part; (ix) the rating of each Series or each Class
within such Series offered hereby (provided, however, that one or more
Classes within such Series not offered hereunder may be unrated or may be
rated below investment grade); (x) if other than denominations of $1,000 and
any integral multiple thereof, the denominations in which such Series or
Class within such Series will be issuable; (xi) whether the Certificates of
any Class within a given Series are to be entitled to (1) principal
distributions, with disproportionate, nominal or no interest distributions,
or (2) interest distributions, with disproportionate, nominal or no principal
distributions ("Strip Certificates"), and the applicable terms thereof; (xii)
whether the Certificates of such Series or of any Class within such Series
are to be issued as Registered Certificates or Bearer Certificates or both
and, if Bearer Certificates are to be issued, whether coupons ("Coupons")
will be attached thereto; whether Bearer Certificates of such Series or Class
may be exchanged for Registered Certificates of such Series or Class and the
circumstances under which and the place or places at which any such
exchanges, if permitted, may be made; (xiii) whether the Certificates of such
Series or of any Class within such series are to be issued in the form of one
or more Global Securities and, if so, the identity of the Depository (as
defined below), if other than The Depository Trust Company, for such Global
Security or Securities; (xiv) if a temporary Certificate is to be issued with
respect to such Series or any Class within such Series, whether any interest
thereon distributable on a Distribution Date prior to the issuance of a
definitive Certificate of such Series or Class will be credited to the
account of the Persons entitled thereto on such Distribution Date; (xv) if a
temporary Global Security is to be issued with respect to such Series or
Class, the terms upon which beneficial interests in such temporary Global
Security may be exchanged in whole or in part for beneficial interests in a
definitive Global Security or for individual Definitive Certificates (as
defined below) of such Series or Class and the terms upon which beneficial
interests in a definitive Global Security, if any, may be exchanged for
individual Definitive Certificates of such Series or Class; (xvi) if other
than U.S. dollars, the Specified Currency applicable to the Certificates of
such Series or Class for purposes of denominations and distributions on such
Series or each Class within such Series and the circumstances and conditions,
if any, when such Specified Currency may be changed, at the election of the
Depositor or a Certificateholder, and the currency or currencies in which any
principal of or any premium or any interest on such Series or Class are to be
distributed pursuant to such election; (xvii) any additional Administrative
Agent Termination Events (as defined below), if applicable, provided for with
respect to such Class; (xviii) all applicable Required Percentages and Voting
Rights (each as defined below) relating to the manner and percentage of votes
of Certificateholders of such Series and each Class within such Series
required with respect to certain actions by the Depositor or the applicable
Administrative Agent, if any, or Trustee under the Trust Agreement or with
respect to the applicable Trust; and (xix) any other terms of such Series or
Class within such Series of Certificates not inconsistent with the provisions
of the Trust Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus Supplement,
Certificates of each Series (including any Class of Certificates not offered
hereby) will be issued only as Registered Certificates in denominations of
$1,000 and any integral multiple thereof and will be payable only in U.S.
dollars (Section 5.01). The authorized denominations of Registered
Certificates of a given Series or Class within such Series having a Specified
Currency other than U.S. dollars will be set forth in the applicable
Prospectus Supplement.
The United States Federal income tax consequences and ERISA consequences
relating to any Series or any Class within such Series of Certificates will
be described in the applicable Prospectus Supplement. In addition, any
special considerations, the specific terms and other information with respect
to the
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issuance of any Series or Class within such Series of Bearer Certificates or
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. Unless otherwise specified
in the applicable Prospectus Supplement, the U.S. dollar equivalent of the
public offering price or purchase price of a Certificate having a Specified
Principal Currency other than U.S. dollars will be determined on the basis of
the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of
New York (the "Market Exchange Rate") for such Specified Principal Currency
on the applicable issue date. As specified in the applicable Prospectus
Supplement, such determination will be made by the Depositor, the Trustee,
the Administrative Agent, if any, or an agent thereof as exchange rate agent
for each Series of Certificates (the "Exchange Rate Agent").
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Certificates may be transferred or exchanged for like Certificates
of the same Series and Class at the corporate trust office or agency of the
applicable Trustee in the City and State of New York, subject to the
limitations provided in the Trust Agreement, without the payment of any
service charge, other than any tax or governmental charge payable in
connection therewith (Section 5.04). Bearer Certificates will be transferable
by delivery. Provisions with respect to the exchange of Bearer Certificates
will be described in the applicable Prospectus Supplement. Unless otherwise
specified in the applicable Prospectus Supplement, Registered Certificates
may not be exchanged for Bearer Certificates. The Depositor may at any time
purchase Certificates at any price in the open market or otherwise.
Certificates so purchased by the Depositor may, at the discretion of the
Depositor, be held or resold or surrendered to the Trustee for cancellation
of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest on the
Certificates of each Series (and Class within such Series) will be made in
the Specified Currency for such Certificates by or on behalf of the Trustee
on each Distribution Date as specified in the related Prospectus Supplement
and the amount of each distribution will be determined as of the close of
business on the date specified in the related Prospectus Supplement (the
"Determination Date"). If the Specified Currency for a given Series or Class
within such Series is other than U.S. dollars, the Administrative Agent, if
any, or otherwise the Trustee will (unless otherwise specified in the
applicable Prospectus Supplement) arrange to convert all payments in respect
of each Certificate of such Series or Class to U.S. dollars in the manner
described in the following paragraph. The Certificateholder of a Registered
Certificate of a given Series or Class within such Series denominated in a
Specified Currency other than U.S. dollars may (if the applicable Prospectus
Supplement and such Certificate so indicate) elect to receive all
distributions in respect of such Certificate in the Specified Currency by
delivery of a written notice to the Trustee and Administrative Agent, if any,
for such Series not later than fifteen calendar days prior to the applicable
Distribution Date, except under the circumstances described under "Currency
Risks -- Payment Currency" below. Such election will remain in effect until
revoked by written notice to such Trustee and Administrative Agent, if any,
received by each of them not later than fifteen calendar days prior to the
applicable Distribution Date.
Unless otherwise specified in the applicable Prospectus Supplement, in the
case of a Registered Certificate of a given Series or Class within such
Series having a Specified Currency other than U.S. dollars, the amount of any
U.S dollar distribution in respect of such Registered Certificate will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable Distribution Date (or, if no such rate is quoted on
such date, the last date on which such rate was quoted), from three (or, if
three are not available, then two) recognized foreign exchange dealers in The
City of New York (one of which may be the Offering Agent and another of which
may be the Exchange Rate Agent) selected by the Exchange Rate Agent, for the
purchase by the quoting dealer, for settlement on such Distribution Date, of
the aggregate amount payable in such Specified Currency on such payment date
in respect of all Registered Certificates. All currency exchange costs will
be borne by the Certificateholders of such Registered Certificates by
deductions from such distributions. If no such bid quotations are available,
such distributions will be made in such Specified Currency, unless such
Specified Currency is unavailable due to the imposition of exchange controls
or to
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other circumstances beyond the Depositor's control, in which case such
distributions will be made as described under "Currency Risks -- Payment
Currency" below. The applicable Prospectus Supplement will specify such
information with respect to Bearer Certificates.
Unless otherwise provided in the applicable Prospectus Supplement and
except as provided in the succeeding paragraph, distributions with respect to
Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement in The City of New York or (in the case of Bearer
Certificates) at the principal London office of the applicable Trustee;
provided, however, that any such amounts distributable on the final
Distribution Date of a Certificate will be distributed only upon surrender of
such Certificate at the applicable location set forth above (Sections 4.01
and 9.01). Except as otherwise provided in the applicable Prospectus
Supplement, no distribution on a Bearer Certificate will be made by mail to
an address in the United States or by wire transfer to an account maintained
by the Certificateholder thereof in the United States.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions on Registered Certificates in U.S. dollars will be made, except
as provided below, by check mailed to the Registered Certificateholders of
such Certificates (which, in the case of Global Securities, will be a nominee
of the Depository); provided, however, that, in the case of a Series or Class
of Registered Certificates issued between a Record Date (as defined below)
and the related Distribution Dates, interest for the period beginning on the
issue date for such Series or Class and ending on the last day of the
interest accrual period ending immediately prior to or coincident with such
Distribution Date will, unless otherwise specified in the applicable
Prospectus Supplement, be distributed on the next succeeding Distribution
Date to the Registered Certificateholders of the Registered Certificates of
such Series or Class on the related Record Date. A Certificateholder of
$10,000,000 (or the equivalent thereof in a Specified Principal Currency
other than U.S. dollars) or more in aggregate principal amount of Registered
Certificates of a given Series shall be entitled to receive such U.S. dollar
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 fifteen (15) calendar days prior to
the applicable Distribution Date. Simultaneously with the election by any
Certificateholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such Certificateholder shall provide appropriate
wire transfer instructions to the Trustee for such Series, and all such
payments will be made by wire transfer of immediately available funds to an
account maintained by the payee with a bank located outside the United
States.
Except as otherwise specified in the applicable Prospectus Supplement,
"Business Day" with respect to any Certificate means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in (a) The City of
New York or (b) if the Specified Currency for such Certificate is other than
U.S. dollars, the financial center of the country issuing such Specified
Currency (which, in the case of ECU, shall be Brussels, Belgium) and (ii) if
the Pass-Through Rate for such Certificate is based on LIBOR, a London
Banking Day. "London Banking Day" with respect to any Certificate means any
day on which dealings in deposits in the Specified Currency of such
Certificate are transacted in the London interbank market. The Record Date
with respect to any Distribution Date for a Series or Class of Registered
Certificates shall be specified as such in the applicable Prospectus
Supplement.
INTEREST ON THE CERTIFICATES
General. Each Class of Certificates (other than certain Classes of Strip
Certificates) of a given Series may have a different Pass-Through Rate, which
may be a fixed or variable Pass-Through Rate, as described below. In the case
of Strip Certificates with no or, in certain cases, a nominal Certificate
Principal Balance, such distributions of interest will be in an amount (as to
any Distribution Date, "Stripped Interest") described in the related
Prospectus Supplement. For purposes hereof, "Notional Amount" means the
notional principal amount specified in the applicable Prospectus Supplement
on which interest on Strip Certificates with no or, in certain cases, a
nominal Certificate Principal Balance will be made on each Distribution Date.
Reference to the Notional Amount of a Class of Strip Certificates herein or
in a Prospectus Supplement does not indicate that such Certificates represent
the right to receive
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any distribution in respect of principal in such amount, but rather the term
"Notional Amount" is used solely as a basis for calculating the amount of
required distributions and determining certain relative voting rights, all as
specified in the related Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one Class exists,
each Class within such Series) of Certificates with a fixed Pass-Through Rate
("Fixed Rate Certificates") will bear interest, on the outstanding
Certificate Principal Balance (or Notional Amount, if applicable), from its
Original Issue Date, or from the last date to which interest has been paid,
at the fixed Pass-Through Rate stated on the face thereof and in the
applicable Prospectus Supplement until the principal amount thereof is
distributed or made available for repayment (or in the case of Fixed Rate
Certificates with no or a nominal principal amount, until the Notional Amount
thereof is reduced to zero), except that, if so specified in the applicable
Prospectus Supplement, the Pass-Through 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 Certificates by one or
more rating agencies, in accordance with a schedule or otherwise, all as
described in such Prospectus Supplement. Unless otherwise set forth in the
applicable Prospectus Supplement, interest on each Series or Class of Fixed
Rate 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. Unless otherwise specified in the applicable
Prospectus Supplement, interest on Fixed Rate Certificates will be computed
on the basis of a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if
applicable), from its Original Issue Date to the first Interest Reset Date
(as defined below) for such Series or Class at the Initial Pass-Through Rate
set forth on the face thereof and in the applicable Prospectus Supplement.
Thereafter, the Pass-Through Rate on such Series or Class 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, if any, or
multiplied by the Spread Multiplier, 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 or Class, and the "Spread Multiplier" is the
percentage that may be specified in the applicable Prospectus Supplement as
being applicable to such Series or Class, except that if so specified in the
applicable Prospectus Supplement, the Spread or Spread Multiplier on such
Series or any such Class or Classes of Floating Rate Certificates may be
subject to adjustment from time to time in response to designated changes in
the rating assigned to such 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, unless otherwise specified
therein, will designate one of the following Base Rates as applicable to a
Floating Rate Certificate: (i) LIBOR (a "LIBOR Certificate"), (ii) the
Commercial Paper Rate (a "Commercial Paper Rate Certificate"), (iii) the
Treasury Rate (a "Treasury Rate Certificate"), (iv) the Federal Funds Rate (a
"Federal Funds Rate Certificate"), (v) the CD Rate (a "CD Rate Certificate")
or (vi) such other Base Rate (which may be based on, among other things, one
or more market indices or the interest and/or other payments (whether
scheduled or otherwise) paid, accrued or available with respect to a
designated asset, pool of assets or type of asset) as is set forth in such
Prospectus Supplement and in such Certificate. The "Index Maturity" for any
Series or Class of Floating Rate Certificates is the period of maturity of
the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates," or any successor publications, published by the
Board of Governors of the Federal Reserve System. "Composite Quotations"
means the daily statistical release entitled "Composite 3:30 p.m. Quotations
for U.S. Government Securities" published by the Federal Reserve Bank of New
York.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given Series or Class 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 Pass-Through
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Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any such interest accrual period ("Minimum Pass-Through
Rate"). In addition to any Maximum Pass-Through Rate that may be applicable
to any Series or Class of Floating Rate Certificates, the Pass-Through Rate
applicable to any Series or Class of Floating Rate Certificates will in no
event be higher than the maximum rate permitted by applicable law, as the
same may be modified by United States law of general application. The
Floating Rate Certificates will be governed by the law of the State of New
York and, under such law as of the date of this Prospectus, the maximum rate
of interest, with certain exceptions, is 25% per annum on a simple interest
basis.
The Depositor will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Pass-Through Rates on each Series or Class
of Floating Rate Certificates. The applicable Prospectus Supplement will set
forth the identity of the Calculation Agent for each Series or Class of
Floating Rate Certificates. All determinations of interest by the Calculation
Agent shall, in the absence of manifest error, be conclusive for all purposes
and binding on the holders of Floating Rate Certificates of a given Series or
Class.
The Pass-Through Rate on each Class of Floating Rate Certificates will be
reset daily, weekly, monthly, quarterly, semiannually or annually (such
period being the "Interest Reset Period" for such Class, 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, and any Class within such Series of Floating Rate Certificates,
will be specified in the applicable Prospectus Supplement; provided, however,
that unless otherwise specified in such Prospectus Supplement, the
Pass-Through Rate in effect for the ten days immediately prior to the
Scheduled Final Distribution Date will be that in effect on the tenth day
preceding such Scheduled Final Distribution Date. If an Interest Reset Date
for any Class of Floating Rate Certificates would otherwise be a day that is
not a Business Day, such Interest Reset Date will occur on a prior or
succeeding Business Day, specified in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Certificates shall be the
accrued interest from and including the Original Issue Date of such Series or
Class 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 Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such
Certificate (or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the
applicable Prospectus Supplement) 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.
Unless otherwise specified in the applicable Prospectus Supplement, the
interest factor (expressed as a decimal calculated to seven decimal places
without rounding) for each such day is computed by dividing the Pass-Through
Rate in effect on such day by 360, in the case of LIBOR Certificates,
Commercial Paper Rate Certificates, Federal Funds Rate Certificates and CD
Rate Certificates or by the actual number of days in the year, in the case of
Treasury Rate Certificates. For purposes of making the foregoing calculation,
the variable Pass-Through Rate in effect on any Interest Reset Date will be
the applicable rate as reset on such date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Pass-Through Rate on a
Floating Rate 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 Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of Floating Rate
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.
Upon the request of the holder of any Floating Rate Certificate of a given
Series or Class, the Calculation Agent for such Series or Class will provide
the Pass-Through Rate then in effect and, if determined, the Pass-Through
Rate that will become effective on the next Interest Reset Date with respect
to such Floating Rate Certificate.
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(1) CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Reset Period at the Pass-Through Rate calculated with reference
to the CD Rate and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"CD Rate" for each Interest Reset Period shall be the rate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period
(a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement
as published in H.15(519) under the heading "CDs (Secondary Market)." In the
event that such rate is not published prior to 3:00 p.m., New York City time,
on the Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus
Supplement as published in Composite Quotations under the heading
"Certificates of Deposit." If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "CD Rate" for such Interest Reset Period will
be calculated by the Calculation Agent for such CD Rate Certificate and will
be the arithmetic mean of the secondary market offered rates as of 10:00
a.m., New York City time, on such CD Rate Determination Date, of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in
The City of New York selected by the Calculation Agent for such CD Rate
Certificate for negotiable certificates of deposit of major United States
money center banks of the highest credit standing (in the market for
negotiable certificates of deposit) with a remaining maturity closest to the
Index Maturity designated in the related Prospectus Supplement in a
denomination of $5,000,000; provided, however, that if the dealers selected
as aforesaid by such Calculation Agent are not quoting offered rates as
mentioned in this sentence, the "CD Rate" for such Interest Reset Period will
be the same as the CD Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial
Pass-Through Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and
the Spread or Spread Multiplier, if any, specified in such Certificate and in
the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by
the Calculation Agent for such Commercial Paper Rate Certificate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "Commercial Paper Rate Determination Date") and shall be the Money
Market Yield (as defined below) on such Commercial Paper Rate Determination
Date of the rate for commercial paper having the Index Maturity specified in
the applicable Prospectus Supplement, as such rate shall be published in
H.15(519) under the heading "Commercial Paper." In the event that such rate
is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such Commercial Paper Rate
Determination Date, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper." If by 3:00 p.m., New York City time, on such Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then
the "Commercial Paper Rate" for such Interest Reset Period shall be the Money
Market Yield of the arithmetic mean of the offered rates, as of 11:00 a.m.,
New York City time, on such Commercial Paper Rate Determination Date of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for such Commercial Paper Rate Certificate for commercial
paper of the specified Index Maturity placed for an industrial issuer whose
bonds are rated "AA" or the equivalent by a nationally recognized rating
agency; provided, however, that if the dealers selected as aforesaid by such
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Calculation Agent are not quoting offered rates as mentioned in this
sentence, the "Commercial Paper Rate" for such Interest Reset Period will be
the same as the Commercial Paper Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the Initial
Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 X 100
-------------
360 -(D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
Business Day, the next succeeding Business Day or (b) the second Business Day
preceding the date any distribution of interest is required to be made
following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospect Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for such Interest Reset Period (a "Federal
Funds Rate Determination Date") for Federal Funds as published in H.15(519)
under the heading "Federal Funds (Effective)." In the event that such rate is
not published prior to 3:00 p.m., New York City time, on the Calculation Date
(as defined below) pertaining to such Federal Funds Rate Determination Date,
the "Federal Funds Rate" for such Interest Reset Period shall be the rate on
such Federal Funds Rate Determination Date as published in Composite
Quotation under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published
in either H.15(519) or Composite Quotations, then the "Federal Funds Rate"
for such Interest Reset Period shall be the rate on such Federal Funds Rate
Determination Date made publicly available by the Federal Reserve Bank of New
York which is equivalent to the rate which appears in H.15(519) under the
heading "Federal Funds (Effective)"; provided, however, that if such rate is
not made publicly available by the Federal Reserve Bank of New York by 3:00
p.m., New York City time, on such Calculation Date, the "Federal Funds Rate"
for such Interest Reset Period will be the same as the Federal Funds Rate in
effect for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the Initial Pass-Through Rate). Unless
otherwise specified in the applicable Prospectus Supplement, in the case of a
Federal Funds Rate Certificate that resets daily, the Pass-Through Rate on
such Certificate for the period from and including a Monday to but excluding
the succeeding Monday will be reset by the Calculation Agent for such
Certificate on such second Monday (or, if not a Business Day, on the next
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rate in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear interest for each
Interest Reset Period at the Pass-Through Rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rate for U.S. dollar
deposits, unless otherwise specified in the applicable Prospectus Supplement,
"LIBOR" for each Interest Reset Period will be determined by the Calculation
Agent for any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Certificate will
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determine the arithmetic mean of the offered rates for deposits in U.S.
dollars for the period of the Index Maturity specified in the applicable
Prospectus Supplement, commencing on such Interest Reset Date, which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m., London
time, on such LIBOR Determination Date. "Reuters Screen LIBO Page" means
the display designated as page "LIBOR" on the Reuters Monitor Money Rates
Service (or such other page may replace the LIBO page on that service for
the purpose of displaying London interbank offered rates of major banks).
If at least two such offered rates appear on the Reuters Screen LIBO Page,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of such
offered rates as determined by the Calculation Agent for such LIBOR
Certificate.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page on such LIBOR Determination Date, the Calculation Agent for such
LIBOR Certificate will request the principal London offices of each of
four major banks in the London interbank market selected by such
Calculation Agent to provide such Calculation Agent with their offered
quotations for deposits in U.S. dollars for the period of the specified
Index Maturity, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single transaction
in such market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of such
quotations. If fewer than two such quotations are provided, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of rates quoted by
three major banks in The City of New York selected by the Calculation
Agent for such LIBOR Certificate at approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date for loans in U.S. dollars to
leading European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal to
an amount of not less than $1,000,000 that is representative of a single
transaction in such market at such time; provided, however, that if fewer
than three banks selected as aforesaid by such Calculation Agent are
quoting rates as mentioned in this sentence, "LIBOR" for such Interest
Reset Period will be the same as LIBOR for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to the offered
rates for deposits in a currency other than U.S. dollars, the applicable
Prospectus Supplement will set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any, specified in such Certificate and in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for
such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Certificate-Treasury bills auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Treasury Rate Determination Date, the auction average rate
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of the Treasury.
In the event that the results of the auction of Treasury bills having the
specified Index Maturity are not published or reported as provided above by
3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held on such Treasury Rate Determination Date, then the "Treasury
Rate" for such Interest Reset Period shall be calculated by the Calculation
Agent for such Treasury Rate Certificate and shall be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such Treasury Rate Determination Date, of three leading primary
United States government securities dealers selected by such Calculation
Agent for the issue of Treasury bills with a remaining
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maturity closest to the specified Index Maturity; provided, however, that if
the dealers selected as aforesaid by such Calculation Agent are not quoting
bid rates as mentioned in this sentence, then the "Treasury Rate" for such
Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on
the following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Treasury Rate Determination Date
pertaining to the Interest Reset Period commencing in the next succeeding
week. Unless otherwise specified in the applicable Prospectus Supplement, if
an auction date shall fall on any day that would otherwise be an Interest
Reset Date for a Treasury Rate Certificate, then such Interest Reset Date
shall instead be the Business Day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise, each
Certificate (other than certain Classes of Strip Certificates) will have a
"Certificate Principal Balance" which, 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 Deposited Assets and other
assets included in the related Trust. Unless otherwise specified in the
related Prospectus Supplement, distributions generally will be applied to
undistributed accrued interest on, then to principal of, and then to premium
(if any) on, each such Certificate of the Class or Classes entitled thereto
(in the manner and priority specified in such Prospectus Supplement) until
the aggregate Certificate Principal Balance of such Class or Classes has been
reduced to zero. The outstanding Certificate Principal Balance of a
Certificate will be reduced to the extent of distributions of principal
thereon, and, if applicable pursuant to the terms of the related Series, by
the amount of any net losses realized on any Deposited Asset ("Realized
Losses") allocated thereto. Unless the related Prospectus Supplement provides
otherwise, the initial aggregate Certificate Principal Balance of all Classes
of Certificates of a Series will equal the outstanding aggregate principal
balance of the related Deposited Assets as of the applicable Cut-off Date.
The initial aggregate Certificate Principal Balance of a Series and each
Class thereof will be specified in the related Prospectus Supplement.
Distributions of principal of any Class of Certificates will be made on a pro
rata basis among all the Certificates of such Class. Strip Certificates with
no Certificate Principal Balance will not receive distributions of principal.
FOREIGN CURRENCY CERTIFICATES
If the specified currency of any Certificate is not U.S. dollars (a
"Foreign Currency Certificate"), certain provisions with respect thereto will
be set forth in the related Prospectus Supplement which will specify the
denominations, the currency or currencies in which the principal and interest
with respect to such Certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise
applicable to the Certificates.
INDEXED CERTIFICATES
From time to time, the Issuer may offer a Series of Certificates ("Indexed
Certificates"), the principal amount payable at the stated maturity date of
which (the "Indexed Principal Amount") and/or interest with respect to which
is determined by reference to (i) the rate of exchange between the specified
currency for such Certificate and the other currency or composite currency
(the "Indexed Currency")
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specified therein; (ii) the difference in the price of a specified commodity
(the "Indexed Commodity") on specified dates; (iii) the difference in the
level of a specified stock index (the "Stock Index"), which may be based on
U.S. or foreign stocks, on specified dates; or (iv) such other objective
price or economic measure as are described in the related Prospectus
Supplement. The manner of determining the Indexed Principal Amount of an
Indexed Certificate, and historical and other information concerning the
Indexed Currency, Indexed Commodity, Stock Index or other price or economic
measure used in such determination, will be set forth in the related
Prospectus Supplement, together with any information concerning tax
consequences to the Holders of such Indexed Certificates.
Except as otherwise specified in the related Prospectus Supplement,
interest on an Indexed Certificate will be payable based on the amount
designated in the related Prospectus Supplement as the "Face Amount" of such
Indexed Certificate. The related Prospectus Supplement will describe whether
the principal amount of the related Indexed Certificate that would be payable
upon redemption or repayment prior to the stated maturity date will be the
Face Amount of such Indexed Certificate, the Indexed Principal Amount of such
Indexed Certificate at the time of redemption or repayment, or another amount
described in such Prospectus Supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates ("Dual Currency
Certificates"), in which case payments of principal and/or interest in
respect of Dual Currency Certificates will be made in such currencies, and
rates of exchange will be calculated upon such bases, as indicated in the
Certificates and described in the related Prospectus Supplement. Other
material terms and conditions relating to Dual Currency Certificates will be
set forth in the Certificates and the related Prospectus Supplement.
OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an "Exchangeable Series." The terms upon which a
holder may exchange Certificates of any Exchangeable Series for a pro rata
portion of the Deposited Assets of the related Trust will be specified in the
related Prospectus Supplement; provided that any right of exchange shall be
exercisable only to the extent that such exchange would not be inconsistent
with the Depositor's and such Trust's continued satisfaction 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. Such terms may relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder 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 Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each Certificate tendered for exchange be an
integral multiple of an amount specified in the Prospectus Supplement;
(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 holder to receive any
benefit upon exchange from any Credit Support or other non-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.
Unless otherwise specified in the related Prospectus Supplement, in order
for a Certificate of a given Exchangeable Series (or Class within such
Exchangeable Series) to be exchanged by the applicable Certificateholder, the
trustee for such Certificate must receive, at least 30 (or such shorter
period
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acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association
of Securities Dealers, Inc., the Depository (in accordance with its normal
procedures) or a commercial bank or trust company in the United States
setting forth the name of the holder of such Registered Certificate, the
Certificate Principal Balance or Notional Amount of such Registered
Certificate to be exchanged, the certificate number or a description of the
tenor and terms of such Registration Certificate, a statement that the option
to elect exchange is being exercised thereby and a guarantee that the
Registered Certificate to be exchanged with the form entitled "Option to
Elect Exchange" on the reverse of the Registered Certificate duly completed
will be received by such Trustee not later than five Business Days after the
date of such telegram, telex, facsimile transmission or letter. If the
procedure described in clause (ii) of the preceding sentence is followed,
then such Registered Certificate and form duly completed must be received by
such Trustee by such fifth Business Day. Any tender of a Certificate by the
holder for exchange shall be irrevocable. The exchange option may be
exercised by the holder of a Certificate for less than the entire Certificate
Principal Balance of such Certificate provided that the Certificate Principal
Balance or Notional Amount, as applicable, of such Certificate remaining
outstanding after redemption is an authorized denomination and all other
exchange requirements set forth in the related Prospectus Supplement are
satisfied. Upon such partial exchange, such Certificate shall be cancelled
and a new Certificate or Certificates for the remaining Certificate Principal
Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged
Certificate).
Unless otherwise specified in the applicable Prospectus Supplement,
because initially and until Definitive Certificates are issued each
Certificate will be represented by a Global Security, the Depository's
nominee will be the Certificateholder of such Certificate and therefore will
be the only entity that can exercise a right of exchange. In order to ensure
that the Depository's nominee will timely exercise a right of exchange with
respect to a particular Certificate, the beneficial owner of such Certificate
must instruct the broker or other direct or indirect participant through
which it holds an interest in such Certificate to notify the Depository of
its desire to exercise a right of exchange. Different firms have different
cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct
or indirect participant through which it holds an interest in a 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 the Depository.
Unless otherwise provided in the applicable Prospectus Supplement, upon
the satisfaction of the foregoing conditions and any applicable conditions
with respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Certificateholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described to
such Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited
Assets, in which event the 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.
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, all
Certificates of a given Series (or, if more than one Class exists, any given
Class within that Series) will, upon issuance, be represented by one or more
Global Securities that will be deposited with, or on behalf of, The
Depository Trust Company, New York (for Registered Certificates denominated
and payable in U.S. dollars), or such other depositary identified in the
related Prospectus Supplement (the "Depository"), and registered in the name
of a nominee of the Depository. Global Securities may be issued in either
registered or bearer form and in either temporary or definitive form. See
"Limitations on Issuance of Bearer Certificates" for provisions applicable to
Certificates issued in bearer form. Unless and until it is exchanged in whole
or in
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part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by
the Depository for such Global Security to a nominee of such Depository or by
a nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor of such
Depository or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Depositor as follows: The
Depository Trust Company 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. The Depository Trust Company 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 such Depository ("participants") in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. Such
Depository's participants include securities brokers and dealers (including
the Offering Agent), banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
such Depository. Access to such Depository'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. The Depository Trust Company has confirmed to the
Depositor that it intends to follow such procedures.
Upon the issuance of a Global Security, the Depository for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual 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 Certificates, or,
if such 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
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
Depository for such Global Security or by participants or Persons that hold
through participants. The laws of some states require that certain purchasers
of securities take physical delivery of such securities. Such limits and such
laws may limit the market for beneficial interests in a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
owner of such Global Security, such Depository or such nominee, as the case
may be, will be considered the sole Certificateholder of the individual
Certificates represented by such Global Security for all purposes under the
Trust Agreement governing such Certificates. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to
have any of the individual Certificates represented by such Global Security
registered in their names, will not receive or be entitled to receive
physical delivery of any such Certificates and will not be considered the
Certificateholders thereof under the Trust Agreement governing such
Certificates. Because the Depository can only act on behalf of its
participants, the ability of a holder of any Certificate to pledge that
Certificate to persons or entities that do not participate in the
Depository's system, or to otherwise act with respect to such Certificate,
may be limited due to the lack of a physical certificate for such
Certificate.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Certificates" below, distributions of principal of (and premium, if
any) and any interest on individual Certificates represented by a Global
Security will be made to the Depository or its nominee, as the case may be,
as the Certificateholder of such Global Security. None of the Depositor, the
Administrative Agent, if any, the Trustee for such Certificates, any Paying
Agent or the Certificate Registrar for such 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 Depository for Certificates of a given
Class and Series, upon receipt of any distribution of principal, premium or
interest in respect of a definitive Global Security representing
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any of such 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
Depository. The Depositor also expects that payments by participants to
owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed
below under "Limitations on Issuance of Bearer Certificates" below.
If the Depository for Certificates of a given Class of any Series is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Depositor within ninety (90) days, the
Depositor will issue individual Definitive Certificates in exchange for the
Global Security or Securities representing such Certificates. In addition,
the Depositor may at any time and in its sole discretion determine not to
have any Certificates of a given Class represented by one or more Global
Securities and, in such event, will issue Definitive Certificates of such
Class in exchange for the Global Security or Securities representing such
Certificates. Further, if the Depositor so specifies with respect to the
Certificates of a given Class, an owner of a beneficial interest in a Global
Security representing Certificates of such Class may, on terms acceptable to
the Depositor and the Depository 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
Class represented by such Global Security equal in principal amount to such
beneficial interest and to have such Definitive Certificates registered in
its name (if the Certificates of such Class are issuable as Registered
Certificates). Individual Definitive Certificates of such Class so issued
will be issued (a) as Registered Certificates in denominations, unless
otherwise specified by the Depositor, of $1,000 and integral multiples
thereof if the Certificates of such Class are issuable as Registered
Certificates, (b) as Bearer Certificates in the denomination or denominations
specified by the Depositor if the Certificates of such Class are issuable as
Bearer Certificates or (c) as either Registered or Bearer Certificates, if
the Certificates of such Class are issuable in either form (Section 5.03).
See, however, "Limitations on Issuance of Bearer Certificates" below for a
description of certain restrictions on the issuance of individual Bearer
Certificates in exchange for beneficial interests in a Global Security.
The applicable Prospectus Supplement will set forth any specific terms of
the depositary arrangement with respect to any Class or Series of
Certificates being offered thereby to the extent not set forth or different
from the description set forth above.
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DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
Each 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
Certificates in a designated, publicly issued, fixed income debt security or
a pool of such debt securities (the "Underlying Securities"), purchased by
the Depositor (or an affiliate thereof) in the secondary market and assigned
to a Trust as described in the applicable Prospectus Supplement. The
Underlying Securities will represent direct obligations of one or more
corporations, banking organizations or insurance companies organized under
the laws of the United States or any state, which are subject to the
informational requirements of the Exchange Act and which, in accordance
therewith, file reports and other information with the Commission (with
respect to each Underlying Security, an "Underlying Securities Issuer").
This Prospectus relates only to the Certificates offered hereby and does
not relate to the Underlying Securities. The following description of the
Underlying Securities is intended only to summarize certain characteristics
of the Underlying Securities the Depositor is permitted to deposit in a Trust
and does not purport to be a complete description of any Underlying Security
Prospectus and Underlying Security Indenture (as defined below).
UNDERLYING SECURITIES INDENTURE
General. Unless otherwise specified in the related Prospectus Supplement,
each Underlying Security will have been issued pursuant to an agreement
(each, a "Underlying Securities Indenture") between the Underlying Securities
Issuer and a trustee (the "Underlying Securities Trustee"). Unless otherwise
specified, the Underlying Securities Indenture and the Underlying Securities
Trustee will be qualified under the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the Underlying Securities Indenture will contain certain
provisions required by the Trust Indenture Act.
Certain Covenants. Indentures generally contain covenants intended to
protect security holders against the occurrence or effects of certain
specified events, including restrictions limiting the issuer's, and in some
cases any subsidiary's, ability to: (i) consolidate, merge, or transfer or
lease assets; (ii) incur or suffer to exist any lien, charge, or encumbrance
upon any of its property or assets, or to incur, assume, guarantee or suffer
to exist any indebtedness for borrowed money if the payment of such
indebtedness is secured by the grant of such a lien; (iii) declare or pay any
cash dividends, or make any distributions on or in respect of, or purchase,
redeem, exchange or otherwise acquire or retire for value any capital stock
or subordinated indebtedness of the issuer or its subsidiaries, if any. An
indenture may also contain financial covenants which, among other things,
require the maintenance of certain financial ratios or the creation or
maintenance of reserves. Subject to certain exceptions, indentures typically
may be amended or supplemented and past defaults may be waived with the
consent of the indenture trustee, the consent of the holders of not less than
a specified percentage of the outstanding securities, or both.
The Underlying Securities Indenture related to one or more Underlying
Securities included in a Trust may include some, all or none of the foregoing
provisions or variations thereof or additional covenants not discussed
herein. To the extent that the Underlying Securities are investment grade
debt, they are unlikely to contain significant restrictive covenants,
although certain non-investment grade debt may not be subject to restrictive
covenants either. There can be no assurance that any such provision will
protect the Trust as a holder of the Underlying Securities against losses.
The Prospectus Supplement used to offer any Series of Certificates will
describe material covenants in relation to any Concentrated Underlying
Security and, as applicable, will describe material covenants which are
common to any pool of Underlying Securities.
Events of Default. Indentures generally provide that any one of a number
of specified events will constitute an event of default with respect to the
securities issued thereunder. Such events of default typically include the
following or variations thereof: (i) failure by the issuer to pay an
installment of interest or principal on the securities at the time required
(subject to any specified grace period) or to
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redeem any of the securities when required (subject to any specified grace
period); (ii) failure by the issuer to observe or perform any covenant,
agreement or condition contained in the securities or the indenture which
failure is materially adverse to security holders and continues for a
specified period after notice thereof is given to the issuer by the indenture
trustee or the holders of not less than a specified percentage of the
outstanding securities; (iii) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to
certain of the other outstanding debt obligations of the issuer or the
acceleration by or on behalf of the holders thereof of such securities; and
(iv) certain events of insolvency or bankruptcy with respect to the
Underlying Securities Issuer.
Remedies. Indentures generally provide that upon the occurrence of an
event of default, the indenture trustee may, and upon the written request of
the holders of not less than a specified percentage of the outstanding
securities must, take such action as it may deem appropriate to protect and
enforce the rights of the security holders. Certain indentures provide that
the indenture trustee or a specified percentage of the holders of the
outstanding securities have the right to declare all or a portion of the
principal and accrued interest on the outstanding securities immediately due
and payable upon the occurrence of certain events of default, subject to the
issuer's right to cure, if applicable. Generally, an indenture will contain a
provision entitling the trustee thereunder to be indemnified by the security
holders prior to proceeding to exercise any right or power under such
indenture with respect to such securities at the request of such security
holders. An indenture is also likely to limit a security holder's right to
institute certain actions or proceedings to pursue any remedy under the
indenture unless certain conditions are satisfied, including obtaining the
consent of the indenture trustee, that the proceeding be brought for the
ratable benefit of all holders of the security, and/or that the indenture
trustee, after being requested to institute a proceeding by the owners of at
least a specified minimum percentage of the securities, shall have refused or
neglected to comply with such request within a reasonable time.
Each Underlying Securities Indenture may include some, all or none of the
foregoing provisions or variations thereof or additional events of default
not discussed herein. The Prospectus Supplement with respect to any Series of
Certificates will describe the events of default under the Underlying
Securities Indenture with respect to any Concentrated Underlying Security
("Underlying Security Events of Default") and applicable remedies with
respect thereto. With respect to any Trust comprising a pool of securities,
the applicable Prospectus Supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no
assurance that any such provision will protect the Trust, as a holder of the
Underlying Securities, against losses. If a Underlying Security Event of
Default occurs and the Trustee as a holder of the Underlying Securities is
entitled to vote or take such other action to declare the principal amount of
a Underlying Security and any accrued and unpaid interest thereon to be due
and payable, the Certificateholders' objectives may differ from those of
holders of other securities of the same series and class as any Underlying
Security ("Outstanding Debt Securities") in determining whether to declare
the acceleration of the Underlying Securities.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Underlying Securities with respect to any Trust may be either
senior ("Senior Underlying Securities") or subordinated ("Subordinated
Underlying Securities") in right to payment to other existing or future
indebtedness of the Underlying Securities Issuer. With respect to
Subordinated Underlying Securities, to the extent of the subordination
provisions of such securities, and after the occurrence of certain events,
security holders and direct creditors whose claims are senior to Subordinated
Underlying Securities, if any, may be entitled to receive payment of the full
amount due thereon before the holders of any subordinated debt securities are
entitled to receive payment on account of the principal (and premium, if any)
or any interest on such securities. Consequently, the Trust as a holder of
subordinated debt may suffer a greater loss than if it held unsubordinated
debt of the Underlying Securities Issuer. There can be no assurance, however,
that in the event of a bankruptcy or similar proceeding the Trust as a holder
of Senior Underlying Securities would receive all payments in respect of such
securities even if holders of subordinated securities receive amounts in
respect of such securities. Reference is made to the Prospectus Supplement
used to offer any Series of Certificates for a description of any
subordination provisions with respect to any Concentrated Underlying
Securities and the percentage of Senior Underlying Securities and
Subordinated Underlying Securities, if any, in a Trust comprised of a pool of
securities.
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Secured Obligations. Certain of the Underlying Securities with respect to
any Trust may represent secured obligations of the Underlying Securities
Issuer ("Secured Underlying Securities"). Generally, unless an event of
default shall have occurred, or with respect to certain collateral or as
otherwise set forth in the indenture pursuant to which such securities were
offered and sold, an issuer of secured obligations generally has the right to
remain in possession and retain exclusive control of the collateral securing
a security and to collect, invest and dispose of any income related to the
collateral. The indenture pursuant to which any secured indebtedness is
issued may also contain certain provisions for release, substitution or
disposition of collateral under certain circumstances with or without the
consent of the indenture trustee or upon the direction of not less than a
specified percentage of the security holders. The indenture pursuant to which
any secured indebtedness is issued will also provide for the disposition of
the collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal
(and premium, if any) or any interest on such securities pending the sale of
any collateral and prior to or during such period the related collateral may
decline in value. If proceeds of the sale of collateral following an
indenture event of default are insufficient to repay all amounts due in
respect of any secured obligations, the holders of such securities (to the
extent not repaid from the proceeds of the sale of the collateral) would have
only an unsecured claim ranking pari passu with the claims of all other
general unsecured creditors.
The Underlying Securities Indenture with respect to any Secured Underlying
Security may include, some, all or none of the foregoing provisions or
variations thereof. The Prospectus Supplement used to offer any Series of
Certificates that includes Concentrated Underlying Securities which are
Secured Underlying Securities will describe the security provisions of such
Underlying Securities and the related collateral. With respect to any Trust
composed of a pool of securities, a substantial portion of which are Secured
Underlying Securities, the applicable Prospectus Supplement will disclose
certain general information with respect to such security provisions and the
collateral.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable Prospectus Supplement with respect to
each Series of Certificates for a description of the following terms, as
applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, and the aggregate principal amount,
denomination and form thereof; (ii) whether such securities are senior or
subordinated to any other obligations of the Underlying Securities Issuer;
(iii) whether any of the obligations are secured or unsecured and the nature
of any collateral; (iv) the limit, if any, upon the aggregate principal
amount of such debt securities; (v) the dates on which, or the range of dates
within which, the principal of (and premium, if any, on) such debt 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 Outstanding Debt 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 debt securities may be 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 debt 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 are denominated, 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 describe the composition of the Underlying
Securities pool as of the Cut-off Date, certain
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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 the terms set
forth in (ii), (iii), (v), (vi), (vii), (viii) and (ix) of the preceding
paragraph and any other material terms regarding such pool of securities.
In addition to the foregoing, with respect to each Concentrated Underlying
Security the applicable Prospectus Supplement will disclose the identity of
the applicable obligor and the Underlying Securities Trustee, and will
describe the existence and type of certain information that is made publicly
available by each obligor regarding such Underlying Security or Underlying
Securities and will disclose where and how prospective purchasers of the
Certificates may obtain such publicly available information with respect to
each such obligor. Such publicly available information will typically consist
of the quarterly and annual reports filed under the Exchange Act by such
issuer with, and which are available from, the Commission.
If an issuer of Concentrated Underlying Securities ceases to file periodic
reports under the Exchange Act, the Depositor, on behalf of the Trust, will
continue to be subject to the reporting requirements of the Exchange Act but
certain information with respect to such issuer may be unavailable.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, the Depositor may also deposit
into a given Trust, or the Trustee on behalf of the 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 related or incidental to one or more of such Underlying Securities or
to some other asset deposited in the Trust, including hedging contracts and
other similar arrangements (such as puts, calls, interest rate swaps,
currency swaps, floors, caps and collars, 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)
and direct obligations of the United States (all such assets for any given
Series, together with the related Underlying Securities, the "Deposited
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.
Unless otherwise specified in the related Prospectus Supplement, the
Deposited Assets for a given Series of Certificates and the related Trust
will not constitute Deposited Assets for any other Series of Certificates and
the related Trust and the Certificates of each Class of a given Series
possess an equal and ratable undivided ownership interest in such Deposited
Assets. The applicable Prospectus Supplement may, however, specify that
certain assets constituting a part of the Deposited 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 Deposited
Assets.
CREDIT SUPPORT
As specified in the applicable Prospectus Supplement for a given Series of
Certificates, the Trust for any Series of Certificates may include, or the
Certificateholders of such Series (or any Class or group of Classes within
such Series) may have the benefit of, Credit Support for any Class or group
of Classes within such Series. 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 group of Classes
of Certificate contains, or the Certificateholders of such 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, including financial information with respect to any such
obligor providing Credit Support for 20% or more of the aggregate principal
amount of such Class or Classes.
Subordination. As discussed below under "--Collections," the rights of the
Certificateholders of any given Class within a Series of Certificates to
receive collections from the Trust for such Series and any Credit Support
obtained for the benefit of the Certificateholders of such Series (or Classes
within such
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Series) may be subordinated to the rights of the Certificateholders of one or
more other Classes of such Series to the extent described in the related
Prospectus Supplement. Such subordination accordingly provides some
additional credit support to those Certificateholders of those other Classes.
For example, if losses are realized during a given period on the Deposited
Assets relating to a Series of Certificates such that the collections
received thereon are insufficient to make all distributions on the
Certificates of such Series, those realized losses would be allocated to the
Certificateholders of any Class of any such Series that is subordinated to
another Class, to the extent and in the manner provided in the related
Prospectus Supplement. In addition, if so provided in the applicable
Prospectus Supplement, certain amounts otherwise payable to
Certificateholders of any Class that is subordinated to another Class may be
required to be deposited into a reserve account. Amounts held in any reserve
account may be applied as described below under "--Reserve Accounts" and in
the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit Support
for any Series or Class of Certificates may include, in addition to the
subordination of certain Classes of such Series and the establishment of a
reserve account, any of the 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 Certificateholders of such Class or as otherwise
specified in the related 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
Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any Series (or
Class or group of Classes of Certificates within such Series) may, if
specified in the applicable Prospectus Supplement, have the benefit of a
letter or letters of credit (a "Letter of Credit") issued by a bank (a
"Letter of Credit Bank") or a surety bond or bonds (a "Surety Bond") issued
by a surety company (a "Surety"). In either case, the Trustee 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 related
Prospectus Supplement, the payment of such fees or premiums is otherwise
provided for. The Trustee 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.
Unless otherwise specified in the applicable Prospectus Supplement, in the
event that the Letter of Credit Bank or the Surety, as applicable, ceases to
satisfy any credit rating or other applicable requirements specified in the
related Prospectus Supplement, the Trustee or such other person specified in
the applicable 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 related Prospectus Supplement, the
Trustee or such other person specified in the Prospectus Supplement will
deposit or cause to be deposited into an account maintained with an eligible
institution (which may be the Trustee) (a "Reserve Account") 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
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addition to such deposit, a Reserve Account may be funded through application
of a portion of collections received on the Deposited Assets for a given
Series of Certificates, in the manner and priority specified in the
applicable Prospectus Supplement. Amounts may be distributed to
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 related 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 named in the related
Prospectus Supplement.
COLLECTIONS
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to
administer the related Deposited 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 account maintained or
controlled by the applicable Trustee for the benefit of such Series (each a
"Certificate Account"). An Administrative Agent, if any is appointed pursuant
to the applicable Prospectus Statement, 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
administrative 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 Certificates of such
Series (and Classes within such Series), all in the manner and priorities
described in the related Prospectus Supplement. The applicable Prospectus
Supplement will specify the collection periods, if applicable, and
Distribution Dates for a given Series of Certificates and the particular
requirements relating to the segregation and investment of collections
received on the Deposited Assets during a given collection period or on or by
certain specified dates. There can be no assurance that amounts received from
the Deposited Assets and any Credit Support obtained for the benefit of
Certificateholders for a particular Series or Class of 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
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 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 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 relative
distribution priority assigned to each Class of a given Series for purposes
of payments of certain amounts, such as principal, may be different from the
relative distribution priority assigned to each such Class for payments of
other amounts, such as interest or premium.
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DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of certain provisions of the Trust Agreement and the
Certificates does not purport to be complete and such summary is qualified in
its entirety by reference to the detailed provisions of the form of Trust
Agreement filed as an exhibit to the Registration Statement. Article and
section references in parentheses below are to articles and sections in the
Trust Agreement. Wherever particular sections or defined terms of the Trust
Agreement are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the Depositor will
cause the Underlying Securities to be included in the related Trust, and any
other Deposited Asset specified in the Prospectus Supplement, to be assigned
to the related Trustee, together with all principal, premium (if any) and
interest received by or on behalf of the Depositor on or with respect to such
Deposited Assets after the cut-off date specified in the Prospectus
Supplement (the "Cut-off Date"), other than principal, premium (if any) and
interest due on or before the Cut-off Date and other than any Retained
Interest (Section 2.01). The Trustee will, concurrently with such assignment,
deliver the Certificates to the Depositor in exchange for certain assets to
be deposited in the Trust (Section 2.06). Each Deposited Asset will be
identified in a schedule appearing as an exhibit to the Trust Agreement. Such
schedule will include certain statistical information with respect to each
Underlying Security and each other Deposited Asset as of the Cut-off Date,
and in the event any Underlying Security represents ten percent or more of
the total Underlying Securities with respect to any Series of Certificates,
such schedule will include, to the extent applicable, information regarding
the payment terms thereof, the Retained Interest, if any, with respect
thereto, the maturity or terms thereof, the rating, if any, thereof and
certain other information with respect thereto.
In addition, the Depositor will, with respect to each Deposited 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 Deposited Asset to the Trustee. The Trustee (or such custodian) will
review such documents upon receipt thereof or within such period as is
permitted in the Prospectus Supplement, and the Trustee (or such custodian)
will hold such documents in trust for the benefit of the Certificateholders
(Sections 2.01 and 2.02).
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement if and to the extent provided therein, if
any such document is found to be missing or defective in any material
respect, the Trustee (or such custodian) shall immediately notify the
Administrative Agent, if any, and the Depositor, and the Administrative
Agent, if any, and otherwise the Trustee shall immediately notify the
relevant person who sold the applicable Deposited Asset to the Depositor (a
"Deposited Asset Provider"). If and to the extent specified in the applicable
Prospectus Supplement, if the Deposited Asset Provider cannot cure such
omission or defect within 60 days after receipt of such notice, the Deposited
Asset Provider will be obligated, within 90 days of receipt of such notice,
to repurchase the related Deposited Asset from the Trustee at the Purchase
Price (as defined below) or provide a substitute for such Deposited Asset.
There can be no assurance that a Deposited Asset Provider will fulfill this
repurchase or substitution obligation. Although the Administrative Agent, if
any, or otherwise the Trustee is obligated to use its best efforts to enforce
such obligation, neither such Administrative Agent nor the Depositor will be
obligated to repurchase or substitute for such Deposited Asset if the
Deposited Asset Provider defaults on its obligation. Unless otherwise
specified in the related Prospectus Supplement, when applicable, this
repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for omission of, or a material
defect in, or failure to provide, a constituent document (Section 2.03).
Each of the Depositor and the Administrative Agent, if any, will make
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the Trust
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Agreement. Upon a breach of any such representation of the Depositor or any
such Administrative Agent, as the case may be, which materially and adversely
affects the interests of the Certificateholders, the Depositor or any such
Administrative Agent, respectively, will be obligated to cure the breach in
all material respects (Sections 2.04 and 2.05).
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates the Trustee or such
other person specified in the Prospectus Supplement directly or through
sub-administrative agents, will make reasonable efforts to collect all
scheduled payments under the Deposited 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 (collectively, the "Credit Support
Instruments") and provided 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.
Sub-Administration. Any Trustee or Administrative Agent may delegate its
obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent"),
but the Trustee or Administrative Agent will remain obligated with respect to
such obligations under the Trust Agreement. Each Sub-Administrative Agent
will be required to perform the customary functions of an administrator of
comparable financial assets, including, if applicable, collecting payments
from obligors and remitting such collections to the Trustee; maintaining
accounting records relating to the Deposited Assets, attempting to cure
defaults and delinquencies; and enforcing any other remedies with respect
thereto all as and to the extent provided in the applicable
Sub-Administration Agreement (as defined below).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a "Sub-Administration Agreement") will be
consistent with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust
Agreement. With respect to any Sub-Administrative Agreement between an
Administrative Agent and a Sub-Administrative Agent, although each such
Sub-Administration Agreement will be a contract solely between such
Administrative Agent and the Sub-Administrative Agent, the Trust Agreement
pursuant to which a Series of Certificates is issued will provide that, if
for any reason such Administrative Agent for such Series of Certificates is
no longer acting in such capacity, the Trustee or any successor
Administrative Agent must recognize the Sub-Administrative Agent's rights and
obligations under such Sub-Administration Agreement.
The Administrative Agent or Trustee, as applicable, will be solely liable
for all fees owed by it to any Sub-Administrative Agent, irrespective of
whether the compensation of the Administrative Agent or Trustee, as
applicable, pursuant to the Trust Agreement with respect to the particular
Series of Certificates is sufficient to pay such fees. However, a
Sub-Administrative Agent may be entitled to a Retained Interest in certain
Deposited Assets to the extent provided in the related Prospectus Supplement.
Each Sub-Administrative Agent will be reimbursed by the Administrative Agent,
if any, or otherwise the Trustee for certain expenditures which it makes,
generally to the same extent the Administrative Agent or Trustee, as
applicable, would be reimbursed under the terms of the Trust Agreement
relating to such Series. See "--Retained Interest; Administrative Agent
Compensation and Payment of Expenses."
The Administrative Agent or Trustee, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. Unless otherwise specified in
the applicable Prospectus Supplement, as administrator with respect to the
Deposited Assets, the Trustee, on behalf of the Certificateholders of a given
Series (or any Class or Classes within such Series), will present claims
under each applicable Credit Support Instrument, and will take such
reasonable steps as are necessary to receive
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payment or to permit recovery thereunder with respect to defaulted Deposited
Assets. As set forth above, all collections by or on behalf of the Trustee or
Administrative Agent under any Credit Support Instrument are to be deposited
in the Certificate Account for the related Trust, subject to withdrawal as
described above.
Unless otherwise provided in the applicable Prospectus Supplement, if
recovery on a defaulted Deposited Asset under any related Credit Support
Instrument is not available, 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 the defaulted Deposited Asset (Section 3.12),
provided that, except as otherwise expressly provided in the applicable
Prospectus Supplement, it shall not be required to expend or risk its own
funds or otherwise incur personal financial liability. If the proceeds of any
liquidation of the defaulted Deposited Asset are less than the sum of (i) the
outstanding principal balance of the defaulted Deposited Asset, (ii) interest
accrued thereon at the applicable interest rate and (iii) the aggregate
amount of expenses incurred by the Administrative Agent and the Trustee, as
applicable, in connection with such proceedings to the extent reimbursable
from the assets of the Trust under the Trust Agreement, the Trust will
realize a loss in the amount of such difference (Section 3.12). Only if and
to the extent provided in the applicable Prospectus Supplement, the
Administrative Agent or Trustee, as so provided, may be entitled to withdraw
or cause to be withdrawn from the related Certificate Account out of the net
proceeds recovered on any defaulted Deposited Asset, prior to the
distribution of such proceeds to Certificateholders, amounts representing its
normal administrative compensation on the Deposited Asset, unreimbursed
administrative expenses incurred with respect to the Deposited Asset and any
unreimbursed advances of delinquent payments made with respect to the
Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Deposited 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 series supplement to the Trust Agreement. A Retained Interest
in a Deposited Asset represents a specified interest therein. Payments in
respect of the Retained Interest will be deducted from payments on the
Deposited Assets as received and, in general, will not be deposited in the
applicable Certificate Account or become a part of the related Trust. Unless
otherwise provided in the applicable Prospectus Supplement, any partial
recovery of interest on a Deposited Asset, after deduction of all applicable
administration fees, will be allocated between the Retained Interest (if any)
and interest distributions to Certificateholders on a pari passu basis.
The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus Supplement, in
addition to amounts payable to any Sub-Administrative Agent, the
Administrative Agent, if any, and otherwise the Trustee will pay from its
compensation certain expenses incurred in connection with its administration
of the Deposited Assets, including, without limitation, payment of the fees
and disbursements of the Trustee, if applicable, and independent accountants,
payment of expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the
related Prospectus Supplement (Section 3.14).
ADVANCES IN RESPECT OF DELINQUENCIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Administrative Agent, if any, specified therein will have no obligation to
make any advances with respect to collections on the Deposited Assets or in
favor of the Certificateholders of the related Series of Certificates.
However, to the extent provided in the applicable Prospectus Supplement, any
such Administrative Agent will advance on or before each Distribution Date
its own funds or funds held in the Certificate Account for such Series that
are not part of the funds available for distribution for such Distribution
Date, in an amount equal to
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the aggregate of payments of principal, premium (if any) and interest (net of
related administration fees and any Retained Interest) with respect to the
Deposited Assets that were due during the related Collection Period and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below) and (ii) such other
conditions as may be specified in the Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled interest,
premium (if any) and principal payments to holders of the Class or Classes of
Certificates entitled thereto, rather than to guarantee or insure against
losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's funds, if any, will be reimbursable
only out of related recoveries on the Deposited Assets (and amounts received
under any form of Credit Support) for such Series with respect to which such
advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any
amounts in the Certificate Accounts for such Series to the extent that such
Administrative Agent shall determine, in its sole judgment, that such advance
(a "Nonrecoverable Advance") is not ultimately recoverable from Related
Proceeds. If advances have been made by such Administrative Agent from excess
funds in the Certificate Account for any Series, such Administrative Agent
will replace such funds in such Certificate Account on any future
Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date (Section 4.03). If so specified in the
related Prospectus Supplement, the obligations, if any, of an Administrative
Agent to make advances may be secured by a cash advance reserve fund or a
surety bond. If applicable, information regarding the characteristics of, and
the identity of any obligor on, any such surety bond, will be set forth in
the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE ADMINISTRATIVE AGENT AND THE DEPOSITOR
An Administrative Agent, if any, for each Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The
entity serving as Administrative Agent for any such Series may be the
Trustee, the Depositor, as affiliate of either thereof, the Deposited Asset
Provider or any third party and may have other normal business relationships
with the Trustee, the Depositor, their affiliates or the Deposited Asset
Provider.
The Trust Agreement will provide that an Administrative Agent may resign
from its obligations and duties under the Trust Agreement with respect to any
Series of Certificates only if such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of
any Class of Certificates of such Series or upon a determination that its
duties under the Trust Agreement with respect to such Series are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor has assumed the Administrative Agent's
obligations and duties under the Trust Agreement with respect to such Series
(Section 6.04).
The Trust Agreement will further provide that neither such an
Administrative Agent, the Depositor nor any director, officer, employee, or
agent or the Administrative Agent or the Depositor will incur any liability
to the related Trust or Certificateholders for any action taken, or for
refraining from taking any action, in good faith pursuant to the Trust
Agreement or for errors in judgment; provided, however, that none of the
Administrative Agent, the company nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. The Trust Agreement will further provide that, unless otherwise
provided in the applicable series supplement thereto, such an Administrative
Agent, the Depositor and any director, officer, employee or agent of the
Administrative Agent or the Depositor will be entitled to indemnification by
the related 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 Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will
provide that neither such an Administrative Agent nor the Depositor will be
under any obligation to
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appear in, prosecute or defend any legal action which is not incidental to
their respective responsibilities under the Trust Agreement or which in its
opinion may involve it in any expense or liability. Each of such
Administrative Agent or the Depositor may, however, in its discretion
undertake any such action which it may deem necessary or desirable with
respect to the Trust Agreement and the rights and duties of the parties
thereto and the interests of the Certificateholders thereunder (Section
6.03). The applicable Prospectus Supplement will describe how such legal
expenses and costs of such action and any liability resulting therefrom will
be allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to
which an Administrative Agent is a part, or any person succeeding to the
business of an Administrative Agent, will be the successor of the
Administrative Agent under the Trust Agreement with respect to the
Certificates of any given Series (Section 6.02).
ADMINISTRATIVE AGENT TERMINATION EVENTS; RIGHTS UPON ADMINISTRATIVE AGENT
TERMINATION EVENT
Unless otherwise provided in the related Prospectus Supplement,
"Administrative Agent Termination Events" under the Trust Agreement with
respect to any given Series of Certificates will consists of the following:
(i) any failure by an Administrative Agent to remit to the Trustee any funds
in respect of collections on the Deposited Assets and Credit Support, if any,
as required under the Trust Agreement, that continues unremedied for five
days after the giving of written notice of such failure to the Administrative
Agent by the Trustee or the Depositor, or to the Administrative Agent, the
Depositor and the Trustee by the holders of such Certificates evidencing not
less than 25% of the Voting Rights (as defined below); (ii) any failure by an
Administrative Agent duly to observe or perform in any material respect any
of its other covenants or obligations under the Trust Agreement with respect
to such Series which continues unremedied for thirty days after the giving of
written notice of such failure to the Administrative Agent by the Trustee or
the Depositor, or to the Administrative Agent, the Depositor and the Trustee
by the holders of such Certificates evidencing not less than 25% of the
Voting Rights; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain
actions by or on behalf of an Administrative Agent indicating its insolvency
or inability to pay its obligations (Section 7.01). Any additional
Administrative Agent Termination Events with respect to any given Series of
Certificates will be set forth in the applicable Prospectus Supplement. In
addition, the applicable Prospectus Supplement and the related series
supplement to the Trust Agreement will specify as to each matter requiring
the vote of holders of Certificates of a Class or group of Classes within a
given Series, the circumstances and manner in which the Required Percentage
(as defined below) applicable to each such matter is calculated. "Required
Percentage" means with respect to any matter requiring a vote of holders of
Certificates of a given Series, the specified percentage (computed on the
basis of outstanding Certificate Principal Balance or Notional Amount, as
applicable) of Certificates of a designated Class or group of Classes within
such Series (either voting as separate classes or as a single class)
applicable to such matter, all as specified in the applicable Prospectus
Supplement and the related series supplement to the Trust Agreement. "Voting
Rights" evidenced by any Certificate will be the portion of the voting rights
of all the Certificates in the related Series allocated in the manner
described in the related Prospectus Supplement (Article I).
Unless otherwise specified in the applicable Prospectus Supplement, so
long as an Administrative Agent Termination Event under the Trust Agreement
with respect to a given Series of Certificates remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of such
Certificates evidencing not less than the "Required Percentage --
Administrative Agent Termination" of the Voting Rights, the Trustee will,
terminate all rights and obligations of such Administrative Agent under the
Trust Agreement relating to the applicable Trust and in and to the related
Deposited Assets (other than any Retained Interest of such Administrative
Agent), whereupon the Trustee will succeed to all the responsibilities,
duties and liabilities of such Administrative Agent under the Trust Agreement
with respect to such Series (except that if the Trustee is prohibited by law
from obligating itself to make advances regarding delinquent Deposited
Assets, then the Trustee will not be so obligated) and will be entitled to
similar compensation arrangements. In the event that the Trustee is unwilling
or unable to act, it may or, at the written request of the holders of such
Certificates evidencing not less than the "Required Percentage --
Administrative Agent Termination" of the Voting Rights, it will appoint, or
petition a court
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of competent jurisdiction for the appointment of, an administration agent
acceptable to the Rating Agency with a net worth at the time of such
appointment of at least $15,000,000 to act as successor to such
Administrative Agent under the Trust Agreement with respect to such Series.
Pending such appointment, the Trustee is obligated to act in such capacity
(except that if the Trustee is prohibited by law from obligating itself to
make advances regarding delinquent Deposited Assets, then the Trustee will
not be so obligated). The Trustee and any such successor may agree upon the
compensation be paid to such successor, which in no event may be greater than
the compensation payable to such Administrative Agent under the Trust
Agreement with respect to such Series (Sections 7.01 and 7.02).
No Certificateholder will have the right under the Trust Agreement to
institute any proceeding with respect thereto unless such holder previously
has given to the Trustee written notice of breach and unless the holders of
Certificates evidencing not less than the "Required Percentage -- Remedies"
of the Voting Rights have made written request upon the Trustee to institute
such proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity, and the Trustee for fifteen days has neglected
or refused to institute any such proceeding (Section 10.03). 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 of matters
arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any
of the holders of Certificates covered by the Trust Agreement, unless such
Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby (Section 8.02).
MODIFICATION AND WAIVER
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement for each Series of Trust Certificates may be amended by the
Depositor and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders, for certain purposes including (i) to cure
any ambiguity, (ii) to correct or supplement any provision therein which may
be inconsistent with any other provision therein or in the Prospectus
Supplement, (iii) to add or supplement any Credit Support for the benefit of
any Certificateholders (provided that if any such addition affects any series
or class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion
of counsel, have a material adverse effect on the interests of any affected
series or class of Certificateholders), (iv) to add to the covenants,
restrictions or obligations of the Depositor, the Administrative Agent, if
any, or the Trustee for the benefit of the Certificateholders, (v) to add,
change or eliminate any other provisions with respect to matters or questions
arising under such Trust Agreement so long as (x) any such addition, change
or elimination will not, as evidenced by an opinion of counsel, affect the
tax status of the Trust or result in a sale or exchange of any Certificate
for tax purposes and (y) the Trustee has received written confirmation from
each Rating Agency rating such Certificates that such amendment will not
cause such Rating Agency to reduce or withdraw the then current rating
thereof, or (vi) to comply with any requirements imposed by the Code. Without
limiting the generality of the foregoing, unless otherwise specified in the
applicable Prospectus Supplement, 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 Certificates evidencing not less than the "Required
Percentage -- Amendment" of the Voting Rights of those Certificates that are
materially adversely affected by such modification or amendment for the
purpose of adding any provision to or changing in any manner or eliminating
any provision of the Trust Agreement or of modifying in any manner the rights
of such Certificateholders; provided, however, that in the event such
modification or amendment would materially adversely affect the rating of any
Series or Class by each Rating Agency, the "Required Percentage -- Amendment"
specified in the related series supplement to the Trust Agreement shall
include an additional specified percentage of the Certificates of such Series
or Class.
Except as otherwise set forth in the applicable Prospectus Supplement, no
such modification or amendment may, however, (i) reduce in any manner the
amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of
such Certificate or (ii) reduce the aforesaid Required Percentage of Voting
Rights required for the consent to any such amendment without the consent of
the holders of all Certificates covered by the Trust Agreement then
outstanding.
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Unless otherwise specified in the applicable Prospectus Supplement,
holders of Certificates evidencing not less than the "Required Percentage --
Waiver" of the Voting Rights of a given Series may, on behalf of all
Certificateholders of that Series, (i) waive, insofar as that Series is
concerned, compliance by the Depositor, the Trustee or the Administrative
Agent, if any, with certain restrictive provisions, if any, of the Trust
Agreement before the time for such compliance and (ii) waive any past default
under the Trust Agreement with respect to Certificates of that Series, except
a default in the failure to distribute amounts received as principal of (and
premium, if any) or any interest on any such Certificate and except a default
in respect of a covenant or provision the modification or amendment of which
would require the consent of the holder of each outstanding Certificate
affected thereby (Section 7.04).
REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in the applicable
Prospectus Supplement, with each distribution to Certificateholders of any
Class of Certificates of a given Series, the Administrative Agent or the
Trustee, as provided in the related Prospectus Supplement, will forward or
cause to be forwarded to each such Certificateholder, to the Depositor and to
such other parties as may be specified in the Trust Agreement, a statement
setting forth:
(i) the amount of such distribution to Certificateholders of such Class
allocable to principal of or interest or premium, if any, on the
Certificates of such Class; and the amount of aggregate unpaid interest as
of such Distribution Date;
(ii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified herein and in the related Prospectus
Supplement;
(iii) the amount of compensation received by the Administrative Agent, if
any, and the Trustee for the period relating to such Distribution Date,
and such other customary information as the Administrative Agent, if any,
or otherwise the Trustee deems necessary or desirable to enable
Certificateholders to prepare their tax returns;
(iv) if the Prospectus Supplement provides for advances, the aggregate
amount of advances included in such distribution, and the aggregate amount
of unreimbursed advances at the close of business on such Distribution
Date;
(v) the aggregate stated principal amount or, if applicable, notional
principal amount of the Deposited Assets and the current interest rate
thereon at the close of business on such Distribution Date;
(vi) the aggregate Certificate Principal Balance or aggregate Notional
Amount, if applicable, of each Class of Certificates (including any Class
of Certificates not offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in such aggregate
Certificate Principal Balance or aggregate Notional Amount due to the
allocation of any Realized Losses or otherwise; and
(vii) as to any Series (or Class within such Series) for which Credit
Support has been obtained, the amount of coverage of each element of
Credit Support included therein as of the close of business on such
Distribution Date.
In the case of information furnished pursuant to subclauses (i) and (iii)
above, the amounts shall be expressed as a U.S. dollar amount (or equivalent
thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent
or the Trustee, as provided in the related Prospectus Supplement, shall
furnish to each person who at any time during the calendar year was a
Certificateholder a statement containing the information set forth in
subclauses (i) and (iii) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Administrative Agent or the Trustee, as applicable,
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Administrative Agent or the
Trustee, as applicable, pursuant to any requirements of the Code as are from
time to time in effect (Section 4.02).
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Notices. Unless otherwise provided in the applicable Prospectus
Supplement, any notice required to be given to a holder of a Registered
Certificate will be mailed to the last address of such holder set forth in
the applicable Certificate Register. Any notice required to be given to a
holder of a Bearer Certificate will be published in a daily morning newspaper
of general circulation in the city or cities specified in the Prospectus
Supplement relating to such Bearer Certificate.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that commencing on a certain date and on or
before a specified date in each year thereafter, a firm of independent public
accountants will furnish a statement to the Trustee to the effect that such
firm has examined certain documents and records relating to the
administration of the Deposited Assets during the related 12-month period
(or, in the case of the first such report, the period ending on or before the
date specified in the Prospectus Supplement, which date shall not be more
than one year after the related Original Issue Date) and that, on the basis
of certain agreed upon procedures considered appropriate under the
circumstances, such firm is of the opinion that such administration was
conducted in compliance with the terms of the Trust Agreement, except for
such exceptions as such firm shall believe to be immaterial and such other
exceptions and qualifications as shall be set forth in such report (Section
3.16).
The Trust Agreement will also provide for delivery to the Depositor, the
Administrative Agent, if any, and the Trustee on behalf of the
Certificateholders, on or before a specified date in each year, of an annual
statement signed by two officers of the Trustee to the effect that the
Trustee has fulfilled its obligations under the Trust Agreement throughout
the preceding year with respect to any Series of Certificates (Section 3.15).
Copies of the annual accountants' statement, if any, and the statement of
officers of the Trustee may be obtained by Certificateholders without charge
upon written request to either the Administrative Agent or the Trustee, as
applicable, at the address set forth in the related Prospectus Supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Certificate is mutilated, destroyed, lost or stolen, it may be replaced at
the corporate trust office or agency of the applicable Trustee in the City
and State of New York (in the case of Registered Certificates) or at the
principal London office of the applicable Trustee (in the case of Bearer
Certificates), or such other location as may be specified in the applicable
Prospectus Supplement, upon payment by the holder of such expenses as may be
incurred by the applicable Trustee in connection therewith and the furnishing
of such evidence and indemnity as such Trustee may require. Mutilated
Certificates must be surrendered before new Certificates will be issued
(Section 5.05).
TERMINATION
The obligations created by the Trust Agreement for each Series of
Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party
entitled to effect such termination, under the circumstances and in the
manner set forth in the related Prospectus Supplement. In no event, however,
will any trust created by the Trust Agreement continue beyond the respective
date specified in the related Prospectus Supplement. Written notice of
termination of the obligations with respect to the related Series of
Certificates under the Trust Agreement will be provided as set forth above
under "--Reports to Certificateholders; Notices -- Notices," and the final
distribution will be made only upon surrender and cancellation of the
Certificates at an office or agency appointed by the Trustee which will be
specified in the notice of termination (Section 9.01).
Any such purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a Series of Certificates shall be made at a
price approximately equal to the aggregate fair
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market value of all the assets in the Trust (as determined by the Trustee,
the Administrative Agent, if any, and, if different than both such persons,
the person entitled to effect such termination), in each case taking into
account accrued interest at the applicable interest rate to the first day of
the month following such purchase or, to the extent specified in the
applicable Prospectus Supplement, a specified price as determined therein
(such price, a "Purchase Price"). The exercise of such right will effect
early retirement of the Certificates of that Series, but the right of the
person entitled to effect such termination is subject to the aggregate
principal balance of the outstanding Deposited Assets for such Series at the
time of purchase being less than the percentage of the aggregate principal
balance of the Deposited Assets at the Cut-off Date for that Series specified
in the related Prospectus Supplement (Section 9.01).
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates of any Series or any Deposited Asset or
related document and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited
Assets, or deposited into or withdrawn from the related Certificate Account
or any other account by or on behalf of such Administrative Agent (Section
8.03). If no Administrative Agent Termination Event has occurred and is
continuing with respect to any given Series, 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 (Section
8.01).
THE TRUSTEE
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the related Prospectus Supplement. The commercial bank,
national banking association or trust company serving as Trustee will be
unaffiliated with, but may have normal banking relationships with, the
Depositor, any Administrative Agent and their respective affiliates.
36
<PAGE>
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 after the issue 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 165(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, 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 Centrale de Livraison de
Valeurs Mobilieres S.A. ("CEDEL") for credit to the accounts designated by or
on behalf of the purchasers 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 CEDEL 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
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Certificate having a Specified Currency other than U.S.
dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. 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. Fluctuations in any particular exchange rate that have occurred
in the past are not necessarily indicative, however, of fluctuations in the
rate that may occur during the term of any Certificate. Depreciation of the
Specified Currency for a Certificate against the U.S. dollar would result in
a decrease in the effective yield of such Certificate below its Pass-Through
Rate and, in certain circumstances, could result in a loss to the investor on
a U.S. dollar basis.
37
<PAGE>
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the
availability of a Specified Currency for making distributions in respect of
Certificates denominated in such currency. At present, the Depositor has
identified the following currencies in which distributions of principal,
premium and interest on Certificates may be made: Australian dollars,
Canadian dollars, Danish kroner, Italian lire, Japanese yen, New Zealand
dollars, U.S. dollars and ECU. However, Certificates distributable with
Specified Currencies other than those listed may be issued at any time. 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 Certificate, the currency in
which amounts then due to be distributed in respect of such Certificate are
distributable would not be available. In that event, such payments will be
made in the manner set forth above under "Description of Certificates --
General" or as otherwise specified in the applicable Prospectus Supplement.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES
DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT
AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus is directed to prospective
purchasers of Certificates who are United States residents. The applicable
Prospectus Supplement for certain issuances of Certificates may set forth
certain information applicable to prospective purchasers who are residents of
countries other than the United States with respect to matters that may
affect the purchase or holding of, or receipt of distributions of principal,
premium or interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain information concerning
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.
PAYMENT CURRENCY
Except as set forth below or unless otherwise provided in the applicable
Prospectus Supplement, if distributions in respect of a Certificate are
required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the Depositor's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all distributions in respect of such Certificate shall be
made in U.S. dollars until such currency is again available or so used. The
amounts so payable on any date in such currency shall be converted into U.S.
dollars on the basis of the most recently available Market Exchange Rate for
such currency or as otherwise indicated in the applicable Prospectus
Supplement.
If distribution in respect of a Certificate is required to be made in ECU
and ECU is no longer used in the European Monetary System, then all
distributions in respect of such Certificate shall be made in U.S. dollars
until ECU is again so used. The amount of each distribution in U.S. dollars
shall be computed on the basis of the equivalent of the ECU in U.S. dollars,
determined as described below, as of the second Business Day prior to the
date on which such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined for the Certificates of any Series and Class
by the applicable Trustee on the following basis. The component currencies of
the ECU for this purpose (the "Components") shall be the currency amounts
that were components of the ECU as of the last date on which the ECU was used
in the European Monetary System. The equivalent of the ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by such Trustee on the basis of the most recently available Market
Exchange Rates for such Components or as otherwise indicated in the
applicable Prospectus Supplement.
38
<PAGE>
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the
amounts of those currencies as Components shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
component currencies expressed in such single currency. If any component
currency is divided into two or more currencies, the amount of that currency
as a Component shall be replaced by amounts of such two or more currencies,
each of which shall be equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above made by the applicable Trustee shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the related Certificateholders of
such Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates will be governed by and construed in accordance with the law of
the State of New York. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than
the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New
York provides, however, that an action based upon an obligation denominated
in a currency other than U.S. dollars will be rendered in the foreign
currency of the underlying obligation and converted into U.S. dollars at the
rate of exchange prevailing on the date of the entry of the judgment or
decree.
PLAN OF DISTRIBUTION
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 Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such 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 Certificates may be listed,
any restrictions on the sale and delivery of Certificates in bearer form and
the place and time of delivery of the Certificates to be offered thereby.
If underwriters are used in the sale, 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
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 Lehman Brothers Inc., an affiliate of the Depositor. Unless
otherwise set forth in the applicable Prospectus Supplement, the obligations
of the underwriters to purchase such Certificates will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Certificates if any of such 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.
Certificates may also be sold through agents designated by the Depositor
from time to time. Any agent involved in the offer or sale of 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 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 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.
39
<PAGE>
Any underwriters, dealers or agents participating in the distribution of
Certificates may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of 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.
Lehman Brothers Inc. is an affiliate of the Depositor. Lehman Brothers
Inc.'s participation in the offer and sale of Certificates complies with the
requirements of Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
As to each Series of 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 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 Certificates. A Prospectus
Supplement will be prepared with respect to the Certificates for use by such
affiliates in connection with offers and sales related to market-making
transactions in the Certificates.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be passed upon
for the Depositor and the underwriters by Weil, Gotshal & Manges, New York,
New York or other counsel identified in the applicable Prospectus Supplement.
40
<PAGE>
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Depositor or Lehman Brothers. This Prospectus Supplement and the Prospectus
do not constitute an offer of any securities other than those to which they
relate or an offer to sell, or a solicitation of an offer to buy, to any
person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus Supplement and the
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any
time subsequent to their respective dates.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary ............................................ S-3
Risk Factors ....................................... S-9
The Trust .......................................... S-10
Description of the Underlying Securities .......... S-10
Description of the Certificates .................... S-16
The Depositor ...................................... S-19
Description of the Trust Agreement ................. S-19
The Market Agent Agreement ......................... S-22
Certain Federal Income Tax Consequences ............ S-22
ERISA Considerations ............................... S-25
Method of Distribution ............................. S-26
Legal Matters ...................................... S-27
Ratings ............................................ S-27
Index of Defined Terms ............................. S-28
PROSPECTUS
PAGE
--------
Prospectus Supplement .............................. 2
Available Information .............................. 2
Incorporation of Certain Documents by Reference ... 2
Reports to Certificateholders ...................... 3
Important Currency Information ..................... 3
Risk Factors ....................................... 4
The Depositor ...................................... 5
Use of Proceeds .................................... 6
Formation of the Trust ............................. 6
Maturity and Yield Considerations .................. 7
Description of the Certificates .................... 8
Description of Underlying Securities and Credit
Support ........................................... 22
Description of the Trust Agreement ................. 28
Limitations on Issuance of Bearer Certificates .... 37
Currency Risks ..................................... 37
Plan of Distribution ............................... 39
Legal Opinions ..................................... 40
</TABLE>
$12,550,000
Corporate Bond-Backed Certificates,
Series 1996-DHC-1
(Underlying Securities will be
8.50% Debentures due December 1, 2022
issued by
Dayton Hudson Corporation)
Pass-Through Certificates
Lehman ABS Corporation
(Depositor)
PROSPECTUS SUPPLEMENT
November 25, 1996
LEHMAN BROTHERS
