As filed with the Securities and Exchange Commission on July 25, 1997
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
AND POST-EFFECTIVE AMENDMENTS UNDER
THE SECURITIES ACT OF 1933
LEHMAN ABS CORPORATION
(Exact name of Registrant as specified in governing instruments)
DELAWARE 13-3447441
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Address of principal executive offices)
TED JANULIS
LEHMAN ABS CORPORATION
3 WORLD TRADE CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Name and address of agent for services)
Copy to:
SCOTT KIMMEL, ESQ. WALTER G. McNEILL, ESQ.
LEHMAN BROTHERS INC. WEIL GOTSHAL & MANGES
3 WORLD FINANCIAL CENTER 767 FIFTH AVENUE
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10153
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE
FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Securities being Amount being Proposed maximum offering Proposed maximum aggregate Amount of
registered registered price per unit offering price(1)(2) registration fee(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Trust Certificates $1,000,000 100% $1,000,000 $303.03
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<FN>
(1) Estimated solely for purposes of calculating the registration fee.
(2) $262,450,000 aggregate principal amount of securities registered by the
Registrant under Registration Statement No. 33-73438 referred to below are
consolidated in this Registration Statement pursuant to Rule 429. All
registration fees in connection with such unsold amount of securities have
been previously paid by the Registrant under the foregoing Registration
Statement. Accordingly, the total amount registered under the Registration
Statement as so consolidated as of the date of this filing is $263,450,000.
</FN>
</TABLE>
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Registration Statement is a combined Prospectus and relates to
this Registration Statement and Registration Statement No. 33-73438 previously
filed by the Registrant on Form S-3 and declared effective on November 28, 1995.
This Registration Statement also constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 33-73438 and such Post-Effective Amendment shall
hereafter become effective concurrently with the effectiveness of this
Registration Statement in accordance with Section 8(c) of the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement includes three different basic prospectuses
with corresponding forms of prospectus supplement for offering Series of
Certificates representing the entire beneficial ownership interest in various
trusts to be created from time to time, the assets of which will consist
primarily of a publicly issued, fixed income debt security or pool of such debt
securities together with certain other assets as described herein deposited in
trust by Lehman ABS Corporation. Following this Explanatory Note in sequential
order are the basic prospectus and form of prospectus supplement for trusts
consisting of obligations of (i) U.S. corporations, banking organizations and
insurance companies subject to the informational requirements of the Securities
Exchange Act of 1934, as amended; (ii) the United States of America and U.S.
government sponsored entities; and (iii) certain foreign governments,
subnationals and agencies or instrumentalities thereof.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion Dated July 25, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 25, 1997)
CORPORATE BOND-BACKED CERTIFICATES, SERIES 1997 -- [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 199[7]-[ ] offered hereby will consist of
classes of Certificates, designated as Class Certificates[,] [and] Class
Certificates[and list others], [all] of which [only the Class Certificates[,]
[and] Class Corporate Bond-Backed Certificates [and list others]] are being
offered hereby (collectively, the "Certificates") and will represent a
fractional undivided beneficial interest in the Series 1997-[ ] Trust (the
"Trust") to be formed pursuant to the Trust Agreement dated as of [ ], between
Lehman ABS Corporation (the "Company") and [ ], as trustee (the "Trustee"), as
supplemented by the Series 1997-[ ] Supplement dated as of [ ] (collectively,
the "Trust Agreement"). The property of the Trust will consist in part of [$][ ]
aggregate principal amount of [a %] [floating rate] [specify publicly issued
debt security] due of [specify issuer]] [a pool of [ %] [floating rate]
publicly issued debt securities having a term of [not less than years and not
more than years] issued by one or more corporations, banking organizations, or
insurance companies organized under the laws of the United States or any State
[(other than the Retained Interest referred to herein)] (collectively, the
"Underlying Securities"), and having the characteristics described herein under
"Description of the Deposited Assets." Terms used but not otherwise defined
herein are defined in the Prospectus attached hereto (the "Prospectus").
The Underlying Securities will be acquired by the Company and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [ ].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year]-[to be conformed to interest payment dates
for Underlying Securities], or, if any such date is not a business day, then on
the immediately following business day (each, a "Distribution Date") commencing
[ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ ] (the "Final Distribution Date"), by which date the holders
of the Certificates will receive a distribution of all amounts allocable to
principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 7.
---------------------- (cover continued on next page)
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS RESPECTIVE 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.
------------------
The Underwriter has agreed to purchase the Certificates from the Company at [ ]%
of the Certificate Principal Balance thereof ($[ ] aggregate proceeds to the
Company, before deducting expenses estimated at $[ ]) plus accrued interest, if
any, at the Pass-Through Rate calculated from [ ], 1997 (the "Expected
Settlement Date"), subject to the terms and conditions set forth in the
Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
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 [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
July , 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class Certificates [and specify other classes].] As and to the extent
described herein, losses realized on the Deposited Assets will be borne by the
holders of the Class Certificates [and specify other classes] before such
losses will be borne by the holders of the other classes of Offered Certificates
[and the Class Certificates [and specify other classes]]. To the extent
described herein, the relative priorities of each class of Certificates with
respect to collections from and losses on the Deposited Assets may each change
over time, either permanently or temporarily, upon the occurrence of certain
circumstances specified herein. See "Description of the Certificates-Allocation
of Losses; Subordination."
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
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 [specify applicable classes] 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. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED [__________], 1997, 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 ,1997, 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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms 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", "Description of the
Deposited Assets" and "Description of Credit Support." Certain capitalized terms
used herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
The Trust.................................. Series 1997-[ ]Trust. The Trust will
be formed pursuant to the Trust
Agreement dated as of [ ] (the "Base
Trust Agreement"), between the
Company and the Trustee, as
supplemented by the Series 1997-[ ]
Supplement dated as of the Expected
Settlement Date (the "Series
Supplement" and, together with the
Base Trust Agreement, the "Trust
Agreement").
Securities
Offered.....................................Corporate Bond-Backed Certificates,
Series 1997-[ ], consisting of Class
[ ] Certificates[,] [and] Class [ ]
Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate
Principal Balance]
[Notional
Amount].....................................Class [ ]: [$] [ ].
Class [ ]: [$] [ ].
Final Scheduled Distribution
Date........................................Class [ ].
Class [ ].
Pass-Through
Rates.......................................[The Variable Pass-Through Rates
applicable to the calculation of the
interest distributable on any
Distribution Date on the
Certificates [(other than the Class
[ ] Certificates)] are equal to
[describe method for determining
variable rates]. The initial
Variable Pass-Through Rates for the
Class [ ] Certificates [,] [and] the
Class [ ] Certificates [and specify
others] are approximately __% [,]
[and] ___% [and ___%] per annum,
respectively.] [The Pass-Through
Rate applicable to the calculation
of the interest distributable on any
Distribution Date on the [specify
classes] Certificates is fixed at
___% [and ___%, respectively,] per
annum.]
S-3
<PAGE>
Deposited
Assets..................................... The Deposited Assets shall consist
of the Underlying Securities [and
describe any assets which are
ancillary or incidental to the
Underlying Securities]. See "--The
Underlying Securities" [, "-- Other
Deposited Assets"] and "Description
of the Deposited Assets" below.
Original Issue
Date....................................... [ ].
Cut-off Date............................... [ ].
Distribution
Date........................................[ ], commencing [ ].
Record Date.................................The [ ] day immediately preceding
each Distribution Date.
Denominations;
Specified
Currency....................................The Class [ ] Certificates [,] [and]
Class [ ] Certificates [and specify
others] will be denominated and
payable in [U.S. dollars] [ ] (the
"Specified Currency") and will be
available for purchase in minimum
denominations of [$][ ] and
[integral multiples thereof]
[multiples of [$][ ] in excess
thereof].
Interest Accrual
Periods.....................................[Monthly] [Quarterly]
[Semi-annually] (or, in the case of
the first Interest Accrual Period,
from and including the Original
Issue Date to but excluding the
first Distribution Date).
Form of
Security....................................Book-entry Certificates with The
Depository Trust Company ("DTC"),
except in certain limited
circumstances. See "Description of
the Certificates -- Definitive
Certificates." Distributions thereon
will be settled in [immediately
available (same-day)] [clearinghouse
(next-day)] funds.
Trustee.....................................[ ], as trustee.
Ratings.....................................[ ] by [ ] [and [ ] by [ ]].
[Specify specific ratings
requirements for particular classes,
including the extent to which the
issuance of the Certificates of a
given class is conditioned upon
satisfaction of the ratings of each
other class of Certificates.] See
"Ratings."
Collection Period...........................With respect to a Distribution Date,
the period beginning on [ ] and
ending at the close of business
on [ ].
S-4
<PAGE>
THE UNDERLYING SECURITIES
- -------------------------
Underlying Securities.......................[A [ ]%] [floating rate] [publicly
issued debt security due [ ] [A pool
of publicly issued debt securities
of various issuers, exclusive of the
Retained Interest] [in/having] an
aggregate principal amount of
[$][ ].
Underlying Securities
Issuer......................................[Specify issuer] [Pool of various
domestic corporations, banking
organizations and insurance
companies.]
Underlying Securities Original
Issue Date..................................[ ].
Underlying Securities Final
Payment Date................................[ ].
Amortization................................[Describe amortization schedule, if
any].
Denominations;
Underlying Securities
Currency....................................The Underlying Securities are
denominated and payable in [U.S.
dollars] [ ] (the "Underlying
Securities Currency") and are
available in minimum denominations
of [$][ ] and [integral multiples
thereof] [multiples of [$][ ] in
excess thereof].
Underlying Securities
Payment Dates...............................[ ], commencing [ ].
Underlying Securities
Rate........................................[ % per annum.] [A [Weighted
Average] rate per annum equal to
[specify interest rate formula for
debt security].]
Underlying Securities Interest
Accrual Periods.............................[Monthly] [Quarterly]
[Semi-annually].
Priority....................................[Describe senior or subordinated
status of Underlying Securities].
Security....................................[Describe existence of any security
for obligations or state that
Underlying Securities are
unsecured].
Redemption/Put/
Other Features..............................[Describe existence of any
redemption, put or other material
features applicable to the
Underlying Securities].
Form of
Security................................... Book-entry debt securities with DTC
[listed on the [New York] [American]
Stock Exchange [specify other
listing]].
S-5
<PAGE>
Underlying Securities
Trustee [Fiscal
and Paying
Agent]..................................... [ ]. The Underlying Securities have
been issued pursuant to [an
indenture dated as of [ ], 19[ ]
(the "Indenture"), between the
Underlying Securities Trustee and
the Underlying Securities Issuer].
Ratings.................................... [ ] by [ ] [and [ ] by [ ]]. See
"Description of the Underlying
Securities--Ratings of Underlying
Securities."
OTHER DEPOSITED ASSETS
- ----------------------
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary 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.
Depositor...................................Lehman ABS Corporation (the
"Company"), an indirect wholly-
owned subsidiary of Lehman Brothers
Inc. See "The Company" in the
Prospectus.
Certificates................................The Certificates, each of which
represents a fractional undivided
beneficial interest in the Trust,
will be issued pursuant to the Trust
Agreement. The Certificates will
consist of [ ] classes, designated
as Class [ ] Certificates [and] [,]
Class [ ] Certificates [and [specify
other classes]], [all] of which [all
but the Class [ ] Certificates] are
being offered hereby (collectively,
the "Certificates").
The Certificate Principal Balance of
a Certificate outstanding at any
time represents the maximum amount
that the holder thereof is entitled
to receive as distributions
allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the
extent distributions allocable to
principal are made to such holder.
[The Notional Amount of the Class [
] Certificates as of any date of
determination is equal to [specify].
Reference to the Notional Amount of
the Class [ ] Certificates is solely
for convenience in determining the
basis on which distributions on the
Class [ ] Certificates are
calculated [and determining the
relative voting rights of
Certificateholders of Class [ ]
Certificates for purposes of voting
on a class-by-class basis or
otherwise]. The Notional Amount does
not represent the right to receive
any distributions allocable to
principal.]
[The Class [ ] Certificates, which
are not being offered hereby, have
in the aggregate an initial
Certificate Principal Balance of [$]
(approximate) and a [Variable]
Pass-Through Rate [of __%]. The
Class [ ] Certificates represent the
right to receive distributions in
respect of their Certificate
Principal Balance and interest
thereon at their applicable
Pass-Through Rate.] Shortfalls in
collections with respect to the
Deposited Assets will be allocated
solely to the Class [ ] Certificates
to the extent provided herein and,
thereafter, will be allocated among
the Certificates and the Class [ ]
Certificates, as provided herein.
[The Class [ ] Certificates will be
transferred by the Company to an
affiliate on or about , 1997 (the
"Closing Date"), and may be sold at
any time in accordance with any
restrictions in the Trust
Agreement.]]
S-7
<PAGE>
The Underlying
Securities..................................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 Final Payment
Date. [The Underlying Securities
have a remaining term to maturity of
approximately years.] [As of the
Cut-off Date, the pool of Underlying
Securities have a weighted average
interest rate of % and a weighted
average remaining term to maturity
of approximately years.
Approximately % [specify if greater
than 10%] of such Underlying
Securities consist of debt
securities of [U.S. corporate
issuers].]
[Name such obligor] is a U.S.
corporation whose principal
executive offices are located at
[specify address]. The obligor is
subject to the informational
requirements of the Exchange Act and
in accordance therewith files
reports and other information
(including financial information)
with the Commission. See
"Description of the Deposited
Assets."
[Other Deposited
Assets and Credit
Support.....................................The Deposited Assets will also
include [direct obligations of the
United States] [describe any assets
which are ancillary or incidental to
the Underlying Securities, including
hedging contracts such as puts,
calls, interest rate swaps, currency
swaps, floors, caps and collars]
(such assets, together with the
Underlying Securities, the
"Deposited Assets"). See
"Description of the Deposited
Assets."
The Certificateholders of the
[specify particular classes]
Certificates will have the benefit
of [describe credit support] to
support or ensure the [servicing
and] [timely] [ultimate]
distribution of amounts due with
respect to the Deposited Assets,
including providing certain coverage
with respect to losses thereon.]
Distributions...............................Holders of the Certificates will be
entitled to receive on each
Distribution Date, to the extent of
available funds on such Distribution
Date, after payment of the expenses
of the Trustee and its respective
agents up to the Allowable Expense
Amount, (i) [in the case of each
class of Certificates other than the
Class [ ] Certificates,]
distributions allocable to interest
at the applicable Pass-Through Rate
on the applicable Certificate
Principal Balance, (ii) [in the case
of each class of Certificates other
than the Class [ ] Certificates,]
distributions allocable to principal
and (iii) [in the case of each class
of Certificates other than the Class
[ ] Certificates,] distributions
allocable to premium (if any) in an
S-8
<PAGE>
amount equal to all payments of
premium (if any) received on the
Underlying Securities for the
applicable Collection Period.
Distributions will be made to
Certificateholders only if, and to
the extent that, payments are made
with respect to the Deposited Assets
or are otherwise covered by any
Credit Support. [The holders of the
Class [ ] Certificates will be
entitled to receive on each
Distribution Date distributions
allocable to interest in an amount
equal to [describe Stripped
Interest].] [The holders of the
Class [ ] Certificates will not be
entitled to receive any
distributions allocable to principal
or premium (if any).] See
"Description of the
Certificates--Distributions."
Special
Distribution
Dates.......................................If a payment with respect to the
Underlying Securities is made to the
Trustee after the Underlying
Securities Payment Date on which
such payment was due, then the
Trustee shall distribute any such
amounts received on the next
occurring Business Day (a "Special
Distribution Date") as if such funds
had constituted Available Funds on
the Distribution Date immediately
preceding such Special Distribution
Date; provided, however, that the
Record Date for such Special
Distribution Date shall be [five
Business Days (as such term is
defined in the Prospectus, "Business
Day") prior to the day on] which the
related payment was received from
the Underlying Securities Trustee.
Subordination...............................As and to the extent described
herein, the rights of the holders of
the Class [ ] Certificates [and
specify other classes] to receive
distributions of principal, premium
(if any), and interest with respect
to the Deposited Assets will be
subordinated to the rights of the
holders of the other classes of
Certificates with respect to losses
attributable to principal, premium
(if any) and interest realized on a
Deposited Asset (such losses,
"Realized Losses"). See "Description
of the Certificate-Allocation of
Losses; Subordination."
Optional
Termination.................................At its option, the [Company] may
purchase all the Deposited Assets in
the Trust, and thereby cause the
termination of the Trust and early
retirement of the Certificates, on
any Distribution Date on which the
aggregate principal amount of the
Deposited Assets remaining in the
Trust is less than [10%] of the
aggregate principal amount of the
Deposited Assets as of the Cut-off
Date. [Specify any other purchase or
repurchase option of the Company.]
See "Description of the Trust
Agreement-- Termination" herein and
"Description of Trust Agreement--
Termination" in the Prospectus.
S-9
<PAGE>
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] [as a partnership]
[as a financial asset securitization
investment trust ("FASIT")] and not
as an association taxable as a
corporation. See "Certain Federal
Income Tax Consequences."
Ratings.....................................It is a condition to the issuance of
the Certificates that the
Certificates have the ratings
specified above under "Summary of
Principal Economic Terms--The
Certificates--Ratings." 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. A security rating does not
address the occurrence or frequency
of redemptions or prepayments on, or
extensions of the maturity of, the
Deposited Assets, the corresponding
effect on yield to investors [or
whether investors in the Class [ ]
Certificates may fail to recover
fully their initial investment]. See
"Ratings."
ERISA
Considerations..............................An employee benefit plan subject to
the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), and an individual
retirement account (each, a "Plan")
may purchase Certificates of any
class if either (i) the Company is
able to confirm the existence of at
least 100 independent purchasers of
such class or (ii) the Plan can
represent that its purchase of the
Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
S-10
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement
(including the Series [ ] Supplement) between the Company and the Trustee.
Concurrently with the execution and delivery of the Series [ ] Supplement, the
Company will deposit the Underlying Securities in 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 Company.
The Underlying Securities will be purchased by the Company in
the secondary market (either directly or through an affiliate of the Company).
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 Company or the issuance of the
Certificates. [Neither the Company nor any of its affiliates participated in the
initial public offering of the Underlying Securities] [Lehman Brothers Inc., an
affiliate of the Company, participated in the initial public offering of the
Underlying Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets and the terms
thereof, as described elsewhere herein.] See "Risk Factors" and "Maturity and
Yield Considerations" in the Prospectus.
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
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. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Deposited Assets. All disclosure contained herein with respect to the
Underlying Securities is derived from publicly available documents. [Describe
publicly available documents.] [The] [Each] Underlying Securities Issuer is
subject to the information reporting requirements of the Exchange Act. Although
the Company has no reason to believe the information concerning the Underlying
Securities, [the] [each] Underlying Securities Issuer or each Underlying
Securities prospectus related to the Underlying Securities is not reliable,
neither the Company nor any of the Underwriters 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, which have not yet been publicly disclosed, which would affect the
accuracy or completeness of the publicly available documents described above.
[Use the following where the Underlying Securities consist of a pool of
obligations of multiple obligors.]
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of publicly issued debt securities of [domestic
corporations, banking organizations and insurance companies]. The Underlying
Securities will be purchased by the Company in the secondary market (either
directly or through an affiliate of the Company) and will be deposited into the
Trust. The Underlying Securities will not be acquired
S-11
<PAGE>
either from the respective obligors on the Underlying Securities or pursuant to
any distribution by or agreement with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
COMPOSITION OF THE UNDERLYING SECURITIES POOL
AS OF THE CUT-OFF DATE
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
DISTRIBUTION BY INDUSTRY CLASSIFICATION
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Industry Principal Principal
Classification Number Balance Balance
- -------------- ------ --------- ----------
Total ====== ========= ==========
DISTRIBUTION BY RATINGS OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
- -------------- ------ --------- ----------
Total ====== ========= ==========
S-12
<PAGE>
DISTRIBUTION BY REMAINING TERM TO MATURITY
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
- -------------- ------ --------- ----------
Total ====== ========= ==========
DISTRIBUTION BY INTEREST RATE OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
- ------------------- ------- ------- ---------
% to % [$] %
Greater than % ------- -------- ---------
Total [$] 100%
======== ========= =========
The Underlying Securities consist of debt securities of
[domestic corporate issuers [specify other]]. As of the Cut-off Date, [all of]
[approximately % of] such Underlying Securities were rated [investment grade]
[specify particular rating] by at least one nationally recognized rating agency,
and no obligor of any Underlying Security was in default in the payment of any
installments of principal, interest or premium (if any) with respect thereto.
Any such rating of any of the Underlying Securities is not a recommendation to
purchase, hold or sell such Underlying Security or the Certificates, and there
can be no assurance that a rating will remain for any given period of time or
that a rating will not be lowered or withdrawn entirely by a rating agency if in
its judgment circumstances in the future so warrant. See "Ratings" herein and
"Risk Factors--Ratings of the Certificates" in the accompanying Prospectus
regarding certain considerations applicable to the ratings of the Certificates.]
UNDERLYING SECURITIES INDENTURE
The Underlying Securities have been issued pursuant to [an]
agreement[s] ([each,] an "Indenture") between the [various] Underlying
Securities Issuer[s] and Underlying Securities Trustee[s]. The following summary
describes certain general terms of such Indenture[s], but investors should refer
to the Indenture[s] [itself] [themselves] for all the terms governing the
Underlying Securities.
Each of the Indenture[s] limits the [respective] Underlying
Securities Issuer's ability to engage in certain activities and transactions and
requires that the Underlying Securities Issuer perform certain obligations
S-13
<PAGE>
with respect to the Underlying Securities. [Describe common restrictive,
financial and other covenants on the Underlying Securities Issuer contained in
the Indentures.]
[The following is a summary of the typical Underlying Security
Events of Default for each series of Outstanding Debt Securities. [Any
additional Underlying Security Events of Default unique to a Concentrated
Underlying Security have been described following the summary]:
(a) failure to make payments of principal (and premium, if
any) and interest to holders of the Outstanding Debt Securities in the
time periods given in the Indentures;
(b) material breaches of certain representations, warranties
or covenants or failure to observe or perform in any material respect
any covenant or agreement under an Indenture continuing for a specified
period of time after notice thereof is given to the Underlying
Securities Issuer by the Underlying Securities Trustee or the holders
of not less than a specified percentage of the Outstanding Debt
Securities;
(c) failure by the Underlying Securities 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
Underlying Securities Issuer or the acceleration by or on behalf of the
holders thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to
the Underlying Securities [Issuer]; and
[(e) describe any additional common events of default with
respect to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities as well
as the nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral].]
The [pool of] Underlying Securities, together with any other
assets described below and any Credit Support described under "Description of
Credit Support," represent the sole assets of the Trust that are available to
make distributions in respect of the Certificates.]
[Use the following with respect to each obligor the Underlying Securities of
which represent more than 10% of the total Underlying Securities available to
make distributions in respect of the Certificates--only a single obligor is
referred to for purposes of this section of the form of Prospectus Supplement.]
[A significant portion of] [Virtually all of] [All of] the
Deposited Assets of the Trust will consist of the [___%] [floating rate]
[specify publicly issued debt security] due of [specify issuer][, exclusive of
the interest therein retained by [the Company] as described below (the "Retained
Interest")], having an aggregate principal amount outstanding as of the Cut-off
Date of approximately [$][specify currency] (the "Underlying Securities"). The
Underlying Securities will be purchased by the Company in the secondary market
(either directly or through an affiliate of the Company) and will be deposited
into the Trust. The Underlying Securities will not be acquired either from [name
such obligor] or pursuant to any distribution by or agreement with [name such
obligor]. [Describe any put, call or other conversion or redemption options
applicable to the Underlying Securities, as well as the nature of the obligation
represented by such Underlying Securities (i.e., senior, subordinate, secured)].
As of the Cut-off Date, the foregoing debt security comprising [ %] of the
Underlying
S-14
<PAGE>
Securities was rated [specify investment grade rating] [investment grade] by
[specify nationally recognized rating agency or agencies], and the obligor
thereon was not in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any such rating of such
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Securities or the Certificates, and there can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk
Factors--Ratings of the Certificates" in the accompanying Prospectus regarding
certain considerations applicable to the ratings of the Certificates.
According to [name such obligor]'s publicly available
documents, [name such obligor] is a [identify form of domestic corporation,
banking organization or insurance company] whose principal executive offices are
located at [specify address]. The Company is not an affiliate of [name such
obligor]. [Name such obligor] is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports and other information
(including financial information) with the Commission [and makes available to
the public upon request certain annual reports containing financial and other
information]. Copies of such reports and other information [may be inspected and
copied at the Commission locations listed under "Available Information" in the
accompanying Prospectus and may be obtained from the Public Reference Section of
the Commission at Washington, D.C. 20549, at prescribed rates. In addition, such
reports and other information [can be inspected at the offices of the [New York
Stock Exchange at 20 Broad Street, New York, New York 10005] [American Stock
Exchange, 86 Trinity Place, New York, New York 10013]] [may be obtained from
[name such obligor], according to its most recent annual report, upon written or
oral request to [name such obligor]].
The Trust will have no other significant assets [other than
any Credit Support or those assets referred to below] 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 [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'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 of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Company nor [any of]
the Underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
The Deposited Assets will also include [direct obligations of
the United States of America][describe any assets which are ancillary or
incidental to the Underlying Securities, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps and collars, and
any cash or other security pledged to support the Underlying Securities] (such
assets, together with the Underlying Securities, the "Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ]
Certificates [and the Class [ ] Certificates]], Credit Support will be obtained
[and will constitute part of the Trust to the extent provided below] to support
or ensure the [servicing and] [timely] [ultimate] distribution of amounts due
with respect to the Deposited Assets, in the form and amount described below.
S-15
<PAGE>
[THE LETTER OF CREDIT
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Letter of Credit from [ ] (the
"Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely][ultimate] remittance of amounts due with respect to the Deposited
Assets]. [The maximum amount that the Trustee may draw under the Letter of
Credit will initially be equal to . The initial amount of the Letter of Credit
will be [$] . Thereafter, the amount of the Letter of Credit with respect to any
Distribution Date will equal [the lesser of (i) % of the aggregate Certificate
Principal Balance outstanding on the preceding Distribution Date (after giving
effect to any payment of principal made on such preceding Distribution Date) but
in any event not less than [$] , and (ii)] the amount of the Letter of Credit on
the preceding Distribution Date, plus [(a) reimbursement of certain advances
under the Letter of Credit and (b) recoveries on defaulted Deposited Assets]
[describe other methods]. The Letter of Credit expires on , 19 . The Trustee
will be obligated, in the event of a drawing on the Letter of Credit, to pursue
appropriate remedies against the Deposited Assets and other collateral, and any
realization thereon shall be paid to the Letter of Credit Bank to the extent of
any amounts owing, in the manner and priority specified herein.]
[Add language regarding the Letter of Credit Bank with respect
to its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank.]]
[THE SURETY BOND
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Surety Bond from [ ] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered][Class[ ]]
Certificates. The Surety Bond expires on
, 19 . The Trustee will be obligated, in the event of a drawing on
the Surety Bond, to pursue appropriate remedies against the Deposited Assets and
other collateral, and any realization thereon shall be paid to the Surety to the
extent of any amounts owing, in the manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with
respect to its debt ratings, activities it engages in, regulatory authorities
having jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the Surety. In addition,
to the extent that the Surety Bond will cover payment of 20% or more of the
aggregate principal amount of the Certificates covered thereby, provide
information of financial and other matters with respect to the issuer of the
Surety Bond.]]
[RESERVE ACCOUNT
The Company will deposit with the Trustee on the Closing Date
cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Certificates in the amount of [$] . [Collections
with respect to the Deposited Assets not distributed with respect to the
Certificates shall be deposited in the Reserve Account.] Amounts so deposited in
such Reserve Account will be used by the Trustee to make payments of principal
of and premium (if any) and interest on the Certificates to the extent that
funds are not
S-16
<PAGE>
otherwise available. Immediately after any Distribution Date, amounts in the
Reserve Account in excess of [indicate formula] [may be paid to the Company].]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms
thereof and the manner and priority in which collections thereon are allocated
to the Certificateholders of each class of the Certificates, as described
elsewhere herein.] See "Maturity and Yield Considerations" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ][,] [and] Class [ ] [and Class___] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]________ (approximate) and a [___%] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$]________ (approximate)
and a [___%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in
the aggregate an initial [Certificate Principal Balance] [Notional Amount] of
[$]________ (approximate) and a [___%] [Variable] Pass-Through Rate.] [The Class
[ ] Certificates, which are not being offered hereby, will be transferred by the
Company to an affiliate on the Closing Date, and may be sold at any time by the
Company in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and
specify others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ] in
excess thereof]. [The Class [ ] Certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal Balances,
as applicable, of [$ ] and integral multiples thereof, except that one
Certificate of each such class may be issued with an initial Notional Amount or
Certificate Principal Balance, as applicable, equal to an integral multiple of
[$ ] plus the excess of the initial aggregate Notional Amount or Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$ ] that is not more than such initial aggregate Notional Amount or
Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the Company, the "Clearing Agency"),
except as provided below. The Company 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.
S-17
<PAGE>
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 Certificate Owners
or their nominees, respectively, rather than to DTC or its nominee, only if (i)
the Company advises the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Clearing Agency with respect to
each class of Certificates [(other than the Definitive Classes)] and the Company
is unable to locate a qualified successor or (ii) the Company, 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 [(other than the
Definitive Classes of 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.
DISTRIBUTIONS
Collections on the Deposited Assets 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:
(i) to the Trustee, all unpaid fees and expenses of the Trustee
and its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support
Providers"), any amounts required to be paid or reimbursed to, or
deposited with, any such person (collectively, "Credit Support
Payments");
(iii)] to the Certificateholders of each Class of such Series,
first, to the payment of Required Interest [and on a pro rata basis to
the Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and third, to
the payment of Required Premium, in each case applicable to such Class,
commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance
with the ranking specified herein under "--Allocation of Losses;
Subordination";
[(iii) to the Credit Support Providers, any Credit Support
Payments;]
[(iv)] to the Trustee, all its remaining unpaid fees and expenses
and those of its respective agents not otherwise paid pursuant to
clause (i) above;
S-18
<PAGE>
[(v) all remaining amounts, if any, to the Company].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of the
Allowable Expense Amount from the preceding Collection Period that have
not been applied on the Distribution Date for such preceding Collection
Period.]
"Available Funds" for any Distribution Date means the sum of
(a) all amounts received on or with respect to the Deposited Assets
(including investment income on Eligible Investments) received during
the preceding Collection Period[,] [and] (b) amounts available as of
such Distribution Date pursuant to the Credit Support described herein
[and (c) any additional amount that the [Company] may remit to the
Trustee from time to time according to the terms of the Trust Agreement
for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date
means [a fixed percentage] [a percentage that varies depending on
[describe basis for variable formula, such as the applicable date or
other factors or indices]].
"Eligible Investments" means, with respect to the
Certificates, those investments acceptable to the Rating Agency 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.
"Required Interest" for the Certificates or any Class thereof
on any given Distribution Date means the accrued and unpaid interest on
the outstanding Certificate Principal Balance [or Notional Amount] of
such Certificates, computed at the applicable Pass-Through Rate.
"Required Premium" for the Certificates or any Class thereof
for any Distribution Date means an amount equal to the product of (a)
the Required Principal for such Certificates on such Distribution Date
and (b) the Call Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof
for any Distribution Date means the amount received on the Deposited
Assets attributable to principal payments thereon during the related
Collection Period, to the extent allocable to such Certificates. The
Certificate Principal Balance of a Certificate outstanding at any time
represents the maximum amount that the holder thereof is entitled to
receive as distributions allocable to principal from the cash flow on
the Underlying Securities, the other assets in the Trust and any Credit
Support obtained for the benefit of such holder. The Certificate
Principal Balance of any class of Certificates [(other than the Class [
] Certificates)] as of any date of determination is equal to the
initial Certificate Principal Balance thereof, reduced by the aggregate
of (a) all amounts allocable to principal previously distributed with
respect to such Certificate and (b) any
S-19
<PAGE>
reductions in the Certificate Principal Balance deemed to have occurred
in connection with allocations of (i) Realized Losses allocable to
principal on the Deposited Assets and (ii) Extraordinary Trust
Expenses, as described herein. [The Notional Amount of the Class [ ]
Certificates as of any date of determination is equal to [specify
amount].] [Holders of the Class [ ] Certificates are not entitled to
receive any distributions allocable to principal.]
[Notwithstanding the priorities described above, holders of
the Class [ ] Certificates and the Class [ ] Certificates will be entitled to
receive on any Distribution Date 100% of all principal collections received in
the related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] in reduction of the Certificate Principal
Balance of the Class [ ] Certificates and the Class [ ] Certificates, if any of
the following conditions shall be satisfied: [describe conditions, if any, by
which a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be
obligated to advance or cause to be advanced on or before each Distribution Date
its own funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are
deemed by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the Certificates.
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ]
Certificates [and the Class [ ] Certificates] is designed to protect holders of
the remaining classes of Certificates from certain losses and other shortfalls
with respect to the Deposited Assets. As a result, losses and other shortfalls
with respect to the Deposited Assets will be borne by the remaining classes of
Certificates, to the extent described below, only if such losses and other
shortfalls are not so covered, or the coverage in respect thereof has been
exhausted.
[Realized Losses and Extraordinary Trust Expenses will be
allocated on any Distribution Date as follows: [describe allocation among the
various classes].]
[An "Extraordinary Trust Expense" is an expense of a given
Trust in excess of the Allowable Expense Amount, including certain
reimbursements to the Company described in the Prospectus under
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<PAGE>
"Description of Certificates-[Certain Matters Regarding the Company"] and
certain reimbursements to the Trustee described under "Description of the Trust
Agreement-The Trustee" herein.]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the
Class [ ] Certificates and the Class [ ] Certificates to the extent set forth
herein, the Class [ ] Certificates may not be purchased by or transferred to a
Plan except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations."]
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 Company with the Commission
following the issuance and sale of the Certificates. The Trust created under the
Trust Agreement (including the Series 1997-[ ] Supplement) will consist of (i)
the Deposited Assets (exclusive of any Retained Interest, which is not part of
the Trust), (ii) all payments on or collections in respect of the Deposited
Assets due after the Cut-off Date, together with any proceeds thereof[,] [and]
[(iii) any Credit Support in respect of any class or classes of Certificates]
[and (iv) the rights of the Company under the Purchase Agreement between the
Company and the Seller]. [In addition, the Certificateholders of the
Certificates may also have the benefit of certain Credit Support discussed
above. See "Description of Credit Support."] Reference is made to the Prospectus
for important information in addition to that set forth herein regarding the
Trust, the terms and conditions of the Trust Agreement and the 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 TRUSTEE
[ ], a [ ] corporation, will act as trustee for the
Certificates and the Trust pursuant to the Trust Agreement. The Trustee's
offices are located at [ ] and its telephone number is [ ].
The Trust Agreement will provide that the Trustee and any
director, officer, employee or agent of the Trustee will be indemnified by the
Trust and will be held harmless against any loss, liability or expense incurred
in connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of 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.]
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[Describe remedies available to Certificateholders upon the occurrence and
continuance of an Event of Default, including, as applicable, directing the
Trustee to vote the Underlying Securities in favor of declaring the principal
balance of and any accrued interest on the Outstanding Debt Securities to be
immediately due and payable].
The Trust Agreement will provide that, within 30 days after
the occurrence of an Event of Default in respect of the Certificates of any
class, the Trustee will give to the holders of such Certificates notice,
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 premium, if any, 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 holders of the Certificates of such class.
No holder of any Certificate will have the right to institute
any proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders 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 the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of
all Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [ ]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class.]
[Specify conditions, if any, under which allocation of Voting
Rights might change from the foregoing percentages.] ["Required
Percentage-Amendment" of Voting Rights necessary to consent to amendment or
modification of the Trust shall be [ %].] ["Required Percentage-Waiver" shall
mean [ %] of the Voting Rights.]
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 Certificateholder of record as of such date. The Trustee
shall request instructions from the Certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative Certificate Principal
Balances and Notional Amounts of the Certificates, as applicable) as the
Certificates of the Trust were actually voted or not voted by the
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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 a Underlying
Securities Event of Default or an event which with the passage of time would
become a Underlying Securities Event of Default and with the unanimous consent
of all holders of Outstanding Certificates or (iii) which would result in the
exchange or substitution of any of the outstanding Underlying Securities
pursuant to a plan for the refunding or refinancing of such Underlying
Securities 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 each outstanding Class of the 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 Debt Securities or any other offer is made for
the Underlying Securities, the Trustee shall notify the Certificateholders of
such offer as promptly as practicable. The Trustee must reject any such offer
unless an event of default under the Indenture has occurred, the Trustee is
directed by the affirmative vote of all of the Certificateholders to accept such
offer and the Trustee has received the tax opinion described above. Accordingly,
a Certificateholder generally would be required to effect a withdrawal of
Requested Underlying Securities from the Trust in order to accept such offer.
See "-Optional Exchange" in the Prospectus.
If an event of default under the Indenture occurs and is
continuing and if directed by all the holders of outstanding Class [ ]
Certificates and, unless the Class [ ] Certificates are no longer outstanding,
by all the holders of outstanding Class [ ] Certificates, 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
Certificateholders' interests of each Class may differ and the interests of
either Class may differ from holders of other Outstanding Debt Securities.
TERMINATION
The circumstances under which the obligations created by the
Trust Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus. The Company will
have the right to purchase all remaining Deposited Assets in the Trust and
thereby effect early retirement of the Certificates on any Distribution Date,
[(a)] once the aggregate principal amount of the Deposited Assets at the time of
any such purchase is less than [10%] of the aggregate principal amount of the
Deposited Assets as of the Cut-off Date [and (b) at the option of the Company at
[specify when and on what terms any such option may be exercised]]; provided,
however, that the right to exercise any such option is contingent on such
exercise being consistent with the Company'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. In the event the Company exercises any such option, the portion of
the purchase price allocable to the Certificates of each class will be, to the
extent of available funds, [100% of their then aggregate outstanding Certificate
Principal Balance or Notional Amount, as applicable, plus with respect to the
Certificates [one month's] [three month's] [specify other period] interest
thereon at the Fixed Pass-Through Rate or the then applicable Variable
Pass-Through Rate, as the case may be, plus, with respect to each class of
Certificates, any previously accrued but unpaid interest thereon.] [Specify
alternative allocation method if different from above.]
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In no event will the Trust created by the Trust Agreement for the Certificates
continue beyond the expiration of 21 years from the death of the survivor of the
person or persons named in the Trust Agreement. See "Description of Trust
Agreement-Termination" in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets
or relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates. Such consequences will depend
on the terms of the Certificate, whether the Trust is treated as a grantor
trust, a partnership or FASIT for Federal income tax purposes, and the assets
collateralizing or otherwise supporting such Certificate. The consequences of
owning Certificates which are deemed for Federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions ["Grantor Trust Certificates"],
["Partnership Certificates"] and ["FASIT Certificates"] respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related 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,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. 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. [The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto.]
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 Company ("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.
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 "Certificate Owner") will be subject
to Federal income taxation as if it owned directly the portion of the Deposited
Assets allocable to such Certificates, and as if it paid directly its share of
expenses paid by the Trust. The following discussion assumes that the Underlying
Securities were not
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issued with original issue discount ("OID") and, accordingly, the Certificate
owners will not realize OID except with respect to a "stripped interest" (as
defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it
pays for its Certificate among the Underlying Securities and the Deposited
Assets in the Trust other than the Underlying Securities (the "other Deposited
Assets") allocable to such Certificate, in proportion to their relative fair
market values on the date of purchase of the Certificate. A Certificate Owner
would calculate separately its income, gain, loss or deduction realized with
respect to each such asset.
The Federal income tax treatment of a holder of a particular
class of Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part, to
be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will not
be considered to represent a stripped interest in the Underlying Securities to
the extent the Certificate is entitled to receive a proportionate amount of all
principal and interest on the Underlying Securities. A class of Certificates
will be considered in its entirety to represent a stripped interest in the
underlying Underlying Securities if it is entitled to receive interest on the
Underlying Securities which is disproportionately less than the principal which
it is entitled to receive on the Underlying Securities, or if it is entitled to
receive all or part of the interest on the Underlying Securities but no
principal on the Underlying Securities. In addition, if a class of Certificates
is entitled to receive interest and principal on the Underlying Securities, but
the interest it is entitled to receive on the Underlying Securities is
disproportionately more than the principal it is entitled to receive on the
Underlying Securities, it could be argued that the Certificates represents (a)
an interest in the Underlying Securities that is not a stripped interest to the
extent it represents a proportional amount of all the principal and interest on
the Underlying Securities and (b) a stripped interest in the Underlying
Securities to the extent of any additional interest to which it is entitled on
the Underlying Securities. If a Certificate represents in part a stripped
interest and in part not a stripped interest, such interests will be treated as
two separate items for tax purposes and a purchaser of Certificates will be
required to allocate its purchase price among the two items (as well as any
other Deposited Assets) in proportion to their relative fair market values on
the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not
Stripped Interests. To the extent a class of Certificates does not represent a
stripped interest in the Underlying Securities, each Certificate Owner will be
required to report on its Federal income tax return, in a manner consistent with
its method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a
Certificate allocated to a Certificate Owner's undivided interest in a
Underlying Security is greater than or less than the portion of the principal
balance of the Underlying Security allocable to the Certificate, such interest
in the Underlying Security will have been acquired at a premium or discount, as
the case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a separate asset, thus, in each case, reducing the
portion of the purchase price allocable to the
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Certificate Owner's undivided interest in the Underlying Securities (the
"allocated Purchase Price"). To the extent that the allocated Purchase Price is
less than the principal balance of an Underlying Security, the Certificate
Owner's interest in such Underlying Security will be treated as purchased at a
"market discount." The market discount on a Underlying Security will, however,
be considered to be zero if it is less than a statutorily defined de minimis
amount. Conversely, to the extent that the allocated Purchase Price exceeds the
principal balance of an Underlying Security, the Certificate Owner's interest
therein will be treated as purchased with "bond premium." See the discussion
below under "Bond Premium."
For example, if the allocated Purchase Price paid by a
Certificate Owner who purchases a Certificate in the initial public offering
were equal or almost equal to the portion of the principal balance of the
Underlying Security that is allocable to the Certificate, there would be no
significant amount of discount or premium with respect to its interest in such
Underlying Security. Moreover, if the total purchase price of a Certificate is
equal to the principal amount of the Underlying Securities allocable to the
Certificate, because a portion of such purchase price will be allocated to the
other Deposited Assets of the Trust, in the aggregate a Certificate Owner's
interest in the Underlying Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of Certificates represents a stripped interest
in the Underlying Securities, each such Certificate will be subject to the OID
rules. The amount of OID on a stripped interest is equal to the excess of all
amounts payable on the stripped interest (other than qualified stated interest)
over the portion of the purchase price for the Certificate allocable to the
stripped interest.
Under the Treasury regulations issued under Section 1286 of
the Code (the "Regulations"), the interest payable with respect to the stripped
interest will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the Certificate
Owner) is also entitled. If none of the amounts payable to a Certificate Owner
with respect to a stripped interest constitute qualified stated interest, then
the stripped interest will have OID in an amount equal to the excess of all
payments to be received on the stripped interest over the purchase price for the
Certificate allocable to the stripped interest. Moreover, in determining the
amount paid for the stripped interest, a portion of the purchase price for a
Certificate must be allocated to the Certificate Owner's share of other
Deposited Assets and to accrued interest.
The tax treatment of a Certificate Owner will depend upon
whether the amount of OID on the stripped interest represented by the
Certificate is less than a statutorily defined de minimis amount. In general,
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under the Regulations, the amount of OID with respect to the stripped interest
will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the "stated redemption price at maturity" and the number of full
years remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity and
the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than a
payment of qualified stated interest) by a fraction, the numerator of which is
the number of complete years from the purchase date until the payment is made
and the denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified stated
interest.
If the amount of OID on the stripped interest represented by
the Certificate is de minimis under the rules discussed above, the stripped
interest would not be treated as having OID. Each Certificate Owner would be
required to report on its Federal income tax return its share of the gross
income of the Trust, including interest on the Underlying Securities and any
gain upon sale or disposition by the Trust of the Underlying Securities. Such
gross income would exceed the Pass-Through Rate on the Certificate by an amount
equal to the Certificate Owner's share of the expenses of the Trust for the
period during which it owns a Certificate. Each Certificate Owner would be
required to include the de minimis OID in income as each principal payment on
the stripped interest is received, in proportion to the amount that each
principal payment bears to the stated principal amount of the stripped interest;
such income would be capital gain, short-term or long-term depending upon the
Certificate Owner's holding period in the Certificate. The Certificate Owner
would be entitled to deduct its share of expenses of the Trust to the extent
described below. Any amounts received by a Certificate Owner from any Credit
Support or any subordination feature will be treated for Federal income tax
purposes as having the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report
its share of the income of the Trust under its usual method of accounting.
Accordingly, except as described below, interest on an Underlying Security would
be includible in a Certificate Owner's gross income when it accrues on the
Underlying Securities, or, in the case of Certificate Owners who are cash basis
taxpayers, when received by the Administrative Agent, if any, or otherwise the
Trustee on behalf of Certificate Owners. Because the interest collected on the
Underlying Securities generally is paid to Certificate Owners in the following
month, the amount of interest includible in a Certificate Owner's gross income
during any calendar month will not equal the interest distributed in that month.
If the OID with respect to the stripped interest in the
Underlying Securities represented by a Certificate is not treated as being de
minimis, a Certificate Owner will be required to include in income, in addition
to any qualified stated interest on the stripped interest as described above,
any OID on the stripped interest. OID must be included in income as it accrues
on a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
In general, if a stripped interest has OID the Certificate
Owner will be required, whether such Certificate Owner uses the cash or the
accrual method of tax accounting, to include in ordinary gross income the sum of
the "daily portions" of OID on the stripped interest for all days during the
taxable year that the Certificate Owner owns the Certificate. The daily portions
of OID on a stripped interest are determined by allocating to each day in any
"accrual period" a ratable portion of the OID allocable to that accrual period.
The amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as
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defined below) of the stripped interest by a fraction, the numerator of which is
the annual yield to maturity of the stripped interest and the denominator of
which is the number of accrual periods in a year and (ii) subtracting from that
product the amount of qualified stated interest (if any) payable on the stripped
interest during (or allocable to) such accrual period.
An "accrual period" would generally be each period ending on
an interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the
beginning of any accrual period is the purchase price for a Certificate
allocable to the stripped interest (including accrued interest, if any) (i)
increased by the amount of OID allocable to all prior accrual periods and (ii)
reduced by the amount of all payments other than qualified stated interest
payments (if any) in all prior accrual periods. In addition, if an interval
between payments of qualified stated interest contains more than one accrual
period, the adjusted issue price at the beginning of each accrual period in the
interval is increased by the amount of qualified stated interest that has
accrued prior to the first day of the accrual period but that is not payable
until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
Bond Premium. In the event that a Certificate represents
either an unstripped interest in an Underlying Security, or a stripped interest
which includes qualified stated interest, and the stripped or unstripped
interest is treated as having been purchased at a premium (i.e., the purchase
price of a Certificate allocable to the Underlying Security exceeds the total
amount payable on the Underlying Security to the Certificateholder other than
qualified stated interest), such premium will be amortizable by the Certificate
Owner as an offset to interest income (with a corresponding reduction in the
Certificate Owner's basis) under a constant yield method over the term of the
underlying Underlying Security if an election under Section 171 of the Code is
made or was previously in effect. Any such election will also apply to all debt
instruments held by the Certificate Owner during the year in which the election
is made and all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest using the constant yield method described
above, treating the instrument as having been issued on the Certificate Owner's
acquisition date at an issue price equal to such owner's adjusted basis with no
interest payments being qualified stated interest. Such an election with respect
to a unstripped or stripped interest having amortizable bond premium or market
discount would constitute, respectively, an election to apply the market
discount rules or bond premium rules with respect to all other debt instruments
with market discount or amortizable bond premium, as the case may be, of such
Certificate Owner.
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 Certificate Owners on which they would recognize gain or loss.
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OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate
Owner 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 Certificate Owner 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 Certificate Owner's tax basis in a Certificate generally
will equal the cost of such Certificate, increased by any amounts of
undistributed taxable income (e.g., OID or market discount) and reduced by any
amortized premium (each as described above) and any payments other than payments
of qualified stated interest on an underlying Underlying Security made on such
Certificate.
If a Certificate is sold, gain or loss will be recognized
equal to the difference between the proceeds of sale allocable to each of the
assets of the Trust and the Certificate Owner's adjusted basis in each of the
foregoing. Any gain or loss will be a capital gain or loss if the Certificate
was held as a capital asset, except that gain will be treated in whole or in
part as ordinary interest income to the extent of the Certificate Owner's
interest in accrued market discount not previously taken into income on
Underlying Securities.
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 Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are
not United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." 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.
[Describe the Federal income tax consequences to Foreign
Certificate Owners of an interest in any other Deposited assets of the Trust.]
S-29
<PAGE>
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 includible in gross income for U.S. Federal income
tax purposes, regardless of its source, or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Company and the Administrative Agent, if any, have agreed,
and the Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of Federal, state and local
income, franchise and any other tax measured in whole or in part by income.
However, the proper characterization of the arrangement involving the Trust, the
Certificate Owners, the Company and the Administrative Agent, if any, is not
entirely clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership"
it could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust). A publicly traded partnership is taxed in the
same manner as a corporation unless at least 90% of its gross income consists of
specified types of "qualifying income." Such qualifying income includes, among
other things, interest income not derived in the conduct of a financial or
insurance business, dividend income, and gain from the disposition of assets
producing such income. In the opinion of Federal Tax Counsel, because of the
nature of the income of the Trust, the Trust will not be a publicly traded
partnership taxable as a corporation.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal
income tax, but each Certificate Owner will be required to separately take into
account such holder's allocable share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of [ ] and any
gain upon collection or disposition [ ]. The Trust's deductions will consist
primarily of [ ].
The tax items of a partnership are allocable to the partners
in accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities that corresponds to any excess of the principal amount of such class
of Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
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An individual taxpayer's miscellaneous itemized deductions
(which do not include interest expense) are subject to limitations and as a
result may be disallowed in whole or in part. Those limitations, which also
apply to estates and trusts, would apply to a Certificate Owner's share of
expenses of the Trust (including fees to the Administrative Agent, if any) and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis
in its Certificate for its allocable share of the Trust's income or loss,
respectively. Any cash distributions by the Trust to a Certificate Owner will
constitute (i) first, a return of capital to the extent of such Certificate
Owner's tax basis in the Certificate (with a corresponding dollar-for-dollar
reduction in such tax basis), and (ii) thereafter, to the extent in excess
thereof, gain on the sale or exchange of such Certificate Owner's Certificate.
See "Disposition of Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not
issued with original issue discount ("OID") and, therefore, the Trust should not
have OID income. However, the purchase price paid by the Trust for the
Underlying Securities may be greater or less than the remaining principal
balance of the Underlying Securities at the time of purchase. If so, the
Underlying Securities will have been acquired at a premium or discount, as the
case may be. (As indicated above, if the Trust acquires a large number of
Underlying Securities it will make this calculation on an aggregate basis, but
might be required to recompute it on an instrument-by- instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
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 Certificate Owners on which they would
recognize gain or loss.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of
the Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
S-31
<PAGE>
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to
terminate for Federal income tax purposes if 50% or more of the capital and
profits interests in the Trust are sold or exchanged within a 12-month period.
Were such a termination to occur, the Trust would be considered to have
contributed its assets to a new partnership and distributed the interests in the
new partnership in liquidation to the Certificate Owners. If any such
constructive termination occurs, the Trust does not intend to comply with
certain technical requirements that might be applicable for various reasons
including the likely lack of relevant data. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses. Moreover,
the Schedule K-1 information thereafter distributed to the Certificate Owners
may be incorrect.
DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale
or other disposition of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to such Certificate. In addition,
both his tax basis in, and the amount realized on a sale of, a Certificate would
include the holder's share of liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such aggregate tax
basis to the Certificates sold (rather than maintaining a separate tax basis in
each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
On the sale of a Certificate, any gain attributable to the
holder's share of any accrued market discount on the Underlying Securities that
has not otherwise been included in the holder's income would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificate Owner is required to recognize an aggregate
amount of income (not including income attributable to disallowed itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be
determined monthly and the tax items for a particular calendar month allocable
to a particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by
existing regulations. If such a convention is not allowed (or only applies to
transfers of less than all of a partner's interest), taxable income or losses of
the Trust might be reallocated among the Certificate Owners. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
S-32
<PAGE>
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates
at a profit (loss), the purchasing Certificate Owner will have a higher (lower)
basis in the Certificates than the selling Certificate Owner had. The tax basis
of the Trust's assets will not be adjusted to reflect that higher (or lower)
basis unless the Trust were to file an election under Section 754 of the Code.
In order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous information
reporting requirements, the Trust will not make such election. As a result
Certificate Owners might be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of
the Trust. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the Trust will be the
calendar year. The Trustee will file a partnership information return (Internal
Revenue Service Form 1065) with the Service for each taxable year of the Trust
and will report each Certificate Owner's allocable share of items of Trust
income and expense to holders and the Service on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and taxpayer identification number of
such person, (y) whether such person is not a United States person, a tax-exempt
entity, or a foreign government, an international organization, or any
wholly-owned agency or instrumentality of either of the foregoing, and (z)
certain information on Certificates that were held, bought or sold on behalf of
such person throughout the year. In addition, brokers and financial institutions
that hold Certificates through a nominee are required to furnish directly to the
Trust information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act is not required
to furnish any such information statement to the Trust. The information referred
to above for any calendar year must be furnished to the Trust on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust with the information described above may be subject to
penalties.
The Company, as the tax matters partner, will be responsible
for representing the Certificate Owners in any dispute with the Service. The
Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificate Owners and, under certain circumstances, a Certificate Owner may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificate Owner's
returns and adjustments of items not related to the income (or loss) of the
Trust.
S-33
<PAGE>
TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. [Although it is not expected that the Trust would be engaged
in a trade or business in the United States for such purposes, the Trust expects
to withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the Trust's income. Each
foreign holder must obtain a taxpayer identification number from the Service and
submit that number to the Trust on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign holder generally would be entitled to
file with the Service a claim for refund with respect to taxes withheld by the
Trust, taking the position that no taxes were due because the Trust was not
engaged in a U.S. trade or business. The Trust will cooperate in any such refund
claim if it can do so without incurring any out-of-pocket cost. No assurance can
be given as to whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to
reflect differences caused by the precise nature of the Deposited Assets
relating to a given Series of Certificates.]
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 Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing
interests in a FASIT and the promulgation of Treasury regulations relating to
the federal income taxation of FASITs and to the federal income tax consequences
of the ownership of FASIT interests, the Prospectus Supplement relating to such
Certificates will describe the requirements for the classification of the Trust
as a FASIT and the consequences to a holder of owning such Certificates.]
[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may
arise, including as a result of the specific nature of the Deposited Assets
relating to a given Series of Certificates or the degree of servicing required
with respect to such Deposited Assets.]]
S-34
<PAGE>
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)(1) of the Code or (c) any entity whose underlying assets are
treated as assets of any such plan by reason of such plan's investment in the
entity (each a "Plan").
In accordance with ERISA's fiduciary standards, before
investing in a Certificate, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments and is appropriate
for the Plan in view of its investment policy and the composition of its
portfolio. Other provisions of ERISA and the Code prohibit certain transactions
involving the assets of a Plan and persons who have specified relationships to
the Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of Section 4975 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.
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 non-exempt prohibited transactions under ERISA and the Code.
Neither ERISA nor the Code defines the term "plan assets." Under 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, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Regulation states that a beneficial interest in a
trust is an equity interest. Thus, if a Plan acquired a Certificate of a
particular class the Plan might be considered to own its share of the underlying
assets of the Trust unless, among other exceptions set forth in the Regulation,
(1) such Certificate is a "publicly-offered security" or (2) equity
participation by benefit plan investors in each class of equity interests is not
"significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, 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 a
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 such public offering occurred. The
Company does not anticipate that the Certificates of any class will be
considered publicly-offered securities within the meaning of the Regulation.
Participation by benefit plan investors in any class of
Certificates would not be significant if, immediately after the most recent
acquisition of any equity interest in the Trust (whether or not from the Company
or an Agent or Underwriter), less than 25 percent of the value of each class of
equity interest were held by benefit plan investors, which are defined as Plans
and employee benefit plans not subject to ERISA (for example, governmental
plans). For purposes of such less than 25 percent limit, the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or provides investment advice for a fee with respect to
the assets of the entity, or any affiliate thereof, shall be disregarded. There
can be no assurance that less than 25 percent of the value of any given class of
Certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited
S-35
<PAGE>
Assets were a party in interest or disqualified person with respect to a Plan
holding a Certificate, the acquisition of the Certificate could be construed as
a prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95-60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its
counsel regarding the applicability of ERISA and Code Section 4975 to its
acquisition and holding of Certificates. In addition, any Plan acquiring
Certificates shall be deemed to have represented that its acquisition and
holding of Certificates would not be prohibited under ERISA and the Code because
an exemption is applicable to the acquisition and holding of the Certificates
and the activities of the Trust. To the extent an insurance company invests
assets treated as assets of a Plan, it will be required to make the foregoing
representation as a condition to the acquisition of a Certificate.
S-36
<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement, dated as of [ ], 199[ ] (the "Underwriting Agreement"),
the Company has agreed to sell and [Lehman Brothers Inc. (an affiliate of the
Company)] [each of the Underwriters named below, including Lehman Brothers Inc.
(an affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed
to purchase, the [Certificates] [the principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Lehman Brothers Inc........ $ $ $
------------ ------------ ------------
Total............. $ $ $
============ ============ ===========
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Company has been advised by the Underwriter[s] that
[it][they] propose[s] 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[s] 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[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] 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.
The Underwriting Agreement provides that the Company will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Company, and the
participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's")][Moody's Investors
Service, Inc. ("Moody's")][Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")](the
"Rating[Agency][Agencies]"). The ratings address the likelihood of the receipt
by the Certificateholders of payments required under the Trust Agreement, and
are based primarily on the credit
S-37
<PAGE>
quality of the Deposited Assets and any providers of Credit Support, as well as
on the relative priorities of the Certificateholders of each class of the
Certificates with respect to collections and losses with respect to the
Deposited Assets. 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 Deposited Assets, the corresponding
effect on yield to investors, or whether investors in the Class [ ] Certificates
[specify class with Notional Amount] may fail to recover fully their initial
investment.
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 any other security rating.
The Company has not requested a rating on the Certificates by
any rating agency other than the Rating [Agency] [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 [Agency] [Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be
passed upon for the Company and the Underwriter[s] by [Weil, Gotshal & Manges
LLP, New York, New York].
S-38
<PAGE>
INDEX OF TERMS
--------------
[LIST DEFINED TERMS AND PAGE NUMBER
WHERE DEFINED IN THE PROSPECTUS SUPPLEMENT]
S-39
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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 on, 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 "Company") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Company, 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 Company in the secondary market
(either directly or through an affiliate of the Company), 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
LEHMAN BROTHERS
July 25, 1997
<PAGE>
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 Company'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
specified 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 Trust Agreement--Advances in
Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the Company, 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, and only
as and to the extent otherwise specified in such Prospectus Supplement) will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Company, any Administrative Agent or their respective affiliates.
Prospective investors should consider the factors set forth herein under "Risk
Factors," beginning on page 5.
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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
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.
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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 or, if applicable, notional 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 (if any), (i) the date of issue, (j) the Final Scheduled Distribution
Date (as defined below), 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 Company 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 Company 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 located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, Suite
1400, 500 West Madison Street, 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 Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy, information statements and other information filed electronically through
the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The
Company does not intend to send any financial reports to Certificateholders.
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Reports and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company 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 Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to and 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 Company will provide without charge to each person to whom
a copy of this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Secretary of 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 (as defined below) 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 Company, on behalf of each Trust, will cause to be filed with the Commission
such periodic reports as are required under the Exchange Act.
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<PAGE>
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.
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 Interests. The Certificates will not
represent a recourse obligation of or interest in the Company 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 Company, any person affiliated with
the Company or the Trust, or any other person. The obligations, if any, of the
Company with respect to the Certificates of any Series will only be pursuant to
certain limited representations and warranties. The Company does not have, and
is not expected in the future to have, any significant assets with which to
satisfy any claims arising from a breach of any representation or warranty. If,
for example, the Company were required to repurchase an Underlying Security with
respect to which the Company has breached a representation or warranty, its only
sources of funds to make such repurchase would be from funds obtained from the
enforcement of a corresponding obligation, if any, on the part of the seller of
such Underlying Security to the Company, or from a reserve fund established to
provide
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<PAGE>
funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, the Company 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 Assets related to such
Series or Class as described in the related Prospectus Supplement, the
Certificates do not represent obligations of the Company, any Administrative
Agent or any of their affiliates and, unless otherwise specified in the
applicable Prospectus Supplement, are not insured or guaranteed by the Company,
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 (as defined below)) 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 Consequences" 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 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
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<PAGE>
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 Depositary (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 Depositary 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 Depositary's system, or to otherwise 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 Company 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.
In addition, 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).
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<PAGE>
THE COMPANY
The Company 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 Company is located in 3 World
Financial Center, New York, New York 10285. Its telephone number is (212)
526-5594.
The Certificate of Incorporation of the Company provides that
the Company 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 Company provides that any securities, except
for subordinated securities, issued by the Company 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 Company 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 Company may not issue any securities which would result in the lowering of
the then current ratings of the outstanding Certificates of any Series.
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
Company 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 Company for
general corporate purposes.
FORMATION OF THE TRUST
The Company 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 or will
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<PAGE>
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
Company'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 Company 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 Company 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 Company will obtain Credit Support for the benefit of
the Certificateholders of any related Series (or Class within such Series) of
Certificates.
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
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<PAGE>
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 a 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 a 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 (as defined below) 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.
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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.
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 Company, 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 Company as an exhibit to a Current Report on Form 8-K 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). The 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."
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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 Company (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") for each such class including
the applicable rate, if fixed (a "Fixed 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
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 (as defined in the related Prospectus Supplement), 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 Company 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 Company'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
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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 Depositary (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 Company 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 Company
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 the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the 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
relating to such
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Series or Class. 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
Company, 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 Company may at any time purchase Certificates at
any price in the open market or otherwise. Certificates so purchased by the
Company may, at the discretion of the Company, 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.
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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 other
circumstances beyond the Company'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 Depositary); provided, however, that, in
the case of a Series or Class of Registered Certificates issued between a Record
Date 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
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received in writing by the Trustee for such Series not later than fifteen
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 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 (as defined below) (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
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<PAGE>
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 ("Initial Pass-Through
Rate"). 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
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interest may accrue during any interest accrual period specified in the
applicable Prospectus Supplement ("Maximum Pass-Through 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 Company 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 Final Scheduled Distribution Date (as defined in the Prospectus
Supplement) will be that in effect on the tenth day preceding such Final
Scheduled 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
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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.
(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
CD Rate 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 CD Rate 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
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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 "CD Rate 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
Commercial Paper Rate 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 Commercial
Paper Rate 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 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).
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"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 "Commercial Rate Paper 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 Prospectus
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 Federal
Funds Rate 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 Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate 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 Federal Funds Rate 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
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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 "Federal Funds Rate 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 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 its 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
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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 specified 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 Certificates-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 Treasury Rate 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 Treasury Rate 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 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
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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 "Treasury Rate 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.
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Indexed Certificates
From time to time, the Trust 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") 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, 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 and/or the related Trust Agreement;
provided that any right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the Company'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
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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 as set forth in the applicable Prospectus Supplement.
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 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 Depositary (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
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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 Depositary'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
Depositary'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 Depositary 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 Depositary.
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 in 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, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. 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 part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole
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by the Depositary for such Global Security to a nominee of such Depositary or by
a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Company 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 participating organizations and to facilitate
the clearance and settlement of securities transactions among the institutions
that have accounts with such Depositary ("participants") in such securities
through electronic book-entry changes in the accounts of the participants,
thereby eliminating the need for physical movement of securities certificates.
Such Depositary'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
Depositary. Access to such Depositary'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 Company that it
intends to follow such procedures.
Upon the issuance of a Global Security, the Depositary for
such Global Security will credit, on its book-entry registration and transfer
system, the respective principal amounts or notional amounts, if applicable, 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 Company 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 Depositary 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 Depositary for a Global Security, or its
nominee, is the owner of such Global Security, such Depositary or such nominee,
as the case may be, will be considered the sole 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
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Certificate to pledge that Certificate to
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persons or entities that do not participate in the Depositary'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 Depositary or its nominee, as the case may
be, as the Certificateholder of such Global Security. None of the Company, 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 Company expects that the Depositary 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 any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company 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 Depositary 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 Company within ninety days, the
Company will issue individual Definitive Certificates in exchange for the Global
Security or Securities representing such Certificates. In addition, the Company
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 individual Definitive Certificates of such Class in
exchange for the Global Security or Securities representing such Certificates.
Further, if the Company 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 Company and the
Depositary of 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 or notional amount, if applicable, 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 Company or in the related Prospectus Supplement, of $1,000 and
integral multiples thereof if the Certificates of such Class are issuable as
Registered Certificates, (b) as Bearer
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Certificates in the denomination or denominations specified by the Company or as
specified in the related Prospectus Supplement 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.
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 Company (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 Company is permitted to deposit
in a Trust and does not purport to be a complete description of any Underlying
Security prospectus, and Underlying Securities Indenture (as defined below) and
as qualified by the applicable Underlying Securities Indenture.
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.
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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 of its 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 (as defined below) 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 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
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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 consent of the
indenture trustee, that the proceeding be brought for the ratable benefit of all
holders of the security, and/or 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 comprised of 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 an 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 an 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
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Securities and the percentage of Senior Underlying Securities and Subordinated
Underlying Securities, if any, in a Trust comprised of a pool of securities.
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 and is continuing, 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 which 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
comprised 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, 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
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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 Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to 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 Company, 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 Company 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
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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 Certificates 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 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
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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
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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 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
deposited in such Reserve Account 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 Company 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 such collections from time
to time prior to any applicable Distribution Date 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 Supplement, 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 Losses will be allocated among the Classes of any Series of
Certificates, if applicable.
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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.
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the Trust
Agreement and the Certificates do 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
Company 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 Company 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 Company in exchange for certain assets to be deposited in
the Trust (Section 2.05). 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 ("Concentrated Underlying
Securities"), 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 Company 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
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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 Company, and the Administrative Agent, if any, and
otherwise the Trustee shall immediately notify the relevant person who sold the
applicable Deposited Asset to the Company (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 Company 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 3.07).
Each of the Company 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 Agreement.
Upon a breach of any such representation of the Company or any such
Administrative Agent, as the case may be, which materially and adversely affects
the interests of the Certificateholders, the Company or any such Administrative
Agent, respectively, will be obligated to cure the breach in all material
respects (Section 2.04).
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.
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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.
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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 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 and 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 3.07),
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 but unpaid 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 3.07). Only if and
to the extent provided in the applicable Prospectus Supplement, the
Administrative Agent or Trustee, as so provided, will 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.
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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 3.11).
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus
Supplement, the Administrative Agent, if any, specified therein or the Trustee
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 or the Trustee 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 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 (as defined in the
related Prospectus Supplement) and were delinquent on the related Determination
Date, subject to (i) any such Administrative Agent's or Trustee'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 or Trustee'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 Account for such Series to the extent that such
Administrative Agent or Trustee 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 or Trustee
from excess funds in the Certificate Account for any Series, such Administrative
Agent or Trustee 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 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee to make
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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 Company
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 Company, an affiliate of either thereof, the Deposited Asset
Provider or any third party and may have other normal business relationships
with the Trustee, the Company, their affiliates or the Deposited Asset Provider.
The Trust Agreement will provide that an Administrative Agent,
if any, 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.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the Company nor any director, officer, employee,
or agent or the Administrative Agent or the Company 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 Company and any director, officer,
employee or agent of the Administrative Agent or the Company 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 Company will be under any
obligation to 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 Company 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 6.02). The
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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.
Administrative Agent Termination Events;
Rights Upon Administrative Agent Termination Event
Unless otherwise provided in the related Prospectus
Supplement, "Administrative Agent Termination Events," if applicable, under the
Trust Agreement with respect to any given Series of Certificates will consist 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 Company, or to the Administrative
Agent, the Company 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 Company, or to the Administrative Agent, the Company 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. 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, if applicable,
under the Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Company or the Trustee may, and at the
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direction of holders of such Certificates evidencing not less than the "Required
Percentage-- Administrative Agent Termination" (as defined in the Prospectus
Supplement, if applicable) of the Voting Rights, the Trustee will, terminate all
the 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 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.
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" (as defined in the Prospectus Supplement) 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 10.02). 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 10.02).
Modification and Waiver
Unless otherwise specified in the applicable Prospectus
Supplement, the Trust Agreement for each Series of Certificates may be amended
by the Company 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
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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 Company, 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 qualify, 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 Company, and the Trustee, with the consent of the holders of
Certificates evidencing not less than the "Required Percentage--Amendment" (as
defined in the Prospectus Supplement) 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.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) 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
Company, 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 5.20).
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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 Company 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
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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 4.03).
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
If so 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.
The Trust Agreement may also provide for delivery to the
Company, 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.
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.
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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 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).
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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 7.04). 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 7.01).
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 Company, any Administrative Agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, the Company 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 (as
defined below) 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
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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
Company 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.
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
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for making distributions in respect of Certificates denominated in such
currency. At present, the Company 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 Company'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.
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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.
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.
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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 Company 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 Company. 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
Company from time to time. Any agent involved in the offer or sale of
Certificates will be named, and any commissions payable by the Company 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
Company 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.
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
Company to indemnification by the Company against certain civil liabilities,
including liabilities under
54
<PAGE>
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 Company or its affiliates in the ordinary course of business.
Lehman Brothers Inc. is an affiliate of the Company. Lehman
Brothers Inc.'s participation in the offer and sale of Certificates complies
with the requirements of Section 2720 of the Conduct Rules 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 Company 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.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be
passed upon for the Company and the underwriters by Weil, Gotshal & Manges LLP,
New York, New York or other counsel identified in the applicable Prospectus
Supplement.
55
<PAGE>
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in the Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or Lehman Brothers Inc. The Prospectus
does 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 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 the date of the Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement..................................................3
Available Information..................................................3
Incorporation of Certain Documents by Reference........................4
Reports to Certificateholders..........................................4
Important Currency Information ........................................5
Risk Factors...........................................................5
The Company............................................................8
Use of Proceeds........................................................8
Formation of the Trust.................................................8
Maturity and Yield Considerations......................................9
Description of Certificates..........................................11
Description of Deposited Assets and Credit Support....................30
Description of the Trust Agreement....................................38
Limitations on Issuance of Bearer Certificates........................50
Currency Risks........................................................51
Plan of Distribution..................................................54
Legal Opinions........................................................55
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion Dated July 25, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 25, 1997)
Trust Certificates, Series 1997 - [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 1997-[ ] offered hereby will consist of classes
of Certificates, designated as Class Certificates[,] [and] Class
Certificates [and list others], [all] of which [only the Class Certificates[,]
[and] Class Certificates [and list others]] are being offered hereby
(collectively, the "Certificates") and will represent a fractional undivided
beneficial interest in the Series 1997-[ ] Trust (the "Trust") to be formed
pursuant to the Trust Agreement dated as of [ ], between Lehman ABS Corporation
(the "Company") and [ ], as trustee (the "Trustee"), as supplemented by the
Series 1997-[ ] Supplement dated as of [ ] (collectively, the "Trust
Agreement"). The property of the Trust will consist in part of [$][ ] aggregate
principal amount of [a [ %] [floating rate] [specify publicly issued debt
security] due of [specify issuer]] [a pool of [ %] [floating rate] publicly
issued debt securities having a term of [not less than years and not more
than years] issued by [the United States of America] [U.S. Government
sponsored entity issuers] [Government Trust Certificates ("GTCs") [provided that
such GTCs, together with any AID-Guaranteed Underlying Securities (as defined
below), shall not account for 20% or more of the aggregate cash flows on the
Underlying Securities securing any Series of Certificates]] [obligations
guaranteed by the United States Agency for International Development
("AID-Guaranteed Underlying Securities") [provided that such AID-Guaranteed
Underlying Securities, together with any GTCs, shall not account for 20% or more
of the aggregate cash flows on the Underlying Securities securing any Series of
Certificates]] [(other than the Retained Interest referred to herein)]
(collectively, the "Underlying Securities"), and having the characteristics
described herein under "Description of the Deposited Assets." Terms used but not
otherwise defined herein are defined in the Prospectus attached hereto (the
"Prospectus").
The Underlying Securities will be acquired by the Company and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [ ].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year] [to be conformed to interest payment dates
for Underlying Securities], or, if any such date is not a business day, then on
the immediately following business day (each, a "Distribution Date") commencing
[ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ ] (the "Final Distribution Date"), by which date the holders
of the Certificates will receive a distribution of all amounts allocable to
principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 7.
------------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS RESPECTIVE 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.
------------------------
The Underwriter has agreed to purchase the Certificates from
the Company at [ ]% of the Certificate Principal Balance thereof ($[ ] aggregate
proceeds to the Company, before deducting expenses estimated at $[ ]) plus
accrued interest, if any, at the Pass-Through Rate calculated from [ ], 1997
(the "Expected Settlement Date"), subject to the terms and conditions set forth
in the Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
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 [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
July , 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class Certificates [and specify other classes].] As and to the extent
described herein, losses realized on the Deposited Assets will be borne by the
holders of the Class Certificates [and specify other classes] before such
losses will be borne by the holders of the other classes of Offered Certificates
[and the Class Certificates [and specify other classes]]. To the extent
described herein, the relative priorities of each class of Certificates with
respect to collections from and losses on the Deposited Assets may each change
over time, either permanently or temporarily, upon the occurrence of certain
circumstances specified herein. [SEE "DESCRIPTION OF THE CERTIFICATES-ALLOCATION
OF LOSSES; SUBORDINATION."]
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
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 [specify applicable classes] 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. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED [_______ __], 1997, 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 ,1997, 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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-3
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms 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", "Description of the
Deposited Assets" and "Description of Credit Support." Certain capitalized terms
used herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
- ----------------
The Trust............................... Series 1997-[ ] Trust. The Trust
will be formed pursuant to the Trust
Agreement dated as of [ ] (the "Base
Trust Agreement"), between the
Company and the Trustee, as
supplemented by the Series 1997-[ ]
Supplement dated as of the Expected
Settlement Date (the "Series
Supplement" and, together with the
Base Trust Agreement, the "Trust
Agreement").
Securities Offered...................... Trust Certificates, Series 1997-[ ],
consisting of Class [ ]
Certificates[,] [and] Class [ ]
Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate
Principal Balance]
[Notional Amount]....................... Class [ ]: [$][ ].
Class [ ]: [$][ ].
Final Scheduled
Distribution Date....................... Class [ ].
Class [ ].
Pass-Through Rates...................... [The Variable Pass-Through Rates
applicable to the calculation of the
interest distributable on any
Distribution Date on the
Certificates [(other than the Class
[ ] Certificates)] are equal to
[describe method for determining
variable rates]. The initial
Variable Pass-Through Rates for the
Class [ ] Certificates[,] [and] the
Class [ ] Certificates [and specify
others] are approximately ___%[,]
[and] ___% [and ___%] per annum,
respectively.] [The Pass-Through
Rate applicable to the calculation
of the interest distributable on any
Distribution Date on the [specify
classes] Certificates is fixed at
___% [and ___%, respectively,] per
annum.]
S-4
<PAGE>
Deposited Assets........................ The Deposited Assets shall consist
of the Underlying Securities [and
describe any assets which are
ancillary or incidental to the
Underlying Securities]. See "-The
Underlying Securities" [, "-Other
Deposited Assets"] and "Description
of the Deposited Assets" below.
Original Issue Date..................... [ ].
Cut-off Date............................ [ ].
Distribution Date....................... [ ], commencing [ ].
Record Date............................. The [ ] day immediately preceding
each Distribution Date.
Denominations;
Specified Currency...................... The Class [ ] Certificates[,] [and]
Class [ ] Certificates [and specify
others] will be denominated and
payable in [U.S. dollars] [ ] (the
"Specified Currency") and will be
available for purchase in minimum
denominations of [$][ ] and
[integral multiples thereof]
[multiples of [$][ ] in excess
thereof].
Interest Accrual Periods................ [Monthly] [Quarterly]
[Semi-annually] (or, in the case of
the first Interest Accrual Period,
from and including the Original
Issue Date to but excluding the
first Distribution Date).
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)] [clearinghouse
(next-day)] funds.
Trustee................................. [ ], as trustee.
Ratings................................. [ ] by [ ] [and [ ] by [ ]].
[Specify specific ratings
requirements for particular classes,
including the extent to which the
issuance of the Certificates of a
given class is conditioned upon
satisfaction of the ratings of each
other class of Certificates.] See
"Ratings."
Collection Period....................... With respect to any Distribution
Date, the period beginning on [ ]
and ending at the close of business
of [ ].
S-5
<PAGE>
THE UNDERLYING SECURITIES
- -------------------------
Underlying Securities................... [A [ ]% [floating rate] [publicly
issued [treasury] [debt] security
due [ ] [A pool of publicly issued
[treasury securities] [debt
securities of various United States
government sponsored entities]
[Government Trust Certificates
("GTCs") [provided that such GTCs,
together with any AID-Guaranteed
Underlying Securities (as defined
below), shall not account for 20% or
more of the aggregate cash flows on
the Underlying Securities securing
any Series of Certificates]]
[obligations guaranteed by the
United States Agency for
International Development
("AID-Guaranteed Underlying
Securities") [provided that such
AID-Guaranteed Underlying
Securities, together with any GTCs,
shall not account for 20% or more of
the aggregate cash flows on the
Underlying Securities securing any
Series of Certificates]], exclusive
of the Retained Interest]
[in/having] an aggregate principal
amount of [$][ ].
[GSE Issuer]............................ [Specify issuer] [Pool of various
U.S. government sponsored entity
issuers].
Underlying Security
Original Issue Date..................... [ ].
Underlying Securities
Final Payment Date...................... [ ].
Amortization............................ [Describe amortization schedule, if
any].
Denominations; Underlying
Securities Currency..................... The Underlying Securities are
denominated and payable in [U.S.
dollars] [ ] (the "Underlying
Securities Currency") and are
available in minimum denominations
of [$][ ] and [integral multiples
thereof] [multiples of [$][ ] in
excess thereof].
Underlying Securities
Payment Dates........................... [ ], commencing [ ].
Underlying Securities Rate.............. [ % per annum.] [A [Weighted
Average] rate per annum equal to
[specify interest rate formula for
debt security].]
Underlying Securities Interest
Accrual Periods......................... [Monthly] [Quarterly]
[Semi-annually].
S-6
<PAGE>
Priority................................ [Describe senior or subordinated
status of Underlying Securities].
Security................................ [Describe existence of any security
for obligations or state that
Underlying Securities are
unsecured].
Redemption/Put/
Other Features.......................... [Describe existence of any
redemption, put or other material
features applicable to the
Underlying Securities].
Form of Security........................ Book-entry debt securities with
[DTC] [Federal Reserve Bank] [listed
on the [New York] [American] Stock
Exchange [specify other listing]].
[Fiscal Agent].......................... [ ]. [The Underlying Securities have
[not] been issued pursuant to [an
indenture and no trustee is provided
for.] [ ] acts as fiscal agent for
the Outstanding Debt Securities
pursuant to an agreement dated as of
[ ], 19[ ] (the "Fiscal Agency
Agreement"), between the Fiscal
Agent and the GSE Issuer.
Ratings................................. [ ] by [ ] [and [ ] by [ ]]. [See
"Description of the Underlying
Securities-Ratings of Underlying
Securities."]
[Underlying Securities
Trustee]................................ [Specify]
OTHER DEPOSITED ASSETS
- ----------------------
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-7
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary 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.
Depositor............................... Lehman ABS Corporation (the
"Company"), an indirect wholly-owned
subsidiary of Lehman Brothers Inc.
See "The Company" in the Prospectus.
Certificates............................ The Certificates, each of which
represents a fractional undivided
beneficial interest in the Trust,
will be issued pursuant to the Trust
Agreement. The Certificates will
consist of [ ] classes, designated
as Class [ ] Certificates [and] [,]
Class [ ] Certificates [and [specify
other classes]], [all] of which [all
but the Class [ ] Certificates] are
being offered hereby (collectively,
the "Certificates").
The Certificate Principal Balance of
a Certificate outstanding at any
time represents the maximum amount
that the holder thereof is entitled
to receive as distributions
allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the
extent distributions allocable to
principal are made to such holder.
[The Notional Amount of the Class [
] Certificates as of any date of
determination is equal to [specify].
Reference to the Notional Amount of
the Class [ ] Certificates is solely
for convenience in determining the
basis on which distributions on the
Class [ ] Certificates are
calculated [and determining the
relative voting rights of
Certificateholders of Class [ ]
Certificates for purposes of voting
on a class-by-class basis or
otherwise]. The Notional Amount does
not represent the right to receive
any distributions allocable to
principal.]
[The Class [ ] Certificates, which
are not being offered hereby, have
in the aggregate an initial
Certificate Principal Balance of
[$]_____ (approximate) and a
[Variable] Pass- Through Rate [of
___%]. The Class [ ] Certificates
represent the right to receive
distributions in respect of their
Certificate Principal Balance and
interest thereon at their applicable
Pass- Through Rate.] Shortfalls in
collections with respect to the
Deposited Assets will be allocated
solely to the Class [ ] Certificates
to the extent provided herein and,
thereafter, will be allocated among
the Certificates and the Class [ ]
Certificates, as provided herein.
[The Class [ ] Certificates
S-8
<PAGE>
will be transferred by the Company
to an affiliate on or about , 1997
(the "Closing Date"), and may be
sold at any time in accordance with
any restrictions in the Trust
Agreement.]
The Underlying Securities............... 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 Final Payment
Date. [The Underlying Securities
have a remaining term to maturity of
approximately years.] [As of the
Cut-off Date, the pool of Underlying
Securities has a weighted average
interest rate of % and a weighted
average remaining term to maturity
of approximately years.
Approximately % [specify if greater
than 10%] of such Underlying
Securities consist of debt
securities of [specify U.S.
government sponsored entity or
agency].
[Name such obligor] is a [U.S.
government-sponsored entity]
[specify other] whose principal
executive offices are located at
[specify address]. The obligor
[makes available to the public upon
request certain annual financial and
other information]. See "Description
of the Deposited Assets."
[Other Deposited Assets
and Credit Support...................... The Deposited Assets will also
include [describe any assets which
are ancillary or incidental to the
Underlying Securities, including
hedging contracts such as puts,
calls, interest rate swaps, currency
swaps, floors, caps and collars]
(such assets, together with the
Underlying Securities, the
"Deposited Assets"). See
"Description of the Deposited
Assets."
The Certificateholders of the
[specify particular classes]
Certificates will have the benefit
of [describe credit support] to
support or ensure the [servicing
and] [timely] [ultimate]
distribution of amounts due with
respect to the Deposited Assets,
including providing certain coverage
with respect to losses thereon.]
Distributions........................... Holders of the Certificates will be
entitled to receive on each
Distribution Date, to the extent of
available funds on such Distribution
Date, after payment of the expenses
of the Trustee and its respective
agents up to the Allowable Expense
Amount, (i) [in the case of each
class of Certificates other than
S-9
<PAGE>
the Class [ ] Certificates,]
distributions allocable to interest
at the applicable Pass-Through Rate
on the applicable Certificate
Principal Balance, (ii) [in the case
of each class of Certificates other
than the Class [ ] Certificates,]
distributions allocable to principal
and (iii) [in the case of each class
of Certificates other than the Class
[ ] Certificates,] distributions
allocable to premium (if any) in an
amount equal to all payments of
premium (if any) received on the
Underlying Securities for the
applicable Collection Period.
Distributions will be made to
Certificateholders only if, and to
the extent that, payments are made
with respect to the Deposited Assets
or are otherwise covered by any
Credit Support. [The holders of the
Class [ ] Certificates will be
entitled to receive on each
Distribution Date distributions
allocable to interest in an amount
equal to [describe Stripped
Interest].] [The holders of the
Class [ ] Certificates will not be
entitled to receive any
distributions allocable to principal
or premium (if any).] See
"Description of the
Certificates-Distributions."
Special Distribution Dates.............. If a payment with respect to the
Underlying Securities is made to the
Trustee after the Underlying
Securities Payment Date on which
such payment was due, then the
Trustee shall distribute any such
amount received on the next
occurring Business Day (a "Special
Distribution Date") as if such funds
had constituted Available Funds on
the Distribution Date immediately
preceding such Special Distribution
Date; provided, however, that the
Record Date for such Special
Distribution Date shall be [five
Business Days (as such term is
defined in the Prospectus, "Business
Day") prior to the day on] which the
related payment was received from
the Underlying Securities Trustee.
[Subordination.......................... As and to the extent described
herein, the rights of the holders of
the Class [ ] Certificates [and
specify other classes] to receive
distributions of principal, premium
(if any), and interest with respect
to the Deposited Assets will be
subordinated to the rights of the
holders of the other classes of
Certificates with respect to losses
attributable to principal, premium
(if any) and interest realized on a
Deposited Asset (such losses,
"Realized Losses"). [See
"Description of the
Certificates-Allocation of Losses;
Subordination."]
Optional Termination.................... At its option, the [Company] may
purchase all the Deposited Assets in
the Trust, and thereby cause the
termination of the Trust and early
retirement of the Certificates, on
any
S-10
<PAGE>
Distribution Date on which the
aggregate principal amount of the
Deposited Assets remaining in the
Trust is less than [10%] of the
aggregate principal amount of the
Deposited Assets as of the Cut-off
Date. [Specify any other purchase or
repurchase option of the Company.]
See "Description of the Trust
Agreement-Termination" herein and
"Description of Trust
Agreement-Termination" in the
Prospectus.
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] [as a partnership]
[as a financial asset securitization
investment trust ("FASIT")] and not
as an association taxable as a
corporation. See "Certain Federal
Income Tax Consequences."
Ratings................................. It is a condition to the issuance of
the Certificates that the
Certificates have the ratings
specified above under "Summary of
Principal Economic Terms-The
Certificates-Ratings." 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. A security rating does not
address the occurrence or frequency
of redemptions or prepayments on, or
extensions of the maturity of, the
Deposited Assets, the corresponding
effect on yield to investors [or
whether investors in the Class [ ]
Certificates may fail to recover
fully their initial investment]. See
"Ratings."
ERISA Considerations.................... An employee benefit plan subject to
the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), and an individual
retirement account (each, a "Plan")
may purchase Certificates of any
class if either (i) the Company is
able to confirm the existence of at
least 100 independent purchasers of
such class or (ii) the Plan can
represent that its purchase of the
Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
S-11
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement
(including the Series [ ] Supplement) between the Company and the Trustee.
Concurrently with the execution and delivery of the Series [ ] Supplement, the
Company will deposit the Underlying Securities in 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 Company.
The Underlying Securities will be purchased by the Company in
the secondary market (either directly or through an affiliate of the Company).
The Underlying Securities will not be acquired from any GSE Issuer as part of
any distribution by or pursuant to any agreement with such issuer. [No][The] GSE
Issuer is [not] participating in this offering and [none] will [not] receive any
of the proceeds of the sale of the Underlying Securities to the Company or the
issuance of the Certificates. [Neither the Company nor any of its affiliates
participated in the initial public offering of the Underlying Securities]
[Lehman Brothers Inc., an affiliate of the Company, participated in the initial
public offering of the Underlying Securities as a [co-underwriter]
[underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets (including any
material risks as a result of the inclusion in the Deposited Assets of GTCs or
AID-Guaranteed Underlying Securities) and the terms thereof, as described
elsewhere herein.] See "Risk Factors" and "Maturity and Yield Considerations" in
the Prospectus.
[The Underlying Securities are not guaranteed by the federal
government or any agency or instrumentally thereof, other than the Underlying
Securities Issuer.]
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
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. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Deposited Assets. All disclosure contained herein with respect to the
Underlying Securities is derived from publicly available documents. [Identify
publicly available documents]. Although the Company has no reason to believe the
information concerning the Underlying Securities, or any GSE Issuer in the
Underlying Securities prospectus[es] [and other publicly available information]
is not reliable, neither the Company nor any of the Underwriters 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 a GSE
S-12
<PAGE>
Issuer have not occurred, which have not yet been publicly disclosed, which
would affect the accuracy or completeness of the publicly available documents
described above.
[Use the following where the Underlying Securities consist of
a pool of obligations of multiple obligors]
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of [treasury securities] [and] [publicly issued
debt securities of U.S. government-sponsored entities] [Government Trust
Certificates ("GTCs") [provided that such GTCs, together with any AID-
Guaranteed Underlying Securities (as defined below), shall not account for 20%
or more of the aggregate cash flows on the Underlying Securities securing any
Series of Certificates]] [obligations guaranteed by the United States Agency for
International Development ("AID-Guaranteed Underlying Securities") [provided
that such AID-Guaranteed Underlying Securities, together with any GTCs, shall
not account for 20% or more of the aggregate cash flows on the Underlying
Securities securing any Series of Certificates]]. The Underlying Securities will
be purchased by the Company in the secondary market (either directly or through
an affiliate of the Company) and will be deposited in to the Trust. The
Underlying Securities will not be acquired either from the respective obligors
on the Underlying Securities or pursuant to any distribution by or agreement
with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
Composition of the Underlying Securities Pool
as of the Cut-off Date
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
S-13
<PAGE>
Distribution by Ratings of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ --------- ----------
------ --------- ----------
Total
====== ========= ==========
Distribution by Remaining Term to Maturity
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
-------------- ------ --------- -----------
------ --------- -----------
Total
====== ========= ===========
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
------------------- ------ --------- ----------
% to % [$] %
Greater than % ______ _________ __________
Total [$] 100%
====== =========== ==========
The Underlying Securities consist of [treasury securities] [debt
securities of U.S. government-sponsored entities] [GTCs [provided that such
GTCs, together with any AID-Guaranteed Underlying Securities, shall not account
for 20% or more of the aggregate cash flows on the
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<PAGE>
Underlying Securities securing any Series of Certificates]] [AID-Guaranteed
Underlying Securities [provided that such AID-Guaranteed Underlying Securities,
together with any GTCs, shall not account for 20% or more of the aggregate cash
flows on the Underlying Securities securing any Series of Certificates]]. As of
the Cut-off Date, [all of] [approximately % of] such Underlying Securities were
rated [investment grade] [specify particular rating] by at least one nationally
recognized rating agency, and, based on publicly available information, no
obligor of any Underlying Security was in default in the payment of any
installments of principal, interest or premium (if any) with respect thereto.
Any such rating of any of the Underlying Securities is not a recommendation to
purchase, hold or sell such Underlying Security or the Certificates, and there
can be no assurance that a rating will remain for any given period of time or
that a rating will not be lowered or withdrawn entirely by a rating agency if in
its judgment circumstances in the future so warrant. See "Ratings" herein and
"Risk Factors -- Ratings of the Certificates" in the accompanying Prospectus
regarding certain considerations applicable to the ratings of the Certificates.]
[The following is a summary of the typical Underlying Security
Events of Default for each series of Outstanding Debt Securities. Any additional
Underlying Security Events of Default unique to a Concentrated Underlying
Security have been described following the summary:
(a) failure to make payments of principal (and premium, if any)
and interest to holders of the Outstanding Debt Securities when the same
shall be due;
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement continuing for a specified period of time after
notice thereof is given to the GSE Issuer by the holders of not less
than a specified percentage of the Outstanding Debt Securities;
(c) certain events of bankruptcy or insolvency relating to the
GSE Issuer[; and
(d) describe any additional common events of default with
respect to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities]] [and
[all of] [approximately % of] the Underlying Securities were [describe the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral.]]
The [pool of] Underlying Securities, together with any other
assets described below and any Credit Support described under "Description of
Credit Support", represent the sole assets of the Trust that are available to
make distributions in respect of the Certificates.]
[USE THE FOLLOWING WITH RESPECT TO EACH OBLIGOR THE UNDERLYING SECURITIES OF
WHICH REPRESENT MORE THAN 10% OF THE TOTAL UNDERLYING SECURITIES AVAILABLE TO
MAKE DISTRIBUTIONS IN RESPECT OF
S-15
<PAGE>
THE CERTIFICATES -- ONLY A SINGLE OBLIGOR IS REFERRED TO FOR PURPOSES OF THIS
SECTION OF THE FORM OF PROSPECTUS SUPPLEMENT]
[A significant portion of] [Virtually all of] [All of] the
Deposited Assets of the Trust will consist of the [___%] [floating rate]
[specify publicly issued debt security] due of [specify issuer][, exclusive
of the interest therein retained by [the Company] as described below (the
"Retained Interest")], having an aggregate principal amount outstanding as of
the Cut-off Date of approximately [$] [specify currency] (the "Underlying
Securities"). The Underlying Securities (other than Underlying Securities which
are issued by the United States of America) will be purchased by the Company in
the secondary market (either directly or through an affiliate of the Company)
and will be deposited into the Trust. The Underlying Securities will not be
acquired either from [name such obligor] or pursuant to any distribution by or
agreement with [name such obligor]. [Describe any put, call or other conversion
or redemption options applicable to the Underlying Securities, s well as the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured)]. As of the Cut-off Date, the foregoing debt
security comprising [ %] of the Underlying Securities was rated [specify
investment grade rating] [investment grade] by [specify nationally recognized
rating agency or agencies], and, based on publicly available information, the
obligor thereon was not in default in the payment of any installments of
principal, interest or premium (if any) with respect thereto. Any such rating of
such Underlying Securities is not a recommendation to purchase, hold or sell
such Underlying Securities or the Certificates, and there can be no assurance
that a rating will remain for any given period of time or that a rating will not
be lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk Factors
- -- Ratings of the Certificates" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.
[THE FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Federal National Mortgage Association ("Fannie Mae") is a
federally chartered and stockholder-owned corporation organized and existing
under the Federal National Mortgage Association Charter Act, 12 U.S.C. ss. 1716
et seq. It is the largest investor in home mortgage loans in the United States.
Fannie Mae originally was established in 1938, as a United States government
agency to provide supplemental liquidity to the mortgage market and was
transformed into a stockholder-owned and privately managed corporation by
legislation enacted in 1968. Fannie Mae provides funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing their funds for
additional lending. Fannie Mae acquires funds to purchase loans from many
capital market investors that ordinarily may not invest in mortgage loans,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus
to capital-short areas. Fannie Mae also issues mortgaged-backed securities
("MBS"). Fannie Mae receives guaranty fees for its guaranty of timely payment of
principal of and interest on MBS. Fannie Mae issues MBS primarily in exchange
for pools of mortgage loans from lenders. The issuance of MBS enables Fannie Mae
to further its statutory purpose of increasing the liquidity of residential
mortgage loans.
Fannie Mae prepares an Information Statement annually which
describes Fannie Mae, its business and operations and contains Fannie Mae's
audited financial statements. From time to
S-16
<PAGE>
time Fannie Mae prepares supplements to its Information Statement which include
certain unaudited financial data and other information concerning the business
and operations of Fannie Mae. These documents can be obtained without charge
from Paul Paquin, Senior Vice President -- Investor Relations, Fannie Mae, 3900
Wisconsin Avenue, N.W., Washington, D.C. 20016 (telephone: (202) 752-7115).
Fannie Mae is not subject to the periodic reporting requirements of the
Securities Exchange Act of 1934.]
[THE FEDERAL HOME LOAN MORTGAGE CORPORATION
The Federal Home Loan Mortgage Corporation ("Freddie Mac") is a
publicly held government-sponsored enterprise created on July 24, 1970 pursuant
to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency
Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory
mission is to provide stability in the secondary market for home mortgages, to
respond appropriately to the private capital market and to provide ongoing
assistance to the secondary market for home mortgages (including mortgages
secured by housing for low-and moderate-income families involving a reasonable
economic return to Freddie Mac) by increasing the liquidity of mortgage
investments and improving the distribution of investment capital available for
home mortgage financing. The principal activity of Freddie Mac consists of the
purchase of first lien, conventional, residential mortgages and participation
interests in such mortgages from mortgage lending institutions and the resale of
the mortgages so purchased in the form of guaranteed mortgage securities.
Freddie Mac generally matches and finances its purchases or mortgages with sales
of guaranteed securities. Mortgages retained by Freddie Mac are financed with
short-and long-term debt, cash temporarily held pending disbursement to security
holders, and equity capital.
Freddie Mac prepares an Information Statement annually which
describes Freddie Mac, its business and operations and contains Freddie Mac's
audited financial statements. From time to time Freddie Mac prepares supplements
to its Information Statement which include certain unaudited financial data and
other information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102
(outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within
Washington, D.C. metropolitan area, telephone (703) 759-8160). Freddie Mac is
not subject to the periodic reporting requirements of the Securities Exchange
Act of 1934.]
[THE STUDENT LOAN MARKETING ASSOCIATION
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan ("FFEL") program and the Health Education
Assistance Loan Program. Under the Higher Education Act, Sallie Mae is
authorized to purchase, warehouse, sell and offer participations or pooled
interests in, or otherwise deal in, student loans, including, but not limited
to, loans insured under the FFEL program, and to make commitments for any of the
foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and
otherwise deal
S-17
<PAGE>
in obligations of eligible lenders, if such obligations are issued by such
eligible lender for the purpose of making or purchasing federally guaranteed
student loans under the Higher Education Act. As a federally chartered
corporation, Sallie Mae's structure and operational authorities are subject to
revision by amendments to the Higher Education Act of other federal enactments.
Sallie Mae prepares an Information Statement annually which
describes Sallie Mae, its business and operations and contains Sallie Mae's
audited financial statements. From time to time Sallie Mae prepares supplements
to its Information Statement which include certain unaudited financial data and
other information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007, telephone (202) 298-3010. Sallie Mae is not
subject to the periodic reporting requirements of the Securities Exchange Act of
1934.]
[THE RESOLUTION FUNDING CORPORATION
The Resolution Funding Corporation ("REFCORP") is a
mixed-ownership government corporation established by Title V of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (the "FIRRE Act").
The sole purpose of the REFCORP is to provide financing for the Resolution Trust
Corporation (the "RTC"). REFCORP is to be dissolved, as soon as practicable,
after the maturity and full payment of all obligations issued by it. REFCORP is
subject to the general oversight and direction of the Oversight Board, which is
comprised of the Secretary of the Treasury, the Chairman of the Federal Reserve
Board of Governors, the Secretary of Housing and Urban Development and two
independent members from different political parties to be appointed by the
President with the advice and consent of the Senate. The day-to-day operations
of REFRCORP are under the management of a three-member Directorate comprised of
the Director of the Office of Finance of the FHLBs and two members selected by
the Oversight Board from among the presidents of twelve FHLBs.
The RTC was established by the FIRRE Act to manage and resolve
cases involving failed savings and loan institutions pursuant to policies
established by the Oversight Board. The RTC is to manage and resolve cases for
which a receiver or conservator was appointed between January 1, 1989 through
August 9, 1992. The RTC is authorized to issue nonvoting capital certificates to
REFCORP in exchange for the funds transferred from REFCORP to the RTC. The RTC
will terminate on or before December 31, 1996. The FIRRE Act limits the
aggregate principal amount of interest bearing obligations which may be issued
by REFCORP to $30 billion, which amount of obligations was issued in 1989.
Pursuant to the FIRRE Act, the net proceeds of these obligations are used to
purchase nonvoting capital certificates issued by the RTC or to retire
previously issued REFCORP obligations.
Information concerning REFCORP may be obtained from the
Resolution Funding Corporation, Suite 850, 655 Fifteenth Street, N.W.,
Washington, D.C. 20005. REFCORP is not subject to the periodic reporting
requirements of the Securities Exchange Act of 1934.]
S-18
<PAGE>
[THE FEDERAL HOME LOAN BANKS
The Federal Home Loan Banks constitute a system of twelve
federally chartered corporations (collectively, the "FHLBs"). The mission of
each FHLB is to enhance the availability of residential mortgage credit by
providing a readily available, low-cost source of funds to its member
institutions. A primary source of funds for the FHLBs is the proceeds from the
sale to the public of debt instruments issued by the Federal Housing Finance
Board, which are the joint and several obligations of all of the FHLBs. The
FHLBs are supervised and regulated by the Federal Housing Finance Board, which
is an independent federal agency in the executive branch of the United States
government, but obligations of the FHLBs are not obligations of the United
States government.
The Federal Home Loan Bank System produces annual and quarterly
financial reports in connection with the original offering and issuance by the
Federal Housing Finance Board of consolidated bonds and consolidated notes of
the FHLBs. Questions regarding the Federal Home Loan Banks Combined Financial
Statement should be directed to the Deputy Director, Financial Reporting and
Operations Divisions, Federal Housing Finance Board, 1777 F Street, N.W.,
Washington, D.C. 20006, (202) 406-2901. Copies of the Financial Reports will be
furnished upon request to the Capital Markets Divisions, Office of Finance.]
[TENNESSEE VALLEY AUTHORITY
TVA is a wholly owned corporate agency and instrumentality of
the United States of America established pursuant to the Tennessee Valley
Authority Act of 1933, as amended (the "TVA Act"). TVA's objective is to develop
the resources of the Tennessee Valley region in order to strengthen the regional
and national economy and the national defense. The programs of TVA consist of
power and nonpower programs. For the fiscal year ending September 30, 1994, TVA
received $140 million in congressional appropriations from the federal
government for the nonpower programs. The power program is required to be
self-supporting from revenues it produces. The TVA Act authorizes TVA to issue
evidences of indebtedness that may only be used to finance its power program.
TVA prepares an Information Statement annually which describes
TVA, its business and operations and contains TVA's audited financial
statements. From time to time TVA prepares supplements to its Information
Statement which include certain unaudited financial data and other information
concerning the business and operations of TVA. These documents can be obtained
upon written request directed to Tennessee Valley Authority, 400 West Summit
Hill Drive, Knoxville, Tennessee 37902, Attention: Vice President and Treasurer,
or by calling (615) 632-3366.]
[FEDERAL FARM CREDIT BANKS
The Farm Credit System is a nationwide system of lending
institutions and affiliated service and other entities (the "System"). Through
its Banks ("FCBs") and related associations, the System provides credit and
related services to farmers, ranchers, producers and harvesters of aquatic
products, rural homeowners, certain farm-related businesses, agricultural and
aquatic cooperatives and rural utilities. System institutions are federally
chartered under the Farm Credit Act of 1971, as
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<PAGE>
amended (the "Farm Credit Act"), and are subject to regulation by a Federal
agency, the Farm Credit Administration (the "FCA"). The FCBs and associations
are not commonly owned or controlled. They are cooperatively owned, directly or
indirectly, by their respective borrowers. Unlike commercial banks and other
financial institutions that lead to the agricultural sector in addition to other
sectors of the economy, under the Farm Credit Act the System institutions are
restricted solely to making loans to qualified borrowers in the agricultural
sector and to certain related businesses. Moreover, the System is required to
make credit and other services available in all areas of the nation. In order to
fulfill its broad statutory mandate, the System maintains lending units in all
50 states and the Commonwealth of Puerto Rico.
The System obtains funds for its lending operations primarily
from the sale of debt securities issued under Section 4.2(d) of the Farm Credit
Act ("Systemwide Debt Securities"). The FCBs are jointly and severally liable on
all Systemwide Debt Securities. Systemwide Debt Securities are issued by the
FCBs through the Federal Farm Credit Banks Funding Corporation, as agent for the
FCBs (the "Funding Corporation"). Each FCB determines its participation in each
issue of Systemwide Debt Securities based on its funding and operating
requirements, subject to the availability of eligible collateral, to
determinations by the Funding Corporation as to conditions of participation and
terms of each issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit
System, including combined financial information, is contained in disclosure
information made available by the Funding Corporation. This information consists
of the most recent Farm Credit System Annual Information Statement and any
Quarterly Information Statements issued subsequent thereto (collectively,
"Information Statements") and certain press releases issued from time to time by
the Funding Corporation. Such information and the Farm Credit System Annual
Report to Investors for the current and two preceding fiscal years are available
for inspection at the Federal Farm Credit Banks Funding Corporation, Investment
Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New
Jersey 07302; Telephone: (201) 200-8000. Upon request, the Funding Corporation
will furnish, without charge, copies of the above information.]
[GOVERNMENT TRUST CERTIFICATES
Government Trust Certificates ("GTCs") consist of certificates
evidencing undivided fractional interests in a trust, the assets of which
consist of promissory notes (the "Notes"), payable in U.S. Dollars, of a certain
foreign government, backed by a full faith and credit guaranty issued by the
United States of America, acting through the Defense Security Assistance Agency
of the Department of Defense (the "DSAA"), of the due and punctual payment of
90% of all payments of principal and interest due on the Notes and a security
interest in collateral, consisting of non-callable securities issued or
guaranteed by the United States government or agencies thereof, sufficient to
pay the remaining 10% of all payments of principal and interest due on the
Notes.
Many issuances of GTCs were undertaken pursuant to Title III of the
Foreign Operations, Export Financing and Related Programs Appropriations Acts
(the "Appropriations Acts"), which permit borrowers to prepay certain eligible
high-interest loans made by the Federal Financing Bank (the "FFB") under the
Foreign Military Sales ("FMS") Credit Program. The Appropriations Acts
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<PAGE>
permit prepayment of the FMS loans with the proceeds of new loans and authorize
the issuance of a United States government guaranty covering no more and no less
than ninety percent (90%) of the payments due on each such new loan, in
accordance with the requirements of the Arms Export Control Act, as amended (the
"AECA"). It is a condition to the issuance of Certificates under such program
that the DSAA approve the refinancing of any such FMS loan.
Although 90% of all payments of principal and interest on the Notes are
guaranteed by the United States government or agencies thereof, and 10% of such
payments are secured by securities of the United States government or agencies
thereof, the GTCs themselves are not so guaranteed. In the event of a default on
the Notes, the Trustee of the Trust would be required by the operative documents
to make a claim against the United States government or an agency thereof or
would be required to liquidate the collateral securing the Notes.
Payments Under the Guaranty. If the borrower under the Notes (the
"Borrower") fails to deposit with the related trustee (the "Trustee") all
amounts due on the Notes on any Note payment date (each, a "Note Payment Date"),
the Trustee will first notify the Borrower and, one business day thereafter,
will send a notice to the Director of the DSAA and to the related depositary
(the "Depositary") setting forth the amounts due on the Notes on such Note
Payment Date and the amounts, if any, received from the Borrower. On the [11th
calendar day] following the Note Payment Date, if any amounts due on a Note
remain unpaid, the Trustee will demand payment from DSAA on the applicable
Guaranty in accordance with its terms. On the day the Trustee receives such
payment, it will instruct the Depositary immediately to deliver sufficient funds
to pay the amounts remaining unpaid on the Note.
On the occurrence of an Event of Default (as defined in the related loan
agreement), the Trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the Declaration of Trust by a suit, action or
other proceeding. As provided in the loan agreement, the Guaranty and the
Depositary Agreement, the Trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the Note.
The Trustee is required to take all necessary action, as permitted by
the Declaration of Trust and applicable law (i) to enforce payments due from
DSAA under the Guaranty and (ii) to take possession of collateral maturing or
paying interest on or prior to the Note payment date on which default occurred,
and to apply such funds in accordance with the Declaration of Trust for the
benefit of holders of GTCs. The Trustee is required to notify the Borrower upon
taking the foregoing actions. Neither the Trust holding a Note nor DSAA has the
right to accelerate payment of the Note, notwithstanding any failure of the
Borrower to make payment on the Note or other Event of Default with respect to
the Note.
[The applicable Prospectus Supplement will specify, to the extent GTCs
are included as Underlying Securities, the waiting period that must elapse
before reimbursement for a default on the Notes, and the delay between payment
on the Notes and payment on the GTCs that is built into the GTCs to protect
against a delay in reimbursement.
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<PAGE>
In addition, the related Prospectus Supplement will specify, to the
extent applicable: (i) the aggregate principal amount of such GTCs; (ii) the
coupon, if any, borne by such GTCs; (iii) the stated maturity of each GTC; (iv)
the identity of each underlying obligor; and (v) the conditions under which, and
the terms on which, any underlying obligation may be prepaid or redeemed prior
to the stated maturity of the obligation.]]
[AID-GUARANTEED UNDERLYING SECURITIES
General. AID-Guaranteed Underlying Securities consist of notes, bonds,
credit facilities and other debt instruments which are issued or arranged by
intermediary financial institutions ("IFIs") and guaranteed in whole or in part
by AID. Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government.
AID Housing Guaranty Program. The Housing Guaranty Program (the "Housing
Program") is administered by the AID Office of Housing and Urban Programs. The
Housing Program facilitates collaboration between AID and host-country housing
institution borrowers in both the public and private sectors. Under the Housing
Program AID participates in the planning, structuring and execution of a housing
or shelter finance program. Through the conclusion of "implementation
Agreements" the Housing Program aids developing countries in securing favorable
terms in U.S.
capital markets for a U.S. government-guaranteed loan.
Payments under the AID Guarantees. Pursuant to the Fiscal Agency
Agreement, if the Borrower does not deposit with the Fiscal Agent thereunder at
or before 12 o'clock noon, New York City time, on any date on which a payment of
principal, interest or maturity amount on the guaranteed AID-Guaranteed
Underlying Securities is due (each, an "AID-Guaranteed Underlying Security
Payment Date"), immediately available funds in an amount sufficient to pay in
full any interest and principal, and any maturity amount, due on such
AID-Guaranteed Underlying Security Payment Date with respect to the guaranteed
AID-Guaranteed Underlying Securities, the Fiscal Agent, acting on behalf of the
holders of the guaranteed AID-Guaranteed Underlying Securities, is obligated to
make a demand upon AID, not later than 2 o'clock p.m., New York City time, on
such AID-Guaranteed Underlying Security Payment Date for payment pursuant to the
guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
Business Days following receipt of such demand, to pay to the demanding
AID-Guaranteed Underlying Securityholders the applicable guaranteed amount.
Upon receipt by the Fiscal Agent of payments from AID pursuant to the
guarantees, the Fiscal Agent will be required, if such payments are received at
or prior to 12 o'clock noon, New York City time, on any Business Date, to remit
such payments to the registered holders of the guaranteed AID-
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Guaranteed Underlying Securities entitled thereto on such Business Day and, if
such payments are received after such time, to remit such payments to such
registered holders on the next such Business Day.
Each AID-Guaranteed Underlying Securityholder is deemed by the
acceptance of a guaranteed AID-Guaranteed Underlying Security to have
irrevocably appointed the Fiscal Agent as its agent for the purpose of making a
demand for payment upon AID pursuant to the guarantees and receiving any payment
to an AID-Guaranteed Underlying Securityholder by AID pursuant to the
guarantees. The Regulations also provide that any AID-Guaranteed Underlying
Securityholder may make demand for payment on AID under a Guarantee on its own
behalf immediately upon the failure of the Borrower to make any payment when due
under such AID-Guaranteed Underlying Securityholder's guaranteed AID-Guaranteed
Underlying Security. All payments made by AID to the Fiscal Agent pursuant to
the guarantees will be held in trust by the Fiscal Agent solely for the benefit
of the registered holders of the guaranteed AID-Guaranteed Underlying Securities
until remitted to such holders. AID will be discharged from its obligations to
make a payment pursuant to the guarantees upon the making of such payment to the
Fiscal Agent on behalf of the AID-Guaranteed Underlying Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
Events of Default. As provided by the terms of each AID-Guaranteed
Underlying Security, an Event of Default will be deemed to have occurred if the
borrower fails to make any payment on such AID-Guaranteed Underlying Security on
the applicable Payment Date. On the occurrence of an Event of Default, the
trustee of such AID-Guaranteed Underlying Security (the "Underlying Trustee") or
the Trustee may make demand on AID under the guarantees. However, none of the
Fiscal Agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Underlying Security, notwithstanding any failure of the borrower to make payment
on the AID-Guaranteed Underlying Securities.
[The related Prospectus Supplement will specify, to the extent
applicable: (i) the aggregate principal or notional principal amount of such
AID-Guaranteed Underlying Securities; (ii) the coupon, if any, borne by such
AID-Guaranteed Underlying Securities; (iii) the stated maturity of each
underlying obligation; (iv) the identity of each underlying obligor; (v) the
credit characteristics of such obligor; (vi) the rating, if any, assigned to
each such obligor, whether an actual or a shadow rating; (vii) the conditions
under which, and the terms on which, any underlying obligation may be prepaid or
redeemed prior to the stated maturity of the obligation; and (viii) the identity
of the Fiscal Agent.]
The Federal Credit Reform Act of 1990, Pub. Law 101-508 (the "Credit
Reform Act"), provides that payments in respect of loan guarantee commitments
made on or after October 1, 1991, including the guarantee commitments made by
AID under the guarantees, will be made by the U.S. Treasury from a "financing
account" established under Section 502(7) of the Credit Reform Act. Section
505(c) of the Credit Reform Act authorizes the Secretary of the Treasury to lend
or pay to the financing account such amounts as may be necessary to make any
payments required to discharge loan guarantee obligations and commitments in the
event funds in the financing account are insufficient.]
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The Trust will have no other significant assets [other than any
Credit Support or those assets referred to below] 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 [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'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 of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Company nor [any of]
the Underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
The Deposited Assets will also include [describe any assets
which are ancillary or incidental to the Underlying Securities, including
hedging contracts such as puts, calls, interest rate swaps, currency swaps,
floors, caps and collars, and any cash or other security pledged to support the
Underlying Securities] (such assets, together with the Underlying Securities,
the "Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ]
Certificates [and the Class [ ] Certificates]], Credit Support will be obtained
[and will constitute part of the Trust to the extent provided below] to support
or ensure the [servicing and] [timely] [ultimate] distribution of amounts due
with respect to the Deposited Assets, in the form and amount described below.
[THE LETTER OF CREDIT
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Letter of Credit from [ ] (the
"Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely] [ultimate] remittance of amounts due with respect to the Deposited
Assets]. The maximum amount that the Trustee may draw under the Letter of Credit
will initially be equal to
. The initial amount of the Letter of Credit will be [$] . Thereafter,
the amount of the Letter of Credit with respect to any Distribution Date will
equal [the lesser of (i) % of the aggregate Certificate Principal Balance
outstanding on the preceding Distribution Date (after giving effect to any
payment of principal made on such preceding Distribution Date) but in any event
not less than [$] , and (ii)] the amount of the Letter of Credit on preceding
Distribution Date, plus [(a) reimbursement of certain advances under the Letter
of Credit and (b) recoveries on defaulted Deposited Assets] [describe other
methods]. The Letter of Credit expires on , 19 . The Trustee will be obligated,
in the event of a drawing on the Letter of Credit, to pursue appropriate
remedies against the Deposited Assets and other collateral, and any realization
thereon shall be paid to the Letter of Credit Bank to the extent of any amounts
owing, in the manner and priority specified herein.]
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[Add language regarding the Letter of Credit Bank with respect
to its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank.]]
[THE SURETY BOND
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Surety Bond from [ ] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered] Class [ ]]
Certificates. The Surety Bond expires on , 19 . The Trustee will be obligated,in
the event of a drawing on the Surety Bond, to pursue appropriate remedies
against the Deposited Assets and other collateral, and any realization thereon
shall be paid to the Surety to the extent of any amounts owing, in the manner
and priority specified herein.
[Add language regarding the issuer of the Surety Bond with
respect to its debt ratings, activities it engages in, regulatory authorities
having jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the Surety. In addition,
to the extent that the Surety Bond will cover payment of 20% or more of the
aggregate principal amount of the Certificates covered thereby, provide
information of financial and other matters with respect to the issuer of the
Surety Bond.]]
[RESERVE ACCOUNT
The Company will deposit with the Trustee on the Closing Date
cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Certificates in the amount of [$] . [Collections
with respect to the Deposited Assets not distributed with respect to the
Certificates shall be deposited in the Reserve Account.] Amounts so deposited in
such Reserve Account will be used by the Trustee to make payments of principal
of and premium (if any) and interest on the Certificates to the extent that
funds are not otherwise available. Immediately after any Distribution Date,
amounts in the Reserve Account in excess of [indicate formula] [may be paid to
the Company.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms
thereof and the manner and priority in which collections thereon are allocated
to the Certificateholders of each class of the Certificates, as described
elsewhere herein.] See "Maturity and Yield Considerations" in the Prospectus.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ] [,] [and] Class [ ] [and Class ____] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]_________ (approximate) and a [ %] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] _____ (approximate) and
a [___%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in the
aggregate an initial [Certificate Principal Balance] [Notional Amount] of [$]
_________ (approximate) and a [ %] [Variable] Pass-Through Rate. [The Class [ ]
Certificates, which are not being offered hereby, will be transferred by the
Company to an affiliate on the Closing Date, and may be sold at any time by the
Company in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and
specify others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ] in
excess thereof]. [The Class [ ] Certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal Balances,
as applicable, of [$ ] and integral multiples thereof, except that one
Certificate of each such class may be issued with an initial Notional Amount or
Certificate Principal Balance, as applicable, equal to an integral multiple of
[$ ] plus the excess of the initial aggregate Notional Amount or Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$ ] that is not more than such initial aggregate Notional Amount or
Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the Company, the "Clearing Agency"),
except as provided below. The Company 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
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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 Certificate Owners or
their nominees, respectively, rather than to DTC or its nominee, only if (i) the
Company advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Clearing Agency with respect to each
class of Certificates [(other than the Definitive Classes)] and the Company is
unable to locate a qualified successor or (ii) the Company, 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 [(other than the
Definitive Classes of 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.
DISTRIBUTIONS
Collections on the Deposited Assets 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:
(i) to the Trustee, all unpaid fees and expenses of the Trustee
and its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support
Providers"), any amounts required to be paid or reimbursed to, or
deposited with, any such person (collectively, "Credit Support
Payments");
(iii)] to the Certificateholders of each Class of such Series,
first, to the payment of Required Interest [and on a pro rata basis to
the Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and third, to
the payment of Required Premium, in each case applicable to such Class,
commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance with
the ranking specified herein under ["-- Allocation of Losses;
Subordination"];
[(iii) to the Credit Support Providers, any Credit Support
Payments;]
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[(iv)] to the Trustee, all its remaining unpaid fees and
expenses and those of its respective agents not otherwise paid pursuant
to clause (i) above;
[(v)] all remaining amounts, if any, to the Company].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of the Allowable
Expense Amount from the preceding Collection Period that have not been applied
on the Distribution Date for such preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum of (a)
all amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period[,] [and] (b) amounts available as of such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional amount
that the [Company] may remit to the Trustee from time to time according to the
terms of the Trust Agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means
[a fixed percentage] [a percentage that varies depending on [describe basis for
variable formula, such as the applicable date or other factors or indices]].
"Eligible Investments" means, with respect to the Certificates,
those investments acceptable to the Rating Agency 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.
"Required Interest" for the Certificates or any Class thereof on
any given Distribution Date means the accrued and unpaid interest on the
outstanding Certificate Principal Balance [or Notional Amount] of such
Certificates, computed at the applicable Pass-Through Rate.
"Required Premium" for the Certificates or any Class thereof for
any Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
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"Required Principal" for the Certificates or any Class thereof
for any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection Period,
to the extent allocable to such Certificates. The Certificate Principal Balance
of a Certificate outstanding at any time represents the maximum amount that the
holder thereof is entitled to receive as distributions allocable to principal
from the cash flow on the Underlying Securities, the other assets in the Trust
and any Credit Support obtained for the benefit of such holder. The Certificate
Principal Balance of any class of Certificates [(other than the Class [ ]
Certificates)] as of any date of determination is equal to the initial
Certificate Principal Balance thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Certificate and (b) any reductions in the Certificate Principal Balance deemed
to have occurred in connection with allocations of (i) Realized Losses allocable
to principal on the Deposited Assets and (ii) [Extraordinary Trust Expenses], as
described herein. [The Notional Amount of the Class [ ] Certificates as of any
date of determination is equal to [specify amount].] [Holders of the Class [ ]
Certificates are not entitled to receive any distributions allocable to
principal.]
[Notwithstanding the priorities described above, holders of the
Class [ ] Certificates and the Class [ ] Certificates will be entitled to
receive on any Distribution Date 100% of all principal collections received in
the related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] in reduction of the Certificate Principal
Balance of the Class [ ] Certificates and the Class [ ] Certificates, if any of
the following conditions shall be satisfied: [describe conditions, if any, by
which a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be
obligated to advance or cause to be advanced on or before each Distribution Date
its own funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are
deemed by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the
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Trustee out of any funds in the Certificate Account allocable to any of the
Deposited Assets prior to the distributions on the Certificates.
[ALLOCATION OF LOSSES; SUBORDINATION [Specify if necessary]
["Extraordinary Trust Expense" - define if necessary]]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Class
[ ] Certificates and the Class [ ] Certificates to the extent set forth herein,
the Class [ ] Certificates may not be purchased by or transferred to a Plan
except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations."]
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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 Company with the Commission following
the issuance and sale of the Certificates. The Trust created under the Trust
Agreement (including the Series 1997-[ ] Supplement) will consist of (i) the
Deposited Assets (exclusive of any Retained Interest, which is not part of the
Trust), (ii) all payments on or collections in respect of the Deposited Assets
due after the Cut-off Date, together with any proceeds thereof[,] [and] [(iii)
any Credit Support in respect of any class or classes of Certificates] [and (iv)
the rights of the Company under the Purchase Agreement between the Company and
the Seller]. [In addition, the Certificateholders of the Certificates may also
have the benefit of certain Credit Support discussed above. See "Description of
Credit Support."] Reference is made to the Prospectus for important information
in addition to that set forth herein regarding the Trust, the terms and
conditions of the Trust Agreement and the 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 TRUSTEE
[ ], a [ ] corporation, will act as trustee for the Certificates
and the Trust pursuant to the Trust Agreement. The Trustee's offices are located
at [ ] and its telephone number is [ ].
The Trust Agreement will provide that the Trustee and any
director, officer, employee or agent of the Trustee will be indemnified by the
Trust and will be held harmless against any loss, liability or expense incurred
in connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of 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.]
[Describe remedies available to Certificateholders upon the occurrence and
continuance of an Event of Default, including, as
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<PAGE>
applicable, directing the Trustee to vote the Underlying Securities in favor of
declaring the principal balance of and any accrued interest on the Outstanding
Debt Securities to be immediately due and payable].
The Trust Agreement will provide that, within 30 days after the
occurrence of an Event of Default in respect of the Certificates of any class,
the Trustee will give to the holders of such Certificates notice, 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 premium, if any, 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 holders
of the Certificates of such class.
No holder of any Certificate will have the right to institute
any proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders 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 the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of
all Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [ ]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class].
[Specify conditions, if any, under which allocation of Voting
Rights might change from the foregoing percentages]. ["Required
Percentage-Amendment" of Voting Rights necessary to consent to amendment or
modification of the Trust shall be [ %].] ["Required Percentage-Waiver" shall
mean [ %].]
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] [Federal Reserve Bank] and except as otherwise
limited by the Trust Agreement. In the event that the Trustee receives a request
from [DTC] [Federal Reserve Bank], the [Fiscal Agent] or the GSE Issuer for its
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consent to any amendment, modification or waiver of the Underlying Securities 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 Certificateholder of record as of such date. The Trustee
shall request instructions from the Certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative Certificate Principal
Balances and Notional Amounts of the Certificates, as applicable) as the
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 event of default
with respect to the Underlying Securities or an event which with the passage of
time would become an event of default and with the unanimous consent of all
holders of Outstanding Certificates or (iii) which would result in the exchange
or substitution of any of the outstanding Underlying Securities pursuant to a
plan for the refunding or refinancing of such Underlying Securities except in
the event of a default under the Underlying Securities and only with the consent
of Certificateholders representing 100% of the aggregate voting rights of each
outstanding Class of the 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 GSE 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 Debt Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders of such offer as
promptly as practicable. The Trustee must reject any such offer unless an event
of default under the Underlying Securities has occurred, the Trustee is directed
by the affirmative vote of all of the Certificateholders to accept such offer
and the Trustee has received the tax opinion described above. [Accordingly, a
Certificateholder generally would be required to effect a withdrawal of
Requested Underlying Securities from the Trust in order to accept such offer.
See "Description of Certificates-Optional Exchange" in the Prospectus.]
If an event of default under the Underlying Securities occurs
and is continuing and if directed by all the holders of outstanding Class [ ]
Certificates [and, Class [ ] Certificates,] the Trustee shall vote the
Underlying Securities in favor of directing, or take such other action as may be
appropriate 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 Certificateholders' interests of each Class may differ and the
interests of either Class may differ from holders of other Outstanding Debt
Securities.
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TERMINATION
[The circumstances under which the obligations created by the
Trust Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus.] [Describe
additional termination provisions.] The Company will have the right to purchase
all remaining Deposited Assets in the Trust and thereby effect early retirement
of the Certificates on any Distribution Date, [(a)] once the aggregate principal
amount of the Deposited Assets at the time of any such purchase is less than
[10%] of the aggregate principal amount of the Deposited Assets as of the
Cut-off Date [and (b) at the option of the Company at [specify when and on what
terms any such option may be exercised]; provided, however, that the right to
exercise any such option is contingent on such exercise being consistent with
the Company'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. In the event the
Company exercises any such option, the portion of the purchase price allocable
to the Certificates of each class will be, to the extent of available funds,
[100% of their then aggregate outstanding Certificate Principal Balance or
Notional Amount, as applicable, plus with respect to the Certificates [one
month's] [three month's] [specify other period] interest thereon at the Fixed
Pass-Through Rate or the then applicable Variable Pass-Through Rate, as the case
may be, plus, with respect to each class of Certificates, any previously accrued
but unpaid interest thereon.] [Specify alternative allocation method if
different from above.] In no event will the Trust created by the Trust Agreement
for the Certificates continue beyond the expiration of 21 years from the death
of the survivor of the person or persons named in the Trust Agreement. See
"Description of Trust Agreement-Termination" in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets
or relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates. Such consequences will depend
on the terms of the Certificate, whether the Trust is treated as a grantor
trust, a partnership or a FASIT for Federal income tax purposes, and the assets
collateralizing or otherwise supporting such Certificate. The consequences of
owning Certificates which are deemed for Federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions ["Grantor Trust Certificates"],
["Partnership Certificates"] and ["FASIT Certificates"], respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related Certificates.
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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,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. 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. [The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto.]
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 Company ("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.
[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 "Certificate Owner") will be subject
to Federal income taxation as if it owned directly the portion of the Deposited
Assets allocable to such Certificates, and as if it paid directly its share of
expenses paid by the Trust. The following discussion assumes that the Underlying
Securities were not issued with original issue discount ("OID") and,
accordingly, the Certificate Owners will not realize OID except with respect to
a "stripped interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays
for its Certificate among the Underlying Securities and the Deposited Assets in
the Trust other than the Underlying Securities (the "other Deposited Assets")
allocable to such Certificate, in proportion to their relative fair market
values on the date of purchase of the Certificate. A Certificate Owner would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.
The Federal income tax treatment of a holder of a particular
class of Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part, to
be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will not
be considered to represent a stripped interest in the underlying Underlying
Securities to the extent the
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Certificate is entitled to receive a proportionate amount of all principal and
interest on the Underlying Securities. A class of Certificates will be
considered in its entirety to represent a stripped interest in the underlying
Underlying Securities if it is entitled to receive interest on the Underlying
Securities which is disproportionately less than the principal which it is
entitled to receive on the Underlying Securities, or if it is entitled to
receive all or part of the interest on the Underlying Securities but no
principal on the Underlying Securities. In addition, if a class of Certificates
is entitled to receive interest and principal on the Underlying Securities, but
the interest it is entitled to receive on the Underlying Securities is
disproportionately more than the principal it is entitled to receive on the
Underlying Securities, it could be argued that the Certificates represents (a)
an interest in the Underlying Securities that is not a stripped interest to the
extent it represents a proportional amount of all the principal and interest on
the Underlying Securities and (b) a stripped interest in the Underlying
Securities to the extent of any additional interest to which it is entitled on
the Underlying Securities. If a Certificate represents in part a stripped
interest and in part not a stripped interest, such interests will be treated as
two separate items for tax purposes and a purchaser of Certificates will be
required to allocate its purchase price among the two items (as well as any
other Deposited Assets) in proportion to their relative fair market values on
the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not
--------------------------------------------------------
Stripped Interests. To the extent a class of Certificates does not represent a
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stripped interest in the Underlying Securities, each Certificate Owner will be
required to report on its Federal income tax return, in a manner consistent with
its method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a
Certificate allocated to a Certificate Owner's undivided interest in a
Underlying Security is greater than or less than the portion of the principal
balance of the Underlying Security allocable to the Certificate, such interest
in the Underlying Security will have been acquired at a premium or discount, as
the case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a separate asset, thus, in each case, reducing the
portion of the purchase price allocable to the Certificate Owner's undivided
interest in the Underlying Securities (the "allocated Purchase Price"). To the
extent that the allocated Purchase Price is less than the principal balance of
an Underlying Security, the Certificate Owner's interest in such Underlying
Security will be treated as purchased at a "market discount." The market
discount on a Underlying Security will, however, be considered to be zero if it
is less than a statutorily defined de minimis amount. Conversely, to the extent
that the allocated Purchase Price exceeds the principal balance of an Underlying
Security, the Certificate Owner's interest therein will be treated as purchased
with "bond premium." See the discussion below under "Bond Premium."
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For example, if the allocated Purchase Price paid by a
Certificate Owner who purchases a Certificate in the initial public offering
were equal or almost equal to the portion of the principal balance of the
Underlying Security that is allocable to the Certificate, there would be no
significant amount of discount or premium with respect to its interest in such
Underlying Security. Moreover, if the total purchase price of a Certificate is
equal to the principal amount of the Underlying Securities allocable to the
Certificate, because a portion of such purchase price will be allocated to the
other Deposited Assets of the Trust, in the aggregate a Certificate Owner's
interest in the Underlying Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
-------------------------------------------------------------
Interests. To the extent a class of Certificates represents a stripped interest
- ---------
in the underlying Underlying Securities, each such Certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest (other than qualified
stated interest) over the portion of the purchase price for the Certificate
allocable to the stripped interest.
Under the Treasury regulations issued under Section 1286 of the
Code (the "Regulations"), the interest payable with respect to the stripped
interest will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the Certificate
Owner) is also entitled. If none of the amounts payable to a Certificate Owner
with respect to a stripped interest constitute qualified stated interest, then
the stripped interest will have OID in an amount equal to the excess of all
payments to be received on the stripped interest over the purchase price for the
Certificate allocable to the stripped interest. Moreover, in determining the
amount paid for the stripped interest, a portion of the purchase price for a
Certificate must be allocated to the Certificate Owner's share of other
Deposited Assets and to accrued interest.
The tax treatment of a Certificate Owner will depend upon
whether the amount of OID on the stripped interest represented by the
Certificate is less than a statutorily defined de minimis amount. In general,
under the Regulations, the amount of OID with respect to the stripped interest
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will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the "stated redemption price at maturity" and the number of full
years remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity and
the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than a
payment of qualified stated interest) by a fraction, the numerator of which is
the number of complete years from the purchase date until the payment is made
and the denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified stated
interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each Certificate Owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass- Through Rate on the Certificate by an amount equal to the
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Certificate. Each Certificate Owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the Certificate Owner's
holding period in the Certificate. The Certificate Owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificate Owner from any Credit Support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report its
share of the income of the Trust under its usual method of accounting.
Accordingly, except as described below, interest on an underlying Underlying
Security would be includible in a Certificate Owner's gross income when it
accrues on the Underlying Securities, or, in the case of Certificate Owners who
are cash basis taxpayers, when received by the Administrative Agent, if any, or
otherwise the Trustee on behalf of Certificate Owners. Because the interest
collected on the Underlying Securities generally is paid to Certificate Owners
in the following month, the amount of interest includible in a Certificate
Owner's gross income during any calendar month will not equal the interest
distributed in that month.
If the OID with respect to the stripped interest in the
Underlying Securities represented by a Certificate is not treated as being de
minimis, a Certificate Owner will be required to include in income, in addition
to any qualified stated interest on the stripped interest as described above,
any OID on the stripped interest. OID must be included in income as it accrues
on a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
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In general, if a stripped interest has OID the Certificate Owner
will be required, whether such Certificate Owner uses the cash or the accrual
method of tax accounting, to include in ordinary gross income the sum of the
"daily portions" of OID on the stripped interest for all days during the taxable
year that the Certificate Owner owns the Certificate. The daily portions of OID
on a stripped interest are determined by allocating to each day in any "accrual
period" a ratable portion of the OID allocable to that accrual period. The
amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the stripped interest by a fraction, the numerator of which is the annual yield
to maturity of the stripped interest and the denominator of which is the number
of accrual periods in a year and (ii) subtracting from that product the amount
of qualified stated interest (if any) payable on the stripped interest during
(or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the
beginning of any accrual period is the purchase price for a Certificate
allocable to the stripped interest (including accrued interest, if any) (i)
increased by the amount of OID allocable to all prior accrual periods and (ii)
reduced by the amount of all payments other than qualified stated interest
payments (if any) in all prior accrual periods. In addition, if an interval
between payments of qualified stated interest contains more than one accrual
period, the adjusted issue price at the beginning of each accrual period in the
interval is increased by the amount of qualified stated interest that has
accrued prior to the first day of the accrual period but that is not payable
until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
Bond Premium. In the event that a Certificate represents either
an unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than qualified
stated interest), such premium will be amortizable by the Certificate Owner as
an offset to interest income (with a corresponding reduction in the Certificate
Owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the Certificate Owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium)
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that accrues on an unstripped or stripped interest using the constant yield
method described above, treating the instrument as having been issued on the
Certificate Owner's acquisition date at an issue price equal to such owner's
adjusted basis with no interest payments being qualified stated interest. Such
an election with respect to a unstripped or stripped interest having amortizable
bond premium or market discount would constitute, respectively, an election to
apply the market discount rules or bond premium rules with respect to all other
debt instruments with market discount or amortizable bond premium, as the case
may be, of such Certificate Owner.
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 Certificate Owners on which they would recognize gain or loss.
OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate
Owner 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 Certificate Owner 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 Certificate Owner's tax basis in a Certificate generally will
equal the cost of such Certificate, increased by any amounts of undistributed
taxable income (e.g., OID or market discount) and reduced by any amortized
premium (each as described above) and any payments other than payments of
qualified stated interest on an underlying Underlying Security made on such
Certificate.
If a Certificate is sold, gain or loss will be recognized equal
to the difference between the proceeds of sale allocable to each of the assets
of the Trust and the Certificate Owner's adjusted basis in each of the
foregoing. Any gain or loss will be a capital gain or loss if the Certificate
was held as a capital asset, except that gain will be treated in whole or in
part as ordinary interest income to the extent of the Certificate Owner's
interest in accrued market discount not previously taken into income on
Underlying Securities.
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 Certificate Owner fails to
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comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are
not United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." 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.
[Describe the Federal income tax consequences to Foreign
Certificate Owners of an interest in any other Deposited assets of the Trust.]
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 includible in gross income for U.S. Federal income
tax purposes, regardless of its source, or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Company and the Administrative Agent, if any, have agreed,
and the Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of Federal, state and local
income, franchise and any other tax measured in whole or in part by income.
However, the proper characterization of the arrangement involving the Trust, the
Certificate Owners, the Company and the Administrative Agent, if any, is not
entirely clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership"
it could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust).
A publicly traded partnership is taxed in the same manner as a
corporation unless at least 90% of its gross income consists of specified types
of "qualifying income." Such qualifying income includes, among other things,
interest income not derived in the conduct of a financial or insurance business,
dividend income, and gain from the disposition of assets producing such income.
In the opinion of Federal Tax Counsel, because of the nature of the income of
the Trust, the Trust will not be a publicly traded partnership taxable as a
corporation.
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PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal
income tax, but each Certificate Owner will be required to separately take into
account such holder's allocable share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of [ ] and any
gain upon collection or disposition [ ]. The Trust's deductions will consist
primarily of [ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities that corresponds to any excess of the principal amount of such class
of Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions
(which do not include interest expenses) are subject to limitations and as a
result may be disallowed in whole or in part. Those limitations, which also
apply to estates and trusts, would apply to a Certificate Owner's share of
expenses of the Trust (including fees to the Administrative Agent, if any) and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis in
its Certificate for its allocable share of the Trust's income or loss,
respectively. Any cash distributions by the Trust to a Certificate Owner will
constitute (i) first, a return of capital to the extent of such Certificate
Owner's tax basis in the Certificate (with a corresponding dollar-for-dollar
reduction in such tax basis), and (ii)
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thereafter, to the extent in excess thereof, gain on the sale or exchange of
such Certificate Owner's Certificate. See "Disposition of Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not
issued with original issue discount ("OID") and, therefore, the Trust should not
have OID income. However, the purchase price paid by the Trust for the
Underlying Securities may be greater or less than the remaining principal
balance of the Underlying Securities at the time of purchase. If so, the
Underlying Securities will have been acquired at a premium or discount, as the
case may be. (As indicated above, if the Trust acquires a large number of
Underlying Securities it will make this calculation on an aggregate basis, but
might be required to recompute it on an instrument-by- instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
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 Certificate Owners on which they would
recognize gain or loss.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of
the Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to
terminate for Federal income tax purposes if 50% or more of the capital and
profits interests in the Trust are sold or exchanged within a 12-month period.
Were such a termination to occur, the Trust would be considered to have
contributed its assets to a new partnership and distributed the interests in the
new partnership in liquidation to the Certificate Owner. If any such
constructive termination occurs, the Trust does not intend to comply with
certain technical requirements that might be applicable for various reasons
including the likely lack of relevant data. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses. Moreover,
the Schedule K-1 information thereafter distributed to the Certificate Owners
may be incorrect.
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DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or
other disposition of Certificates in an amount equal to the difference between
the amount realized and the seller's tax basis in the Certificates sold. A
Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to such Certificate. In addition,
both his tax basis in, and the amount realized on a sale of, a Certificate would
include the holder's share of liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such aggregate tax
basis to the Certificates sold (rather than maintaining a separate tax basis in
each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
On the sale of a Certificate, any gain attributable to the
holder's share of any accrued market discount on the Underlying Securities that
has not otherwise been included in the holder's income would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificate Owner is required to recognize an aggregate
amount of income (not including income attributable to disallowed itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be
determined monthly and the tax items for a particular calendar month allocable
to a particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by
existing regulations. If such a convention is not allowed (or only applies to
transfers of less than all of a partner's interest), taxable income or losses of
the Trust might be reallocated among the Certificate Owners. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates at
a profit (loss), the purchasing Certificate Owner will have a higher (lower)
basis in the Certificates than the selling
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Certificate Owner had. The tax basis of the Trust's assets will not be adjusted
to reflect that higher (or lower) basis unless the Trust were to file an
election under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records, as
well as potentially onerous information reporting requirements, the Trust will
not make such election. As a result Certificate Owners might be allocated a
greater or lesser amount of Trust income than would be appropriate based on
their own purchase price for Certificates.
ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of
the Trust. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the Trust will be the
calendar year. The Trustee will file a partnership information return (Internal
Revenue Service Form 1065) with the Service for each taxable year of the Trust
and will report each Certificate Owner's allocable share of items of Trust
income and expense to holders and the Service on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Company, as the tax matters partner, will be responsible for
representing the Certificate Owners in any dispute with the Service. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment
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<PAGE>
could also result in an audit of a Certificate Owner's returns and adjustments
of items not related to the income (or loss) of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. [Although it is not expected that the Trust would be engaged
in a trade or business in the United States for such purposes, the Trust expects
to withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign holder must
obtain a taxpayer identification number from the Service and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to
reflect differences caused by the precise nature of the Deposited Assets
relating to a given Series of Certificates.]
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 Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing
interests in a FASIT and the promulgation of Treasury regulations relating to
the federal income taxation of FASITs and to the federal income tax consequences
of the ownership of FASIT interests, the Prospectus Supplement
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<PAGE>
relating to such Certificates will describe the requirements for the
classification of the Trust as a FASIT and the consequences to a holder of
owning such Certificates.]
[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given Series of Certificates or the degree of servicing required with respect
to such Deposited Assets.]]
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)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing
in a Certificate, a Plan fiduciary should determine whether such an investment
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its investment policy and the composition of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 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.
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 non-exempt prohibited transactions under ERISA and the Code.
Neither ERISA nor the Code defines the term "plan assets." Under 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, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Regulation states that a beneficial interest in a
trust is an equity interest. Thus, if a Plan acquired a Certificate of a
particular class the Plan might be considered to own its share of the underlying
assets of the Trust unless, among other exceptions set forth in the Regulation,
(1) such Certificate is a "publicly-offered security" or (2) equity
participation by benefit plan investors in each class of equity interests is not
"significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, and (3) either is (A) part of a class of securities
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<PAGE>
registered under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the
Plan as a 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 such public offering
occurred. The Company does not anticipate that the Certificates of any class
will be considered publicly-offered securities within the meaning of the
Regulation.
Participation by benefit plan investors in any class of
Certificates would not be significant if, immediately after the most recent
acquisition of any equity interest in the Trust (whether or not from the Company
or an Agent or Underwriter), less than 25 percent of the value of each class of
equity interest were held by benefit plan investors, which are defined as Plans
and employee benefit plans not subject to ERISA (for example, governmental
plans). For purposes of such less than 25 percent limit, the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or provides investment advice for a fee with respect to
the assets of the entity, or any affiliate thereof, shall be disregarded. There
can be no assurance that less than 25 percent of the value of any given class of
Certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
Certificate, the acquisition of the Certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95- 60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of Certificates. In addition, any Plan acquiring Certificates shall
be deemed to have represented that its acquisition and holding of Certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the Certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a Certificate.
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<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement, dated as of [ ]. 199[ ] (the "Underwriting Agreement"),
the Company has agreed to sell and [Lehman Brothers Inc. (an affiliate of the
Company)] [each of the Underwriters named below, including Lehman Brothers Inc.
(an affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed
to purchase, the [Certificates] [the principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Lehman Brothers Inc............... $ $ $
Total.......................... $ $ $
=========== =========== ===========
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Company has been advised by the Underwriter[s] that [it]
[they] propose[s] 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[s] 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[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] 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.
The Underwriting Agreement provides that the Company will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Company, and the
participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
S-49
<PAGE>
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's)] [Moody's Investors
Service, Inc. ("Moody's)] [Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")] (the Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by the
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Deposited Assets and any providers of
Credit Support, as well as on the relative priorities of the Certificateholders
of each class of the Certificates with respect to collections and losses with
respect to the Deposited Assets. 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 Deposited
Assets, the corresponding effect on yield to investors, or whether investors in
the Class [ ] Certificates [specify class with Notional Amount] may fail to
recover fully their initial investment.
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 any other security rating.
The Company has not requested a rating on the Certificates by
any rating agency other than the Rating [Agency] [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 rating assigned to the Certificates by
the Rating [Agency] [Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be
passed upon for the Company and the Underwriter[s] by [Weil, Gotshal & Manges
LLP, New York, New York].
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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 on, 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 "Company") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Company, 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 Company in the secondary market
(either directly or through an affiliate of the Company), and will not be
acquired from the obligor with respect thereto or pursuant to any distribution
by or agreement with any such obligor. The Underlying Securities discussed
herein and in the related Prospectus Supplement represent (i) an obligation
issued or guaranteed by the United States of America or any agency thereof for
the payment of which the full faith and credit of the United States of America
is pledged, (ii) an obligation of one or more U.S. government sponsored
entities, (iii) Government Trust Certificates ("GTCs") (provided that such GTCs,
together with any AID-Guaranteed Underlying Securities (as defined below), shall
not account for 20% or more of the aggregate cash flows on the Underlying
Securities securing any Series of Certificates), or (iv) obligations guaranteed
by the United States Agency for International Development pursuant to the AID
Housing Guaranty Program ("AID-Guaranteed Underlying Securities") (provided that
such AID-Guaranteed Underlying Securities, together with any GTCs, shall not
account for 20% or more of the aggregate cash flows on the Underlying Securities
securing any Series of Certificates). 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."
LEHMAN BROTHERS
July 25, 1997
<PAGE>
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 Company'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
specified 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 Trust Agreement--Advances in
Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the Company, 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, and only
as and to the extent otherwise specified in such Prospectus Supplement) will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Company, any Administrative Agent or their respective affiliates.
Prospective investors should consider the factors set forth herein under "Risk
Factors," beginning on page 5.
-----------------
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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The Certificates may be offered and sold to or through underwriters, through
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.
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<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 or, if applicable, notional 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 (if any), (i) the date of issue, (j) the Final Scheduled Distribution
Date (as defined below), 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 Company 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 Company 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 located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, Suite
1400, 500 West Madison Street, 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 Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy, information statements and other information filed electronically through
the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The
Company does not intend to send any financial reports to Certificateholders.
Reports and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
3
<PAGE>
The Company 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 Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to and 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 Company will provide without charge to each person to whom
a copy of this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Secretary of 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 (as defined below) 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 Company, on behalf of each Trust, will cause to be filed with the Commission
such periodic reports as are required under the Exchange Act.
4
<PAGE>
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.
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 Interests. The Certificates will not
represent a recourse obligation of or interest in the Company 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 Company, any person affiliated with
the Company or the Trust or any other person. The obligations, if any, of the
Company with respect to the Certificates of any Series will only be pursuant to
certain limited representations and warranties. The Company does not have, and
is not expected in the future to have, any significant assets with which to
satisfy any claims arising from a breach of any representation or warranty. If,
for example, the Company were required to repurchase an Underlying Security with
respect to which the Company has breached a representation or warranty, its only
sources of funds to make such repurchase would be from funds obtained from the
enforcement of a corresponding obligation, if any, on the part of the seller of
such Underlying Security to the Company, or from a reserve fund established to
provide
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funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, the Company 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 Assets related to such
Series or Class as described in the related Prospectus Supplement, the
Certificates do not represent obligations of the Company, any Administrative
Agent or any of their affiliates and, unless otherwise specified in the
applicable Prospectus Supplement, are not insured or guaranteed by the Company,
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 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 Consequences" 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 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,
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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 Depositary (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 Depositary 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 Depositary's system, or to otherwise act with respect to such
Certificate, may be limited. See "Description of Certificates--Global
Securities" 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 Company 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 GSE 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.
In addition, 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 COMPANY
The Company 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 Company is located in 3 World
Financial Center, New York, New York 10285. Its telephone number is (212)
526-5594.
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The Certificate of Incorporation of the Company provides that
the Company 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 Company provides that any securities, except
for subordinated securities, issued by the Company 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 Company 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 Company may not issue any securities which would result in the lowering of
the then current ratings of the outstanding Certificates of any Series.
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
Company 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 Company for
general corporate purposes.
FORMATION OF THE TRUST
The Company 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 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
Company'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
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"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 Company 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 Company 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 Company will obtain Credit Support for the benefit of
the Certificateholders of any related Series (or Class within such Series) of
Certificates.
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
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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
an issuer exercises any right of redemption in respect of its securities. The
rate of redemption may also be influenced by prepayments on the obligations a
GSE Issuer holds for its own account. 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 a GSE 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."
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 (as defined below) 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 government 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.
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 Company, 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
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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 Company as an exhibit to a Current Report on Form 8-K 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). The 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 Company (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
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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") for each such Class including
the applicable rate, if fixed (a "Fixed 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
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 (as defined in the related Prospectus Supplement), 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 Company 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 Company'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 in the form of one or more
Global Securities and, if so, the identity of the Depositary (as defined below),
if other than The Depository Trust Company, for such Global Security or
Securities; (xiii) 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; (xiv) 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; (xv) 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 Company 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; (xvi) any
additional Administrative Agent Termination Events (as defined below), if
applicable, provided for with respect to such Class; (xvii) 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 Company
or the applicable Administrative Agent, if any, or Trustee under the Trust
Agreement or with respect to
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the applicable Trust; and (xviii) 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 the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the issuance of any Series or Class
within such Series of 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 relating to such Series or
Class. 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 Company, 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). The Company may at any time purchase Certificates at
any price in the open market or otherwise. Certificates so purchased by the
Company may, at the discretion of the Company, 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
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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 other
circumstances beyond the Company's control, in which case such distributions
will be made as described under "Currency Risks -- Payment Currency" below.
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; 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).
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
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the Registered Certificateholders of such Certificates (which, in the case of
Global Securities, will be a nominee of the Depositary); provided, however,
that, in the case of a Series or Class of Registered Certificates issued between
a Record Date 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 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 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.
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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 (as defined below) (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 ("Initial Pass-Through
Rate"). 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
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entitled "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication, 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 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 Company 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 Final Scheduled Distribution Date (as defined in the Prospectus
Supplement) will be that in effect on the tenth day preceding such Final
Scheduled 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.
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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.
(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
CD Rate 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 CD Rate Calculation Date
such rate is not yet published in either H.15(519) or Composite
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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 "CD Rate 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
Commercial Paper Rate 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 Commercial
Paper Rate 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 "Commercial Paper Rate 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 Prospectus
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 Federal
Funds Rate 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 Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate 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 Federal Funds Rate 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
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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 "Federal Funds Rate 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 rates 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 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 its 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
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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 specified 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 Certificates-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 Treasury Rate 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 Treasury Rate 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 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
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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 "Treasury Rate 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.
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Indexed Certificates
From time to time, the Trust 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") 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.
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Optional Exchange
If a holder may exchange Certificates of any given Series for
a pro rata portion of the Deposited Assets, 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 and/or the related Trust Agreement;
provided that any right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the Company'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 as set forth in the applicable Prospectus Supplement, if
applicable.
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 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 Depositary (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,
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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 Depositary'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
Depositary'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 Depositary 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 Depositary.
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 in 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.
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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, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. Global Securities may be issued in either
temporary or definitive form. Unless and until it is exchanged in whole or in
part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Company 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 participating organizations and to facilitate
the clearance and settlement of securities transactions among the institutions
that have accounts with such Depositary ("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
Depositary'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
Depositary. Access to such Depositary'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 Company that it
intends to follow such procedures.
Upon the issuance of a Global Security, the Depositary for
such Global Security will credit, on its book-entry registration and transfer
system, the respective principal amounts or notional amounts, if applicable, 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 Company 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 Depositary 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.
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So long as the Depositary for a Global Security, or its
nominee, is the owner of such Global Security, such Depositary or such nominee,
as the case may be, will be considered the sole 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
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary 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 Depositary'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.
Distributions of principal of (and premium, if any) and any
interest on individual Certificates represented by a Global Security will be
made to the Depositary or its nominee, as the case may be, as the
Certificateholder of such Global Security. None of the Company, 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 Company expects that the Depositary 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 any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company 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.
If the Depositary 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 Company within ninety days, the
Company will issue individual Definitive Certificates in exchange for the Global
Security or Securities representing such Certificates. In addition, the Company
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 individual Definitive Certificates of such Class in
exchange for the Global Security or Securities representing such Certificates.
Further, if the Company 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 Company and the
Depositary of 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 or notional amount, if applicable, to such
beneficial interest and to have such Definitive Certificates registered in its
name (if the
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Certificates of such Class are issuable as Registered Certificates). Individual
Definitive Certificates of such Class so issued will be issued as Registered
Certificates in denominations, unless otherwise specified by the Company, of
$1,000 and integral multiples thereof (Section 5.03).
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.
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 Company (or an affiliate thereof) in the secondary market and
assigned to a Trust as described in the applicable Prospectus Supplement. Each
Underlying Security will represent (i) an obligation issued or guaranteed by the
United States of America or any agency thereof for the payment of which the full
faith and credit of the United States of America is pledged ("Treasury
Securities"), (ii) an obligation of one or more U.S. government sponsored
entities created pursuant to federal statute (a "GSE"), (iii) Government Trust
Certificates ("GTCs") (provided that such GTCs, together with any AID-
Guaranteed Underlying Securities (as defined below), shall not account for 20%
or more of the aggregate cash flows on the Underlying Securities securing any
Series of Certificates), or (iv) obligations guaranteed by the United States
Agency for International Development pursuant to the AID Housing Guaranty
Program ("AID-Guaranteed Underlying Securities") (provided that such AID-
Guaranteed Underlying Securities, together with any GTCs, shall not account for
20% or more of the aggregate cash flows on the Underlying Securities securing
any Series of Certificates). As specified in the applicable Prospectus
Supplement, the obligations of one or more of the following GSEs may be included
in a Trust: Federal National Mortgage Association ("Fannie Mae"), Federal Home
Loan Mortgage Association ("Freddie Mac"), Student Loan Marketing Association
("Sallie Mae"), Resolution Funding Corporation ("REFCORP"), Federal Home Loan
Banks ("FHLB") (to the extent such obligations represent the joint and several
obligations of the twelve Federal Home Loan Banks), Tennessee Valley Authority
("TVA") and Federal Farm Credit Banks ("FFCB"). GSE debt securities are exempt
from registration under the Securities Act pursuant to Section 3(a)(2) of the
Securities Act (or are deemed by statute to be so exempt) and are not required
to be registered under the Exchange Act. The securities of any GSE will be
included in a Trust only to the extent (A) its obligations are supported by the
full faith and credit of the U.S. government or (B) such organization makes
publicly available its annual report, which shall include financial statements
or similar financial information with respect to such organization (a "GSE
Issuer"). GTCs and AID-Guaranteed Obligations will have been registered under
the Securities Act of 1933 (or will qualify for an exemption from registration)
and will have been acquired by the Company in purely secondary market
transactions. Based on information contained in the prospectus pursuant to which
any GSE Issuer's securities were originally
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offered (an "Underlying Security Prospectus"), the applicable Prospectus
Supplement will set forth certain information with respect to the public
availability of information with respect to any GSE Issuer the debt securities
of which constitute more than ten percent of the Underlying Securities for any
Series of Certificates as of the date of such Prospectus Supplement. The
specific terms and conditions of the Underlying Securities will be set forth in
the related Prospectus Supplement.
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 Company is permitted to deposit
in a Trust and does not purport to be a complete description of any Underlying
Security and is qualified in its entirety by reference to the applicable
Prospectus Supplement, Underlying Security Prospectus, if any, and, to the
extent applicable, the statement of terms or similar document with respect to
any Underlying Security.
Underlying Securities
General. Unless otherwise specified in the related Prospectus
Supplement, none of the Underlying Securities will have been issued pursuant to
an indenture, and no trustee is provided for with respect to any Underlying
Security. There will generally be a fiscal agent ("Fiscal Agent") for a GSE
Issuer with respect to any related Underlying Security whose actions will be
governed by a fiscal agency agreement. A Fiscal Agent is not a trustee for the
holders of the Underlying Securities and does not have the same responsibilities
or duties to act for the holders of a GSE's securities as would a trustee.
Unless otherwise specified in the related Prospectus Supplement, the Underlying
Securities with respect to any GSE Issuer will not be guaranteed by the United
States and do not constitute a debt or obligation of the United States or of any
agency or instrumentality thereof other than the related GSE.
Contractual and Statutory Restrictions. A GSE Issuer and the
related Underlying Securities may be subject to certain contractual and
statutory restrictions which may provide some protection to securityholders
against the occurrence or effects of certain specified events. Unless otherwise
specified in the related Prospectus Supplement, each GSE is limited to such
activities as will promote its statutory purposes as set forth in the publicly
available information with respect to such issuer. See "Description of the
Deposited Assets--Publicly Available Information" in the related Prospectus
Supplement. A GSE's promotion of its statutory purposes, as well as its
statutory, structural and regulatory relationships with the federal government
may cause or require such GSE to conduct its business in a manner that differs
from that an enterprise which is not a GSE might employ.
Neither the United States nor any agency thereof is obligated
to finance any GSE Issuer's operations or to assist a GSE Issuer in any manner.
Prospective purchasers should consult the publicly available information with
respect to each GSE Issuer for a more detailed description of the regulatory and
statutory restrictions on the related GSE's activities.
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Events of Default. Underlying Securities issued by a GSE
Issuer may provide that any one of a number of specified events will constitute
an event of default with respect thereto. 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 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 authorizing legislation or regulation, as the case may be, which
failure is materially adverse to securityholders and continues for a specified
period after notice thereof; and (iii) certain events of insolvency or
bankruptcy with respect to the GSE Issuer. The Underlying Securities will
generally provide that, upon the occurrence of an event of default, the holders
of not less than a specified percentage of the outstanding securities may
declare all or a portion of the principal and accrued interest on the
outstanding securities immediately due and payable, subject to the issuer's
right to cure, if applicable.
Each Underlying Security 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
with respect to any Concentrated Underlying Security (as defined below)
("Underlying Security Events of Default") and applicable remedies with respect
thereto. With respect to any Trust comprised of 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 an 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 an 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.
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, 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 securities pursuant to any sinking
fund or analogous provisions, or at the option of a holder
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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 Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to 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.
Publicly Available Information
In addition to the foregoing, with respect to each
Concentrated Underlying Security issued by a GSE Issuer the applicable
Prospectus Supplement will disclose the identity of the applicable obligor, 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 information will typically consist of such obligor's
annual report, which contains financial statements or similar financial
information, and can be obtained from the Commission, if so specified in the
applicable Prospectus Supplement, or from the office of such obligor identified
in the related Prospectus Supplement. However, the precise nature of such
publicly available information and where and how it may be obtained with respect
to any given GSE Issuer will vary, and, as described above, will be set forth in
the applicable Prospectus Supplement with respect to any such obligor.
Other Deposited Assets
In addition to the Underlying Securities, the Company 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
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through foreclosure or in settlement of claims with respect thereto) (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 Certificates 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 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 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.
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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.
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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 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
deposited in such Reserve Account 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 Company 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 such collections from time
to time prior to any applicable Distribution Date 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 Supplement, 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 Losses 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
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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.
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the Trust
Agreement and the Certificates do 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
Company 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 Company 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 Company in exchange for certain assets to be deposited in
the Trust (Section 2.05). 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 ("Concentrated Underlying
Securities"), 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 Company 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).
Each of the Company and the Administrative Agent, if any, will
make certain representations and warranties regarding its authority to enter
into, and its ability to perform its
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obligations under, the Trust Agreement. Upon a breach of any such representation
of the Company or any such Administrative Agent, as the case may be, which
materially and adversely affects the interests of the Certificateholders, the
Company or any such Administrative Agent, respectively, will be obligated to
cure the breach in all material respects (Section 2.04).
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
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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 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 and 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 3.07),
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 but unpaid 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 3.07). Only if and
to the extent provided in the applicable Prospectus Supplement, the
Administrative Agent or Trustee, as so provided, will 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
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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 3.11).
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus
Supplement, the Administrative Agent, if any, specified therein or the Trustee
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 or the Trustee 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 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 (as defined in the
Prospectus Supplement) and were delinquent on the related Determination Date,
subject to (i) any such Administrative Agent's or the Trustee'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 or Trustee'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 Account for such Series to the extent that such
Administrative Agent or
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Trustee 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 or Trustee from excess
funds in the Certificate Account for any Series, such Administrative Agent or
Trustee 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 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee 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 Company
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 Company, an affiliate of either thereof, the Deposited Asset
Provider or any third party and may have other normal business relationships
with the Trustee, the Company, their affiliates or the Deposited Asset Provider.
The Trust Agreement will provide that an Administrative Agent,
if any, 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.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the Company nor any director, officer, employee,
or agent or the Administrative Agent or the Company 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 Company and any director, officer,
employee or agent of the Administrative Agent or the Company 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 Company will be under any
obligation to appear in,
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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 Company
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 6.02). 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.
Administrative Agent Termination Events;
Rights Upon Administrative Agent Termination Event
Unless otherwise provided in the related Prospectus
Supplement, "Administrative Agent Termination Events," if applicable, under the
Trust Agreement with respect to any given Series of Certificates will consist 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 Company, or to the Administrative
Agent, the Company 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 Company, or to the Administrative Agent, the Company 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. 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).
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Unless otherwise specified in the applicable Prospectus
Supplement, so long as an Administrative Agent Termination Event, if applicable,
under the Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Company or the Trustee may, and at the direction of holders of
such Certificates evidencing not less than the "Required Percentage--
Administrative Agent Termination" (as defined in the Prospectus Supplement, if
applicable) of the Voting Rights, the Trustee will, terminate all the 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 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.
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" (as defined in the Prospectus Supplement) 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 10.02). 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 10.02).
Modification and Waiver
Unless otherwise specified in the applicable Prospectus
Supplement, the Trust Agreement for each Series of Certificates may be amended
by the Company 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
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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 Company, 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
Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" (as defined in the
Prospectus Supplement) 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.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) 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
Company, 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 5.20).
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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 Company 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
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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 4.03).
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.
Evidence as to Compliance
If so 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.
The Trust Agreement may also provide for delivery to the
Company, 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.
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, 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
45
<PAGE>
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 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 7.04). 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
46
<PAGE>
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 7.01).
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 Company, any Administrative Agent and their respective affiliates.
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
Company 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.
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 Company 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.
47
<PAGE>
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 Company'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
48
<PAGE>
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.
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 Company 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 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
49
<PAGE>
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 Company. 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
Company from time to time. Any agent involved in the offer or sale of
Certificates will be named, and any commissions payable by the Company 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
Company 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.
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
Company to indemnification by the Company 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 Company or its affiliates in the ordinary
course of business.
Lehman Brothers Inc. is an affiliate of the Company. Lehman
Brothers Inc.'s participation in the offer and sale of Certificates complies
with the requirements of Section 2720 of the Conduct Rules 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 Company 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
50
<PAGE>
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.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be
passed upon for the Company and the underwriters by Weil, Gotshal & Manges LLP,
New York, New York or other counsel identified in the applicable Prospectus
Supplement.
51
<PAGE>
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in the Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or Lehman Brothers Inc. The Prospectus
does 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 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 the date of the Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement..................................................3
Available Information..................................................3
Incorporation of Certain Documents by Reference........................4
Reports to Certificateholders..........................................4
Important Currency Information ........................................5
Risk Factors...........................................................5
The Company............................................................7
Use of Proceeds........................................................8
Formation of the Trust.................................................8
Maturity and Yield Considerations......................................9
Description of Certificates...........................................10
Description of Deposited Assets and Credit Support....................29
Description of the Trust Agreement....................................36
Currency Risks........................................................47
Plan of Distribution..................................................49
Legal Opinions........................................................51
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion Dated July 25, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 25, 1997)
TRUST CERTIFICATES, SERIES 1997 - [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 1995-[ ] offered hereby will consist of classes
of Certificates, designated as Class Certificates[,] [and] Class
Certificates [and list others], [all] of which [only the Class Certificates
[,] [and] Class Certificates [and list others]] are being offered hereby
(collectively, the "Certificates") and will represent a fractional undivided
beneficial interest in the Series 1997-[ ] Trust (the "Trust") to be formed
pursuant to the Trust Agreement dated as of [ ], between Lehman ABS Corporation
(the "Company") and [ ], as trustee (the "Trustee"), as supplemented by the
Series 1997-[ ] Supplement dated as of [ ] (collectively, the "Trust
Agreement"). The property of the Trust will consist in part of [$][ ] aggregate
principal amount of [a [ %] [floating rate] [specify publicly issued debt
security] due of [specify issuer]] [a pool of [ %] [floating rate] publicly
issued debt securities having a term of [not less than years and not more
than years] issued by one or more [foreign governments, foreign political
subdivisions or agencies and instrumentalities thereof] [(other than the
Retained Interest referred to herein)] (collectively, the "Underlying
Securities"), and having the characteristics described herein under "Description
of the Deposited Assets." Terms used but not otherwise defined herein are
defined in the Prospectus attached hereto (the "Prospectus").
The Underlying Securities will be acquired by the Company and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [ ].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year] [to be conformed to interest payment dates
for Underlying Securities], or, if any such date is not a business day, then on
the immediately following business day (each, a "Distribution Date") commencing
[ ]. The last day on which distributions are scheduled to be made on the
Certificates is [ ] (the "Final Distribution Date"), by which date the holders
of the Certificates will receive a distribution of all amounts allocable to
principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 8. (cover continued on next page)
--------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS RESPECTIVE 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.
----------------------
The Underwriter has agreed to purchase the Certificates from the Company at [ ]%
of the Certificate Principal Balance thereof ($[ ] aggregate proceeds to the
Company, before deducting expenses estimated at $[ ]) plus accrued interest, if
any, at the Pass-Through Rate calculated from [ ], 1997 (the "Expected
Settlement Date"), subject to the terms and conditions set forth in the
Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
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 [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
July , 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class Certificates [and specify other classes].] As and to the extent
described herein, losses realized on the Deposited Assets will be borne by the
holders of the Class Certificates [and specify other classes] before such
losses will be borne by the holders of the other classes of Offered Certificates
[and the Class Certificates [and specify other classes]]. To the extent
described herein, the relative priorities of each class of Certificates with
respect to collections from and losses on the Deposited Assets may each change
over time, either permanently or temporarily, upon the occurrence of certain
circumstances specified herein. See "Description of the Certificates-Allocation
of Losses; Subordination."
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
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 [specify applicable classes] 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. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED ___________, 1997, 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 ,1997, 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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms 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", "Description of the
Deposited Assets" and "Description of Credit Support." Certain capitalized terms
used herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
The Trust............................... Series 1997-[ ] Trust. The Trust
will be formed pursuant to the Trust
Agreement dated as of [ ] (the "Base
Trust Agreement"), between the
Company and the Trustee, as
supplemented by the Series 1997-[ ]
Supplement dated as of the Expected
Settlement Date (the "Series
Supplement" and, together with the
Base Trust Agreement, the "Trust
Agreement").
Securities Offered...................... Trust Certificates, Series 1997-[ ],
consisting of Class [ ]
Certificates[,] [and] Class [ ]
Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate
Principal Balance]
[Notional Amount]....................... Class [ ]: [$][ ].
Class [ ]: [$][ ].
Final Scheduled
Distribution Date....................... Class [ ].
Class [ ].
Pass-Through Rates...................... [The Variable Pass-Through Rates
applicable to the calculation of the
interest distributable on any
Distribution Date on the
Certificates [(other than the Class
[ ] Certificates)] are equal to
[describe method for determining
variable rates]. The initial
Variable Pass-Through Rates for the
Class [ ] Certificates[,] [and] the
Class [ ] Certificates [and specify
others] are approximately ___%[,]
[and] ___% [and ___%] per annum,
respectively.] [The Pass-Through
Rate applicable to the calculation
of the interest distributable on any
S-3
<PAGE>
Distribution Date on the [specify
classes] Certificates is fixed at
___% [and ___%, respectively,] per
annum.]
Deposited Assets........................ The Deposited Assets shall consist
of the Underlying Securities [and
describe any assets which are
ancillary or incidental to the
Underlying Securities]. See "-The
Underlying Securities" [, "-Other
Deposited Assets"] and "Description
of the Deposited Assets" below.
Original Issue Date..................... [ ].
Cut-off Date............................ [ ].
Distribution Date....................... [ ], commencing [ ].
Record Date............................. The [ ] day immediately preceding
each Distribution Date.
Denominations;
Specified Currency...................... The Class [ ] Certificates[,] [and]
Class [ ] Certificates [and specify
others] will be denominated and
payable in [U.S. dollars] [ ] (the
"Specified Currency") and will be
available for purchase in minimum
denominations of [$][ ] and
[integral multiples thereof]
[multiples of [$][ ] in excess
thereof].
Interest Accrual Periods................ [Monthly] [Quarterly]
[Semi-annually] (or, in the case of
the first Interest Accrual Period,
from and including the Original
Issue Date to but excluding the
first Distribution Date).
Form of Security........................ Book-entry Certificates with The
Depository Trust Company ("DTC"),
except in certain limited
circumstances. See "Description of
the Certificates-Definitive
Certificates." Distributions thereon
will be settled in [immediately
available (same-day)] [clearinghouse
(next-day)] funds.
Trustee................................. [ ], as trustee.
Ratings................................. [ ] by [ ] [and [ ] by [ ]].
[Specify specific ratings
requirements for particular classes,
including the extent to which the
issuance of the Certificates of a
given class is conditioned upon
satisfaction of the ratings of each
other class of Certificates.] See
"Ratings."
S-4
<PAGE>
Collection Period....................... With respect to any Distribution
Date, the period beginning on [ ]
and ending at the close of business
on [ ].
THE UNDERLYING SECURITIES
Underlying Securities................... [A [ ]% [floating rate] [publicly
issued debt security due [ ] [A pool
of publicly issued debt securities
of various issuers, exclusive of the
Retained Interest] [in/having] an
aggregate principal amount of [$][].
Underlying Securities Issuer............ [Specify issuer] [Pool of various
Foreign Government Issuers].
[Foreign Government
Guarantor].............................. [Specify guarantor, if any.]
Underlying Securities
Original Issue Date..................... [ ].
Underlying Securities Final
Payment Date............................ [ ].
Amortization............................ [Describe amortization schedule,
if any].
Denominations; Underlying
Securities Currency..................... The Underlying Securities are
denominated and payable in [U.S.
dollars] [ ] (the "Underlying
Securities Currency") and are
available in minimum denominations
of [$][ ] and [integral multiples
thereof] [multiples of [$][ ] in
excess thereof].
Underlying Securities
Payment Dates........................... [ ], commencing [ ].
Underlying Securities Rate.............. [ % per annum.] [A [Weighted
Average] rate per annum equal to
[specify interest rate formula for
debt security].]
Underlying Securities
Interest Accrual Periods................ [Monthly] [Quarterly]
[Semi-annually].
Priority................................ [Describe senior or subordinated
status of Underlying Securities].
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Security................................ [Describe existence of any security
for obligations or state that
Underlying Securities are
unsecured].
Redemption/Put/
Other Features.......................... [Describe existence of any
redemption, put or other material
features applicable to the
Underlying Securities].
Form of Security........................ Book-entry debt securities with DTC
[listed on the [New York] [American]
Stock Exchange [specify other
listing]].
Underlying Securities
Trustee [Fiscal
and Paying Agent]....................... [ ]. [The Underlying Securities have
[not] been issued pursuant to [an
indenture dated as of [ ], 19[ ]
(the "Indenture"), between the
Underlying Securities Trustee and
the Underlying Securities Issuer] [a
fiscal and paying agency agreement
dated as of [ ], 19[ ] (the "Fiscal
and Paying Agency Agreement"),
between the Fiscal and Paying Agent
and the Underlying Securities
Issuer] [specify other agreement].
Ratings................................. [ ] by [ ] [and [ ] by [ ]]. [See
"Description of the Underlying
Securities-Ratings of Underlying
Securities."]
[Underlying Securities
Trustee]................................ [Specify].
OTHER DEPOSITED ASSETS
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
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SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary 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.
Depositor............................... Lehman ABS Corporation (the
"Company"), an indirect wholly-owned
subsidiary of Lehman Brothers Inc.
See "The Company" in the Prospectus.
Certificates............................ The Certificates, each of which
represents a fractional undivided
beneficial interest in the Trust,
will be issued pursuant to the Trust
Agreement. The Certificates will
consist of [ ] classes, designated
as Class [ ] Certificates [and] [,]
Class [ ] Certificates [and [specify
other classes]], [all] of which [all
but the Class [ ] Certificates] are
being offered hereby (collectively,
the "Certificates").
The Certificate Principal Balance of
a Certificate outstanding at any
time represents the maximum amount
that the holder thereof is entitled
to receive as distributions
allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the
extent distributions allocable to
principal are made to such holder.
[The Notional Amount of the Class [
] Certificates as of any date of
determination is equal to [specify].
Reference to the Notional Amount of
the Class [ ] Certificates is solely
for convenience in determining the
basis on which distributions on the
Class [ ] Certificates are
calculated [and determining the
relative voting rights of
Certificateholders of Class [ ]
Certificates for purposes of voting
on a class-by-class basis or
otherwise]. The Notional Amount does
not represent the right to receive
any distributions allocable to
principal.]
[The Class [ ] Certificates, which
are not being offered hereby, have
in the aggregate an initial
Certificate Principal Balance of
[$]_____ (approximate) and a
[Variable] Pass- Through Rate [of
___%]. The Class [ ] Certificates
represent the right to receive
distributions in respect of their
Certificate Principal Balance and
interest thereon at their applicable
Pass- Through Rate.] Shortfalls in
collections with respect to the
Deposited Assets will be allocated
solely to the Class [ ] Certificates
to the extent provided herein and,
thereafter, will be allocated among
the Certificates and the Class [ ]
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<PAGE>
Certificates, as provided herein.
[The Class [ ] Certificates will be
transferred by the Company to an
affiliate on or about , 1997 (the
"Closing Date"), and may be sold at
any time in accordance with any
restrictions in the Trust
Agreement.]
The Underlying Securities............... 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 Final Payment
Date. [The Underlying Securities
have a remaining term to maturity of
approximately years.] [As of the
Cut-off Date, the pool of Underlying
Securities has a weighted average
interest rate of % and a weighted
average remaining term to maturity
of approximately years.
Approximately % [specify if greater
than 10%] of such Underlying
Securities consist of debt
securities of [specify foreign
governments or their political
subdivisions or agencies and
instrumentalities.]
[Name such obligor] is a [identify
nature of foreign government] whose
principal executive offices are
located at [specify address]. The
obligor [is subject to the
informational requirements of the
Exchange Act and in accordance
therewith files reports and other
information (including financial
information) with the Commission]
[makes available to the public upon
request certain annual financial and
other information]. See "Description
of the Deposited Assets."
[Other Deposited Assets
and Credit Support...................... The Deposited Assets will also
include [direct obligations of the
United States of America] [describe
any assets which are ancillary or
incidental to the Underlying
Securities, including hedging
contracts such as puts, calls,
interest rate swaps, currency swaps,
floors, caps and collars] (such
assets, together with the Underlying
Securities, the "Deposited Assets").
See "Description of the Underlying
Securities."
The Certificateholders of the
[specify particular classes]
Certificates will have the benefit
of [describe credit support] to
support or ensure the [servicing
and] [timely] [ultimate]
distribution of amounts due with
respect to the Deposited Assets,
including providing certain coverage
with respect to losses thereon.]
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<PAGE>
Distributions........................... Holders of the Certificates will be
entitled to receive on each
Distribution Date, to the extent of
available funds on such Distribution
Date, after payment of the expenses
of the Trustee and its respective
agents up to the Allowable Expense
Amount, (i) [in the case of each
class of Certificates other than the
Class [ ] Certificates,]
distributions allocable to interest
at the applicable Pass-Through Rate
on the applicable Certificate
Principal Balance, (ii) [in the case
of each class of Certificates other
than the Class [ ] Certificates,]
distributions allocable to principal
and (iii) [in the case of each class
of Certificates other than the Class
[ ] Certificates,] distributions
allocable to premium (if any) in an
amount equal to all payments of
premium (if any) received on the
Underlying Securities for the
applicable Collection Period.
Distributions will be made to
Certificateholders only if, and to
the extent that, payments are made
with respect to the Deposited Assets
or are otherwise covered by any
Credit Support. [The holders of the
Class [ ] Certificates will be
entitled to receive on each
Distribution Date distributions
allocable to interest in an amount
equal to [describe Stripped
Interest].] [The holders of the
Class [ ] Certificates will not be
entitled to receive any
distributions allocable to principal
or premium (if any).] See
"Description of the
Certificates-Distributions."
Special Distribution Dates.............. If a payment with respect to the
Underlying Securities is made to the
Trustee after the Underlying
Securities Payment Date on which
such payment was due, then the
Trustee shall distribute any such
amount received on the next
occurring Business Day (a "Special
Distribution Date") as if such funds
had constituted Available Funds on
the Distribution Date immediately
preceding such Special Distribution
Date; provided, however that the
Record Date for such Special
Distribution Date shall be [five
Business Days (as such term is
defined in the Prospectus, "Business
Day") prior to the day on] which the
related payment was received from
the Underlying Securities Trustee.
[Subordination.......................... As and to the extent described
herein, the rights of the holders of
the Class [ ] Certificates [and
specify other classes] to receive
distributions of principal, premium
(if any), and interest with respect
to the Deposited Assets will be
subordinated to the rights of the
holders of the other classes of
Certificates with respect to losses
attributable to principal, premium
(if any) and interest realized on a
Deposited Asset
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<PAGE>
(such losses, "Realized Losses").
See "Description of the
Certificates-Allocation of Losses;
Subordination."
Optional Termination.................... At its option, the [Company] may
purchase all the Deposited Assets in
the Trust, and thereby cause the
termination of the Trust and early
retirement of the Certificates, on
any Distribution Date on which the
aggregate principal amount of the
Deposited Assets remaining in the
Trust is less than [10%] of the
aggregate principal amount of the
Deposited Assets as of the Cut-off
Date. [Specify any other purchase or
repurchase option of the Company.]
See "Description of the Trust
Agreement-Termination" herein and
"Description of Trust
Agreement-Termination" in the
Prospectus.
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] [as a partnership]
[as a financial asset securitization
investment trust ("FASIT")] and not
as an association taxable as a
corporation. See "Certain Federal
Income Tax Consequences."
Ratings................................. It is a condition to the issuance of
the Certificates that the
Certificates have the ratings
specified above under "Summary of
Principal Economic Terms-The
Certificates-Ratings." 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. A security rating does not
address the occurrence or frequency
of redemptions or prepayments on, or
extensions of the maturity of, the
Deposited Assets, the corresponding
effect on yield to investors [or
whether investors in the Class [ ]
Certificates may fail to recover
fully their initial investment]. See
"Ratings."
ERISA Considerations.................... An employee benefit plan subject to
the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), and an individual
retirement account (each, a "Plan")
may purchase Certificates of any
class if either (i) the Company is
able to confirm the existence of at
least 100 independent purchasers of
such class or (ii) the Plan can
represent that its purchase of the
Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
S-10
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement
(including the Series [ ] Supplement) between the Company and the Trustee.
Concurrently with the execution and delivery of the Series [ ] Supplement, the
Company will deposit the Underlying Securities in 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 Company.
The Underlying Securities will be purchased by the Company in
the secondary market (either directly or through an affiliate of the Company).
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 Company or the issuance of the
Certificates. [Neither the Company nor any of its affiliates participated in the
initial public offering of the Underlying Securities] [Lehman Brothers Inc., an
affiliate of the Company, participated in the initial public offering of the
Underlying Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets and the terms
thereof, as described elsewhere herein.] See "Risk Factors" and "Maturity and
Yield Considerations" in the Prospectus.
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
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. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Deposited Assets. All disclosure contained herein with respect to the
Underlying Securities is derived from publicly available documents. [Describe
publicly available documents and whether the Underlying Securities Issuer is
subject to the informational reporting requirements of the Exchange Act.]
Although the Company has no reason to believe the information concerning the
Underlying Securities or the Underlying Securities Issuer in the Underlying
Securities prospectus related to the Underlying Securities is not reliable,
neither the Company nor any of the Underwriters 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, which have not yet been publicly
S-11
<PAGE>
disclosed, which would affect the accuracy or completeness of the publicly
available documents described above.
[Use the following where the Underlying Securities consist of a pool
of obligations of multiple obligors].
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of publicly issued debt securities of [foreign
governments, foreign political subdivisions or agencies and instrumentalities
thereof]. The Underlying Securities will be purchased by the Company in the
secondary market (either directly or through an affiliate of the Company) and
will be deposited in to the Trust. The Underlying Securities will not be
acquired either from the respective obligors on the Underlying Securities or
pursuant to any distribution by or agreement with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
Composition of the Underlying Securities Pool
as of the Cut-off Date
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
Distribution by Ratings of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ --------- ----------
------- --------- -----------
Total
======== ========= ===========
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<PAGE>
Distribution by Remaining Term to Maturity
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
-------------- ------ --------- ---------
------- --------- ---------
Total ======= ========= =========
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
------------------- ------ --------- ----------
% to % [$] %
Greater than % _______ ________ ________
Total [$] 100%
=========== =========== =========
The Underlying Securities consist of debt securities [issued or
guaranteed by foreign governments, foreign political subdivisions or agencies
and instrumentalities thereof]. As of the Cutoff Date, [all of] [approximately %
of] such Underlying Securities were rated [investment grade] [specify particular
rating] by at least one nationally recognized rating agency, and, based on
publicly available information, no obligor of any Underlying Security was in
default in the payment of any installments of principal, interest or premium (if
any) with respect thereto. Any such rating of any of the Underlying Securities
is not a recommendation to purchase, hold or sell such Underlying Security or
the Certificates, and there can be no assurance that a rating will remain for
any given period of time or that a rating will not be lowered or withdrawn
entirely by a rating agency if in its judgment circumstances in the future so
warrant. See "Ratings" herein and "Risk Factors -- Ratings of the Certificates"
in the accompanying Prospectus regarding certain considerations applicable to
the ratings of the Certificates.]
S-13
<PAGE>
[UNDERLYING SECURITIES INDENTURE]
[The Underlying Securities have been issued pursuant to
agreements (each an ["Indenture"] ["Fiscal Agency Agreement"] [specify other])
between the [various] Underlying Securities Issuers and Underlying Securities
Trustees [Agents]. The following summary describes certain general terms of such
[Indenture[s]] [Fiscal Agency Agreement[s]], but investors should refer to the
[Indenture[s]] [Fiscal Agency Agreement[s]] [itself] [themselves] for all the
terms governing the Underlying Securities.]
Each of the Indenture[s] [Fiscal Agency Agreement[s]] limits the
[respective] Underlying Securities Issuer's ability to engage in certain
activities and transactions and requires that the Underlying Securities Issuer
perform certain obligations with respect to the Underlying Securities. [Describe
common restrictive, financial and other covenants on the Underlying Securities
contained in the Underlying Securities Indenture[s] [Fiscal Agency
Agreement[s]].]
[The following is a summary of the typical Underlying Security
Events of Default for each series of Outstanding Debt Securities. [Any
additional Underlying Security Events of Default unique to a Concentrated
Underlying Security have been described following the summary]:
(a) failure to make payments of principal (and premium, if any)
and interest to holders of the Outstanding Debt Securities in the time
periods given in the Indenture[s] [Fiscal Agency Agreement[s]];
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement under an Indenture continuing for a specified
period of time after notice thereof is given to the Underlying
Securities Issuer by the Underlying Securities Trustee or the holders of
not less than a specified percentage of the Outstanding Debt Securities;
(c) failure by the Underlying Securities 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
Underlying Securities Issuer or the acceleration by or on behalf of the
holders thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to the
Underlying Securities Issuer[s][; and
[(e) describe any additional common events of default with
respect to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities]] [and
[all of] [approximately % of] the Underlying Securities were [describe the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate,
S-14
<PAGE>
secured) and describe commonalities with respect to any subordination or
security provisions or collateral.]]
The [pool of] Underlying Securities, together with any other
assets described below and any Credit Support described under "Description of
Credit Support", represent the sole assets of the Trust that are available to
make distributions in respect of the Certificates.]
[USE THE FOLLOWING WITH RESPECT TO EACH OBLIGOR THE UNDERLYING SECURITIES OF
WHICH REPRESENT MORE THAN 10% OF THE TOTAL UNDERLYING SECURITIES AVAILABLE TO
MAKE DISTRIBUTIONS IN RESPECT OF THE CERTIFICATES -- ONLY A SINGLE OBLIGOR IS
REFERRED TO FOR PURPOSES OF THIS SECTION OF THE FORM OF PROSPECTUS SUPPLEMENT]
[A significant portion of] [Virtually all of] [All of] the
Deposited Assets of the Trust will consist of the [___%] [floating rate]
[specify publicly issued debt security] due of [specify issuer][, exclusive
of the interest therein retained by [the Company] as described below (the
"Retained Interest")], having an aggregate principal amount outstanding as of
the Cut-off Date of approximately [$] [specify currency] (the "Underlying
Securities"). The Underlying Securities will be purchased by the Company in the
secondary market (either directly or through an affiliate of the Company) and
will be deposited into the Trust. The Underlying Securities will not be acquired
either from [name such obligor] or pursuant to any distribution by or agreement
with [name such obligor]. [Describe any put, call or other conversion or
redemption options applicable to the Underlying Securities, as well as the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured)]. As of the Cut-off Date, the foregoing debt
security comprising [ %] of the Underlying Securities was rated [specify
investment grade rating] [investment grade] by [specify nationally recognized
rating agency or agencies], and, based on publicly available information, the
obligor thereon was not in default in the payment of any installments of
principal, interest or premium (if any) with respect thereto. Any such rating of
such Underlying Securities is not a recommendation to purchase, hold or sell
such Underlying Securities or the Certificates, and there can be no assurance
that a rating will remain for any given period of time or that a rating will not
be lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk Factors
- -- Ratings of the Certificates" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.
The Trust will have no other significant assets [other than any
Credit Support or those assets referred to below] 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 [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'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 of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Company nor
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<PAGE>
[any of] the Underwriter[s] has participated in the preparation of such
documents, or takes any responsibility for the accuracy or completeness of the
information provided therein.]
[The Deposited Assets will also include [direct obligations of
the United States of America] [describe any assets which are ancillary or
incidental to the Underlying Securities, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps and collars, and
any cash or other security pledged to support the Underlying Securities] (such
assets, together with the Underlying Securities, the "Deposited Assets").]
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ]
Certificates [and the Class [ ] Certificates]], Credit Support will be obtained
[and will constitute part of the Trust to the extent provided below] to support
or ensure the [servicing and] [timely] [ultimate] distribution of amounts due
with respect to the Deposited Assets, in the form and amount described below.
[THE LETTER OF CREDIT
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Letter of Credit from [ ] (the
"Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely] [ultimate] remittance of amounts due with respect to the Deposited
Assets]. The maximum amount that the Trustee may draw under the Letter of Credit
will initially be equal to
. The initial amount of the Letter of Credit will be [$] . Thereafter,
the amount of the Letter of Credit with respect to any Distribution Date will
equal [the lesser of (i) % of the aggregate Certificate Principal Balance
outstanding on the preceding Distribution Date (after giving effect to any
payment of principal made on such preceding Distribution Date) but in any event
not less than [$] , and (ii)] the amount of the Letter of Credit on preceding
Distribution Date, plus [(a) reimbursement of certain advances under the Letter
of Credit and (b) recoveries on defaulted Deposited Assets] [describe other
methods]. The Letter of Credit expires on , 19 . The Trustee will be obligated,
in the event of a drawing on the Letter of Credit, to pursue appropriate
remedies against the Deposited Assets and other collateral, and any realization
thereon shall be paid to the Letter of Credit Bank to the extent of any amounts
owing, in the manner and priority specified herein.]
[Add language regarding the Letter of Credit Bank with respect
to its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank.]]
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<PAGE>
[THE SURETY BOND
Simultaneously with the Company's assignment of the Deposited
Assets to the Trust, the Company will obtain the Surety Bond from [ ] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered] Class [ ]]
Certificates. The Surety Bond expires on , 19 . The Trustee will be obligated,in
the event of a drawing on the Surety Bond, to pursue appropriate remedies
against the Deposited Assets and other collateral, and any realization thereon
shall be paid to the Surety to the extent of any amounts owing, in the manner
and priority specified herein.
[Add language regarding the issuer of the Surety Bond with
respect to its debt ratings, activities it engages in, regulatory authorities
having jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the Surety. In addition,
to the extent that the Surety Bond will cover payment of 20% or more of the
aggregate principal amount of the Certificates covered thereby, provide
information of financial and other matters with respect to the issuer of the
Surety Bond.]]
[RESERVE ACCOUNT
The Company will deposit with the Trustee on the Closing Date
cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Certificates in the amount of [$] . [Collections
with respect to the Deposited Assets not distributed with respect to the
Certificates shall be deposited in the Reserve Account.] Amounts so deposited in
such Reserve Account will be used by the Trustee to make payments of principal
of and premium (if any) and interest on the Certificates to the extent that
funds are not otherwise available. Immediately after any Distribution Date,
amounts in the Reserve Account in excess of [indicate formula] [may be paid to
the Company.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms
thereof and the manner and priority in which collections thereon are allocated
to the Certificateholders of each class of the Certificates, as described
elsewhere herein.] See "Maturity and Yield Considerations" in the Prospectus.
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<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ] [,] [and] Class [ ] [and Class ____] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]_________ (approximate) and a [ %] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] _____ (approximate) and
a [___%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in the
aggregate an initial [Certificate Principal Balance] [Notional Amount] of [$]
_________ (approximate) and a [ %] [Variable] Pass-Through Rate. [The Class [ ]
Certificates, which are not being offered hereby, will be transferred by the
Company to an affiliate on the Closing Date, and may be sold at any time by the
Company in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and
specify others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ] in
excess thereof]. [The Class [ ] Certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal Balances,
as applicable, of [$ ] and integral multiples thereof, except that one
Certificate of each such class may be issued with an initial Notional Amount or
Certificate Principal Balance, as applicable, equal to an integral multiple of
[$ ] plus the excess of the initial aggregate Notional Amount or Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$ ] that is not more than such initial aggregate Notional Amount or
Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the Company, the "Clearing Agency"),
except as provided below. The Company 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
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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 [Certificate Owners]
or their nominees, respectively, rather than to DTC or its nominee, only if (i)
the Company advises the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Clearing Agency with respect to
each class of Certificates [(other than the Definitive Classes)] and the Company
is unable to locate a qualified successor or (ii) the Company, 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 [(other than the
Definitive Classes of 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.
DISTRIBUTIONS
Collections on the Deposited Assets 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:
(i) to the Trustee, all unpaid fees and expenses of the Trustee
and its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support
Providers"), any amounts required to be paid or reimbursed to, or
deposited with, any such person (collectively, "Credit Support
Payments");
(iii)] to the Certificateholders of each Class of such Series,
first, to the payment of Required Interest [and on a pro rata basis to
the Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and third, to
the payment of Required Premium, in each case applicable to such Class,
commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance with
the ranking specified herein under "-- Allocation of Losses;
Subordination";
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[(iii) to the Credit Support Providers, any Credit Support
Payments;]
[(iv)] to the Trustee, all its remaining unpaid fees and
expenses and those of its respective agents not otherwise paid pursuant
to clause (i) above;
[(v) all remaining amounts, if any, to the Company].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of the Allowable
Expense Amount from the preceding Collection Period that have not been applied
on the Distribution Date for such preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum of (a)
all amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period[,] [and] (b) amounts available as of such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional amount
that the [Company] may remit to the Trustee from time to time according to the
terms of the Trust Agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means
[a fixed percentage] [a percentage that varies depending on [describe basis for
variable formula, such as the applicable date or other factors or indices]].
"Eligible Investments" means, with respect to the Certificates,
those investments acceptable to the Rating Agency 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.
"Required Interest" for the Certificates or any Class thereof on
any given Distribution Date means the accrued and unpaid interest on the
outstanding Certificate Principal Balance [or Notional Amount] of such
Certificates, computed at the applicable Pass-Through Rate.
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"Required Premium" for the Certificates or any Class thereof for
any Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof
for any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection Period,
to the extent allocable to such Certificates. The Certificate Principal Balance
of a Certificate outstanding at any time represents the maximum amount that the
holder thereof is entitled to receive as distributions allocable to principal
from the cash flow on the Underlying Securities, the other assets in the Trust
and any Credit Support obtained for the benefit of such holder. The Certificate
Principal Balance of any class of Certificates [(other than Class [ ]
Certificates)] as of any date of determination is equal to the initial
Certificate Principal Balance thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Certificate and (b) any reductions in the Certificate Principal Balance deemed
to have occurred in connection with allocations of (i) Realized Losses allocable
to principal on the Deposited Assets and (ii) Extraordinary Trust Expenses, as
described herein. [The Notional Amount of the Class [ ] Certificates as of any
date of determination is equal to [specify amount].] [Holders of the Class [ ]
Certificates are not entitled to receive any distributions allocable to
principal.]
[Notwithstanding the priorities described above, holders of the
Class [ ] Certificates and the Class [ ] Certificates will be entitled to
receive on any Distribution Date 100% of all principal collections received in
the related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] in reduction of the Certificate Principal
Balance of the Class [ ] Certificates and the Class [ ] Certificates, if any of
the following conditions shall be satisfied: [describe conditions, if any, by
which a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be
obligated to advance or cause to be advanced on or before each Distribution Date
its own funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are
deemed by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
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All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the Certificates.
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ]
Certificates [and the Class [ ] Certificates] is designed to protect holders of
the remaining classes of Certificates from certain losses and other shortfalls
with respect to the Deposited Assets. As a result, losses and other shortfalls
with respect to the Deposited Assets will be borne by the remaining classes of
Certificates, to the extent described below, only if such losses and other
shortfalls are not so covered, or the coverage in respect thereof has been
exhausted.
[Realized Losses and Extraordinary Trust Expenses will be
allocated on any Distribution Date as follows: [describe allocation among the
various classes].]
[An "Extraordinary Trust Expense" is an expense of a given Trust
in excess of the Allowable Expense Amount, including certain reimbursements to
the Company described in the Prospectus under "Description of Certificates --
[Certain Matters Regarding the Company]" and certain reimbursements to the
Trustee described under "Description of the Trust Agreement -- The Trustee"
herein.]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Class
[ ] Certificates and the Class [ ] Certificates to the extent set forth herein,
the Class [ ] Certificates may not be purchased by or transferred to a Plan
except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations."]
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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 Company with the Commission following
the issuance and sale of the Certificates. The Trust created under the Trust
Agreement (including the Series 1997-[ ] Supplement) will consist of (i) the
Deposited Assets (exclusive of any Retained Interest, which is not part of the
Trust), (ii) all payments on or collections in respect of the Deposited Assets
due after the Cut-off Date, together with any proceeds thereof[,] [and] [(iii)
any Credit Support in respect of any class or classes of Certificates] [and (iv)
the rights of the Company under the Purchase Agreement between the Company and
the Seller]. [In addition, the Certificateholders of the Certificates may also
have the benefit of certain Credit Support discussed above. See "Description of
Credit Support."] Reference is made to the Prospectus for important information
in addition to that set forth herein regarding the Trust, the terms and
conditions of the Trust Agreement and the 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 TRUSTEE
[ ], a [ ] corporation, will act as trustee for the Certificates
and the Trust pursuant to the Trust Agreement. The Trustee's offices are located
at [ ] and its telephone number is [ ].
The Trust Agreement will provide that the Trustee and any
director, officer, employee or agent of the Trustee will be indemnified by the
Trust and will be held harmless against any loss, liability or expense incurred
in connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of 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.]
[Describe remedies available to
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Certificateholders upon the occurrence and continuance of an Event of Default,
including, as applicable, directing the Trustee to vote the Underlying
Securities in favor of declaring the principal balance of and any accrued
interest on the Outstanding Debt Securities to be immediately due and payable].
The Trust Agreement will provide that, within 30 days after the
occurrence of an Event of Default in respect of the Certificates of any class,
the Trustee will give to the holders of such Certificates notice, 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 premium, if any, 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 holders
of the Certificates of such class.
No holder of any Certificate will have the right to institute
any proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders 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 the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of
all Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [ ]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class].
[Specify conditions, if any, under which allocation of Voting
Rights might change from the foregoing percentages]. ["Required
Percentage-Amendment" of Voting Rights necessary to consent to amendment or
modification of the Trust shall be [ %].] ["Required Percentage-Waiver" shall
mean [ %].]
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
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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 Certificateholder of
record as of such date. The Trustee shall request instructions from the
Certificateholders as to whether or not to consent to or vote to accept such
amendment, modification, waiver or solicitation. The Trustee shall consent or
vote, or refrain from consenting or voting, in the same proportion (based on the
relative Certificate Principal Balances and Notional Amounts of the
Certificates, as applicable) as the 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 a Underlying Securities Event of Default or an event which with the
passage of time would become a Underlying Securities Event of Default and with
the unanimous consent of holders of all Outstanding Certificates or (iii) which
would result in the exchange or substitution of any of the outstanding
Underlying Securities pursuant to a plan for the refunding or refinancing of
such Underlying Securities except in the event of a default under the Underlying
Securities and only with the consent of Certificateholders representing 100% of
the aggregate voting rights of each outstanding Class of the 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 Debt Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders of such offer as
promptly as practicable. The Trustee must reject any such offer unless a
Underlying Securities Event of Default under the Indenture has occurred, the
Trustee is directed by the affirmative vote of all of the Certificateholders to
accept such offer and the Trustee has received the tax opinion described above.
[Accordingly, a Certificateholder generally would be required to effect a
withdrawal of Requested Underlying Securities from the Trust in order to accept
such offer. See "Description of Certificates-Optional Exchange" in the
Prospectus.]
If an event of default under the [Indenture] [Underlying
Securities] occurs and is continuing and if directed by all the holders of
outstanding Class [ ] Certificates and, unless the Class [ ] Certificates are no
longer outstanding, by the holders of all outstanding Class [ ] Certificates,]
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,
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the Certificateholders' interests of each Class may differ and the interests of
either Class may differ from holders of other Outstanding Debt Securities.
TERMINATION
[The circumstances under which the obligations created by the
Trust Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus.] [Describe
additional termination provisions.] The Company will have the right to purchase
all remaining Deposited Assets in the Trust and thereby effect early retirement
of the Certificates on any Distribution Date, [(a)] once the aggregate principal
amount of the Deposited Assets at the time of any such purchase is less than
[10%] of the aggregate principal amount of the Deposited Assets as of the
Cut-off Date [and (b) at the option of the Company at [specify when and on what
terms any such option may be exercised]; provided, however, that the right to
exercise any such option is contingent on such exercise being consistent with
the Company'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. In the event the
Company exercises any such option, the portion of the purchase price allocable
to the Certificates of each class will be, to the extent of available funds,
[100% of their then aggregate outstanding Certificate Principal Balance or
Notional Amount, as applicable, plus with respect to the Certificates [one
month's] [three month's] [specify other period] interest thereon at the Fixed
Pass-Through Rate or the then applicable Variable Pass-Through Rate, as the case
may be, plus, with respect to each class of Certificates, any previously accrued
but unpaid interest thereon.] [Specify alternative allocation method if
different from above.] In no event will the Trust created by the Trust Agreement
for the Certificates continue beyond the expiration of 21 years from the death
of the survivor of the person or persons named in the Trust Agreement. See
"Description of Trust Agreement-Termination" in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets
or relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates. Such consequences will depend
on the terms of the Certificate, whether the Trust is treated as a grantor
trust, as a partnership or a FASIT for Federal income tax purposes, and the
assets collateralizing or otherwise supporting such Certificate. The
consequences of owning Certificates which are deemed for Federal income tax
purposes to be interests in a grantor trust, in a partnership or in a FASIT are
discussed separately below under the captions ["Grantor Trust Certificates"],
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["Partnership Certificates"], and ["FASIT Certificates"], respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related 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,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. 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. The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto. Accordingly, this
discussion should only be read in conjunction with the discussion under "Certain
Federal Income Tax Consequences" in the Prospectus Supplement.
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 Company ("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.
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 "Certificate Owner") will be subject
to Federal income taxation as if it owned directly the portion of the Deposited
Assets allocable to such Certificates, and as if it paid directly its share of
expenses paid by the Trust. The following discussion assumes that the Underlying
Securities were not issued with original issue discount ("OID") and,
accordingly, the Certificate Owners will not realize OID except with respect to
a "stripped interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays
for its Certificate among the Underlying Securities and the Deposited Assets in
the Trust other than the Underlying Securities (the "other Deposited Assets")
allocable to such Certificate, in proportion to their relative
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fair market values on the date of purchase of the Certificate. A Certificate
Owner would calculate separately its income, gain, loss or deduction realized
with respect to each such asset.
The Federal income tax treatment of a holder of a particular
class of Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part, to
be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will not
be considered to represent a stripped interest in the underlying Underlying
Securities to the extent the Certificate is entitled to receive a proportionate
amount of all principal and interest on the Underlying Securities. A class of
Certificates will be considered in its entirety to represent a stripped interest
in the underlying Underlying Securities if it is entitled to receive interest on
the Underlying Securities which is disproportionately less than the principal
which it is entitled to receive on the Underlying Securities, or if it is
entitled to receive all or part of the interest on the Underlying Securities but
no principal on the Underlying Securities. In addition, if a class of
Certificates is entitled to receive interest and principal on the Underlying
Securities, but the interest it is entitled to receive on the Underlying
Securities is disproportionately more than the principal it is entitled to
receive on the Underlying Securities, it could be argued that the Certificates
represents (a) an interest in the Underlying Securities that is not a stripped
interest to the extent it represents a proportional amount of all the principal
and interest on the Underlying Securities and (b) a stripped interest in the
Underlying Securities to the extent of any additional interest to which it is
entitled on the Underlying Securities. If a Certificate represents in part a
stripped interest and in part not a stripped interest, such interests will be
treated as two separate items for tax purposes and a purchaser of Certificates
will be required to allocate its purchase price among the two items (as well as
any other Deposited Assets) in proportion to their relative fair market values
on the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not
Stripped Interests. To the extent a class of Certificates does not represent a
stripped interest in the Underlying Securities, each Certificate Owner will be
required to report on its Federal income tax return, in a manner consistent with
its method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a
Certificate allocated to a Certificate Owner's undivided interest in a
Underlying Security is greater than or less than the portion of the principal
balance of the Underlying Security allocable to the Certificate, such interest
in the Underlying Security will have been acquired at a premium or discount, as
the case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a
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separate asset, thus, in each case, reducing the portion of the purchase price
allocable to the Certificate Owner's undivided interest in the Underlying
Securities (the "allocated Purchase Price"). To the extent that the allocated
Purchase Price is less than the principal balance of an Underlying Security, the
Certificate Owner's interest in such Underlying Security will be treated as
purchased at a "market discount." The market discount on a Underlying Security
will, however, be considered to be zero if it is less than a statutorily defined
de minimis amount. Conversely, to the extent that the allocated Purchase Price
exceeds the principal balance of an Underlying Security, the Certificate Owner's
interest therein will be treated as purchased with "bond premium." See the
discussion below under "Bond Premium."
For example, if the allocated Purchase Price paid by a
Certificate Owner who purchases a Certificate in the initial public offering
were equal or almost equal to the portion of the principal balance of the
Underlying Security that is allocable to the Certificate, there would be no
significant amount of discount or premium with respect to its interest in such
Underlying Security. Moreover, if the total purchase price of a Certificate is
equal to the principal amount of the Underlying Securities allocable to the
Certificate, because a portion of such purchase price will be allocated to the
other Deposited Assets of the Trust, in the aggregate a Certificate Owner's
interest in the Underlying Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of Certificates represents a stripped interest
in the underlying Underlying Securities, each such Certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest (other than qualified
stated interest) over the portion of the purchase price for the Certificate
allocable to the stripped interest.
Under the Treasury regulations issued under Section 1286 of the
Code (the "Regulations"), the interest payable with respect to the stripped
interest will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on
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principal on the Underlying Securities to which the stripped interest (i.e., the
Certificate Owner) is also entitled. If none of the amounts payable to a
Certificate Owner with respect to a stripped interest constitute qualified
stated interest, then the stripped interest will have OID in an amount equal to
the excess of all payments to be received on the stripped interest over the
purchase price for the Certificate allocable to the stripped interest. Moreover,
in determining the amount paid for the stripped interest, a portion of the
purchase price for a Certificate must be allocated to the Certificate Owner's
share of other Deposited Assets and to accrued interest.
The tax treatment of a Certificate Owner will depend upon
whether the amount of OID on the stripped interest represented by the
Certificate is less than a statutorily defined de minimis amount. In general,
under the Regulations, the amount of OID with respect to the stripped interest
will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the "stated redemption price at maturity" and the number of full
years remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity and
the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than a
payment of qualified stated interest) by a fraction, the numerator of which is
the number of complete years from the purchase date until the payment is made
and the denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified stated
interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each Certificate Owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass- Through Rate on the Certificate by an amount equal to the
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Certificate. Each Certificate Owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the Certificate Owner's
holding period in the Certificate. The Certificate Owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificate Owner from any Credit Support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report its
share of the income of the Trust under its usual method of accounting.
Accordingly, except as described below, interest on an underlying Underlying
Security would be includible in a Certificate Owner's gross income when it
accrues on the Underlying Securities, or, in the case of Certificate Owners who
are cash basis taxpayers, when received by the Administrative Agent, if any, or
otherwise the Trustee on behalf of Certificate Owners. Because the interest
collected on the Underlying Securities generally is paid to
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Certificate Owners in the following month, the amount of interest includible in
a Certificate Owner's gross income during any calendar month will not equal the
interest distributed in that month.
If the OID with respect to the stripped interest in the
Underlying Securities represented by a Certificate is not treated as being de
minimis, a Certificate Owner will be required to include in income, in addition
to any qualified stated interest on the stripped interest as described above,
any OID on the stripped interest. OID must be included in income as it accrues
on a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
In general, if a stripped interest has OID the Certificate Owner
will be required, whether such Certificate Owner uses the cash or the accrual
method of tax accounting, to include in ordinary gross income the sum of the
"daily portions" of OID on the stripped interest for all days during the taxable
year that the Certificate Owner owns the Certificate. The daily portions of OID
on a stripped interest are determined by allocating to each day in any "accrual
period" a ratable portion of the OID allocable to that accrual period. The
amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the stripped interest by a fraction, the numerator of which is the annual yield
to maturity of the stripped interest and the denominator of which is the number
of accrual periods in a year and (ii) subtracting from that product the amount
of qualified stated interest (if any) payable on the stripped interest during
(or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the
beginning of any accrual period is the purchase price for a Certificate
allocable to the stripped interest (including accrued interest, if any) (i)
increased by the amount of OID allocable to all prior accrual periods and (ii)
reduced by the amount of all payments other than qualified stated interest
payments (if any) in all prior accrual periods. In addition, if an interval
between payments of qualified stated interest contains more than one accrual
period, the adjusted issue price at the beginning of each accrual period in the
interval is increased by the amount of qualified stated interest that has
accrued prior to the first day of the accrual period but that is not payable
until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
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Bond Premium. In the event that a Certificate represents either
an unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than qualified
stated interest), such premium will be amortizable by the Certificate Owner as
an offset to interest income (with a corresponding reduction in the Certificate
Owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the Certificate Owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest using the constant yield method described
above, treating the instrument as having been issued on the Certificate Owner's
acquisition date at an issue price equal to such owner's adjusted basis with no
interest payments being qualified stated interest. Such an election with respect
to a unstripped or stripped interest having amortizable bond premium or market
discount would constitute, respectively, an election to apply the market
discount rules or bond premium rules with respect to all other debt instruments
with market discount or amortizable bond premium, as the case may be, of such
Certificate Owner.
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 Certificate Owners on which they would recognize gain or loss.
Foreign Tax Credits. Any foreign income taxes withheld from
payments to the Trust will be includible in the income of Certificate Owners and
will likewise be deductible to Certificate Owners, or, alternatively,
Certificate Owners may be eligible for a U.S. foreign tax credit subject to
various limitations.
OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate
Owner 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
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Certificate Owner 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 Certificate Owner's tax basis in a Certificate generally will
equal the cost of such Certificate, increased by any amounts of undistributed
taxable income (e.g., OID or market discount) and reduced by any amortized
premium (each as described above) and any payments other than payments of
qualified stated interest on an underlying Underlying Security made on such
Certificate.
If a Certificate is sold, gain or loss will be recognized equal
to the difference between the proceeds of sale allocable to each of the assets
of the Trust and the Certificate Owner's adjusted basis in each of the
foregoing. Any gain or loss will be a capital gain or loss if the Certificate
was held as a capital asset, except that gain will be treated in whole or in
part as ordinary interest income to the extent of the Certificate Owner's
interest in accrued market discount not previously taken into income on
Underlying Securities.
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 Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are
not United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." 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.
[Describe the Federal income tax consequences to Foreign
Certificate Owners of an interest in any other Deposited assets of the Trust.]
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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 includible in gross income for U.S. Federal income
tax purposes, regardless of its source or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Company and the Administrative Agent, if any, have agreed,
and the Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of Federal, state and local
income, franchise and any other tax measured in whole or in part by income.
However, the proper characterization of the arrangement involving the Trust, the
Certificate Owners, the Company and the Administrative Agent, if any, is not
entirely clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership"
it could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust).
A publicly traded partnership is taxed in the same manner as a
corporation unless at least 90% of its gross income consists of specified types
of "qualifying income." Such qualifying income includes, among other things,
interest income not derived in the conduct of a financial or insurance business,
dividend income, and gain from the disposition of assets producing such income.
In the opinion of Federal Tax Counsel, because of the nature of the income of
the Trust, the Trust will not be a publicly traded partnership taxable as a
corporation.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal
income tax, but each Certificate Owner will be required to separately take into
account such holder's allocable share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of [ ] and any
gain upon collection or disposition [ ]. The Trust's deductions will consist
primarily of [ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities
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that corresponds to any excess of the principal amount of such class of
Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions
(which do not include interest expense) are subject to limitations and as a
result may be disallowed in whole or in part. Those limitations, which also
apply to estates and trusts, would apply to a Certificate Owner's share of
expenses of the Trust (including fees to the Administrative Agent, if any) and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis in
its Certificate for its allocable share of the Trust's income or loss,
respectively. Any cash distributions by the Trust to a Certificate Owner will
constitute (i) first, a return of capital to the extent of such Certificate
Owner's tax basis in the Certificate (with a corresponding dollar-for-dollar
reduction in such tax basis), and (ii) thereafter, to the extent in excess
thereof, gain on the sale or exchange of such Certificate Owner's Certificate.
See "Disposition of Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not
issued with original issue discount ("OID") and, therefore, the Trust should not
have OID income. However, the purchase price paid by the Trust for the
Underlying Securities may be greater or less than the remaining principal
balance of the Underlying Securities at the time of purchase. If so, the
Underlying Securities will have been acquired at a premium or discount, as the
case may be. (As indicated above, if the Trust acquires a large number of
Underlying Securities it will make this calculation on an aggregate basis, but
might be required to recompute it on an instrument-by- instrument basis.)
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The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
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 Certificate Owners on which they would
recognize gain or loss.
FOREIGN TAX CREDITS
Any foreign income taxes withheld from payments to the Trust
will be includible in the income of Certificate Owners and will likewise be
deductible to Certificate Owners, or, alternatively, Certificate Owners may be
eligible for a U.S. foreign tax credit subject to various limitations.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of
the Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to
terminate for Federal income tax purposes if 50% or more of the capital and
profits interests in the Trust are sold or exchanged within a 12-month period.
Were such a termination to occur, the Trust would be considered to have
contributed its assets to a new partnership and distributed the interests in the
new partnership to the Certificate Owner. If any such constructive termination
occurs, the Trust does not intend to comply with certain technical requirements
that might be applicable for various reasons including the likely lack of
relevant data. As a result, the Trust may be subject to certain tax penalties
and may incur additional expenses. Moreover, the Schedule K-1 information
thereafter distributed to the Certificate Owners may be incorrect.
DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or
other disposition of Certificates in an amount equal to the difference between
the amount realized and the seller's tax basis in the Certificates sold. A
Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to
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such Certificate. In addition, both his tax basis in, and the amount realized on
a sale of, a Certificate would include the holder's share of liabilities of the
Trust. A holder acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificate and, upon
sale or other disposition of some of the Certificates, allocate a pro rata
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of computing
gain or loss on a sale of that Certificate).
On the sale of a Certificate, any gain attributable to the
holder's share of any accrued market discount on the Underlying Securities that
has not otherwise been included in the holder's income would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificate Owner is required to recognize an aggregate
amount of income (not including income attributable to disallowed itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be
determined monthly and the tax items for a particular calendar month allocable
to a particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by
existing regulations. If such a convention is not allowed (or only applies to
transfers of less than all of a partner's interest), taxable income or losses of
the Trust might be reallocated among the Certificate Owners. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates at
a profit (loss), the purchasing Certificate Owner will have a higher (lower)
basis in the Certificates than the selling Certificate Owner had. The tax basis
of the Trust's assets will not be adjusted to reflect that higher (or lower)
basis unless the Trust were to file an election under Section 754 of the Code.
In order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous information
reporting requirements, the Trust will not make such election. As a result
Certificate Owners might be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
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ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of
the Trust. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the Trust will be the
calendar year. The Trustee will file a partnership information return (Internal
Revenue Service Form 1065) with the Service for each taxable year of the Trust
and will report each Certificate Owner's allocable share of items of Trust
income and expense to holders and the Service on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Company, as the tax matters partner, will be responsible for
representing the Certificate Owners in any dispute with the Service. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificate Owner's returns and adjustments of
items not related to the income (or loss) of the Trust.
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TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. [Although it is not expected that the Trust would be engaged
in a trade or business in the United States for such purposes, the Trust expects
to withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign holder must
obtain a taxpayer identification number from the Service and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to
reflect differences caused by the precise nature of the Deposited Assets
relating to a given Series of Certificates.]
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 Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing
interests in a FASIT and the promulgation of Treasury regulations relating to
the federal income taxation of FASITs and to the federal income tax consequences
of the ownership of FASIT interests, the prospectus supplement relating to such
Certificates will describe the requirements for the classification of the Trust
as a FASIT and the consequences to a holder of owning such Certificates.]
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[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given Series of Certificates or the degree of servicing required with respect
to such Deposited Assets.]]
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)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing
in a Certificate, a Plan fiduciary should determine whether such an investment
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its investment policy and the composition of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 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.
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 non-exempt prohibited transactions under ERISA and the Code.
Neither ERISA nor the Code defines the term "plan assets." Under 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, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Regulation states that a beneficial interest in a
trust is an equity interest. Thus, if a Plan acquired a Certificate of a
particular class the Plan might be considered to own its share of the underlying
assets of the Trust unless, among other exceptions set forth in the Regulation,
(1) such Certificate is a "publicly-offered security" or (2) equity
participation by benefit plan investors in each class of equity interests is not
"significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, 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 a
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
S-40
<PAGE>
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 such public offering
occurred. The Company does not anticipate that the Certificates of any class
will be considered publicly-offered securities within the meaning of the
Regulation.
Participation by benefit plan investors in any class of
Certificates would not be significant if, immediately after the most recent
acquisition of any equity interest in the Trust (whether or not from the Company
or an Agent or Underwriter), less than 25 percent of the value of each class of
equity interest were held by benefit plan investors, which are defined as Plans
and employee benefit plans not subject to ERISA (for example, governmental
plans). For purposes of such less than 25 percent limit, the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or provides investment advice for a fee with respect to
the assets of the entity, or any affiliate thereof, shall be disregarded. There
can be no assurance that less than 25 percent of the value of any given class of
Certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
Certificate, the acquisition of the Certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95- 60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of Certificates. In addition, any Plan acquiring Certificates shall
be deemed to have represented that its acquisition and holding of Certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the Certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a Certificate.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement, dated as of [ ]. 199[ ] (the "Underwriting Agreement"),
the Company has agreed to sell and [Lehman Brothers Inc. (an affiliate of the
Company)] [each of the Underwriters named below, including Lehman Brothers Inc.
(an affiliate of the Company)] (the "Underwriter[s]")[,] has [severally] agreed
S-41
<PAGE>
to purchase, the [Certificates] [the principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Lehman Brothers Inc................ $ $ $
Total........................... $ $ $
=========== ========== ===========
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Company has been advised by the Underwriter[s] that [it]
[they] propose[s] 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[s] 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[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] 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.
The Underwriting Agreement provides that the Company will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Company, and the
participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's)] [Moody's Investors
Service, Inc. ("Moody's")] [Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")] (the Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by the
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Deposited Assets and any
S-42
<PAGE>
providers of Credit Support, as well as on the relative priorities of the
Certificateholders of each class of the Certificates with respect to collections
and losses with respect to the Deposited Assets. 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
Deposited Assets, the corresponding effect on yield to investors, or whether
investors in the Class [ ] Certificates [specify class with Notional Amount] may
fail to recover fully their initial investment.
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 any other security rating.
The Company has not requested a rating on the Certificates by
any rating agency other than the Rating [Agency] [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 [Agency] [Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be
passed upon for the Company and the Underwriter[s] by [Weil, Gotshal & Manges
LLP, New York, New York].
S-43
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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 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 on, 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 "Company") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Company, 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 Company in the secondary market
(either directly or through an affiliate of the Company), and will not be
acquired from the issuer thereof as part of any distribution by or pursuant to
any agreement with such issuer. Each of the Underlying Securities discussed
herein and in the related Prospectus Supplement represents an obligation issued
by or guaranteed by one or more foreign governments, foreign political
subdivisions or agencies or instrumentalities thereof. 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.
LEHMAN BROTHERS
July 25, 1997
<PAGE>
Except as otherwise provided herein and in the applicable Prospectus Supplement,
the Company'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
specified 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 Trust Agreement--Advances in
Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the Company, 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, and only
as and to the extent otherwise specified in such Prospectus Supplement) will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Company, any Administrative Agent or their respective affiliates.
Prospective investors should consider the factors set forth herein under "Risk
Factors," beginning on page 5.
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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
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.
2
<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 or, if applicable, notional 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 (if any), (i) the date of issue, (j) the Final Scheduled Distribution
Date (as defined below), 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 Company 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 Company 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 located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, Suite
1400, 500 West Madison Street, 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 Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy, information statements and other information filed electronically through
the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The
Company does not intend to send any financial reports to Certificateholders.
3
<PAGE>
Reports and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company 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 Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to and 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 Company will provide without charge to each person to whom
a copy of this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Secretary of 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 (as defined below) 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 Company, on behalf of each Trust, will cause to be filed with the Commission
such periodic reports as are required under the Exchange Act.
4
<PAGE>
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.
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 Interests. The Certificates will not
represent a recourse obligation of or interest in the Company 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 Company, any person affiliated with
the Company or the Trust, or any other person. The obligations, if any, of the
Company with respect to the Certificates of any Series will only be pursuant to
certain limited representations and warranties. The Company does not have, and
is not expected in the future to have, any significant assets with which to
satisfy any claims arising from a breach of any representation or warranty. If,
for example, the Company were required to repurchase an Underlying Security with
respect to which the Company has breached a representation or warranty, its only
sources of funds to make such repurchase would be from funds obtained from the
enforcement of a corresponding obligation, if any, on the part of the seller of
such Underlying Security to the Company, or from a reserve fund established to
provide
5
<PAGE>
funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, the Company 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 Assets related to such
Series or Class as described in the related Prospectus Supplement, the
Certificates do not represent obligations of the Company, any Administrative
Agent or any of their affiliates and, unless otherwise specified in the
applicable Prospectus Supplement, are not insured or guaranteed by the Company,
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 any moratorium or similar circumstance with
respect to a Underlying Securities Issuer (as defined below)) 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,
political 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 Consequences" in the related Prospectus Supplement.
Purchasers of the Certificates may also be affected by the tax treatment of the
Underlying Securities by the relevant issuing government.
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 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
6
<PAGE>
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 Depositary (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 Depositary 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 Depositary's system, or to otherwise 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.
Foreign Government Issuer. The Underlying Securities will
include obligations of, or guaranteed by, foreign governments, foreign political
subdivisions, or agencies and instrumentalities thereof (each such issuer and
guarantor, if any, sometimes referred to herein as a "Foreign Government Issuer"
and a "Foreign Government Guarantor," respectively; and collectively referred to
as "Foreign Governments"). Consequently, it may be difficult for the applicable
Trust as a holder of the Underlying Securities to obtain or realize upon
judgments in the United States against such obligor. In the absence of a waiver
of immunity by a Foreign Government, it would not be possible to obtain a United
States judgment against such Foreign Government unless a court were to determine
that such issuer is not entitled under the Sovereign Immunities Act of 1976 (the
"Immunities Act") to sovereign immunity with respect to such action. Even if
such an issuer is amenable to suit in the United States, the enforceability of
any judgment obtained may be limited by a lack of substantial assets which can
be levied upon in the United States or the inability to obtain recognition and
enforcement of the judgment in the issuer's country. Because the Underlying
Securities represent direct or indirect obligations of foreign governments,
Certificateholders should consider the political, economic and other risks
attendant on holding the obligations of a foreign government which are not
typically associated with an investment in securities of a domestic issuer. Such
risks include future political and economic developments, governmental
repudiation, moratorium on payment or rescheduling of external debts,
confiscatory taxation, imposition of any withholding tax, exchange rate
fluctuations, political or social instability or diplomatic developments and the
imposition of additional governmental laws or restrictions. While a Foreign
Government Issuer may make certain information available by filing periodic
reports and other information with the Commission, such information
7
<PAGE>
(including financial information) may differ in timing, form and substance from
that normally available with respect to domestic issuers.
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
Company 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." In addition, there are certain
risks associated with Underlying Securities denominated in a currency other than
the local currency of a Foreign Government. Governments have from time to time
imposed, and may in the future impose, exchange controls that could affect the
availability of a currency for making distributions in respect of Underlying
Securities denominated in such currency.
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.
In addition, 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 COMPANY
The Company 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 Company is located in 3 World
Financial Center, New York, New York 10285. Its telephone number is (212)
526-5594.
The Certificate of Incorporation of the Company provides that
the Company 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 Company provides that any securities, except
for subordinated securities, issued by the Company 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 Company 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
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Company may not issue any securities which would result in the lowering of the
then current ratings of the outstanding Certificates of any Series.
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
Company 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 Company for
general corporate purposes.
FORMATION OF THE TRUST
The Company 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 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
Company'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
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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 Company 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 Company 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 Company will obtain Credit Support for the benefit of
the Certificateholders of any related Series (or Class within such Series) of
Certificates.
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
political, economic, social, tax, accounting and other factors influence whether
a Foreign Government will exercise 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
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would be expected to increase. There can be no certainty as to whether any
Underlying Security redeemable at the option of a Foreign Government 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." If a Foreign Government Issuer or
Foreign Government Guarantor, as applicable, repudiates or places any limitation
or moratorium on the payment of external indebtedness or imposes any
confiscatory or withholding tax, the timing and amount of payments on the
Certificates may be materially and adversely affected. A variety of factors
could influence a Foreign Government's willingness or ability to satisfy its
obligations under the related Underlying Securities, and no assurance can be
given as to the probability of a moratorium or other action affecting any
Underlying Security.
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 (as defined below) 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 foreign government 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.
A variety of economic, social, political, tax, accounting and
other factors may affect the degree to which any of the Underlying Securities
are redeemed or called (whether by the applicable obligor or pursuant to a
third-party call option) or the maturity of such Underlying Securities is
extended, as specified in the related Prospectus Supplement. There can be no
assurance as to the rate or likelihood of redemption, third-party call or
extension of maturity, in each case to the extent applicable, of any Underlying
Security. The applicable Prospectus Supplement will, to the extent available,
provide further information with respect to any such experience applicable to
the related Underlying Securities. In addition, 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 Company, 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 Company as an exhibit to a Current Report on Form 8-K 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). The 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 Company (and, with respect to
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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") for each such
Class, including the applicable rate, if fixed (a "Fixed 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 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 (as defined in the related Prospectus Supplement), 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 Company 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 Company'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 Depositary (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
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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 Company 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 Company
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 the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the 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
relating to such Series or Class. 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
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the applicable issue date. As specified in the applicable Prospectus Supplement,
such determination will be made by the Company, 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 Company may at any time purchase Certificates at
any price in the open market or otherwise. Certificates so purchased by the
Company may, at the discretion of the Company, 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
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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 other
circumstances beyond the Company'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 Depositary); 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 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.
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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 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 (as defined below) (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
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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 ("Initial Pass-Through
Rate"). 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 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
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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 Company 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 Final Scheduled Distribution Date (as defined in the Prospectus
Supplement) will be that in effect on the tenth day preceding such Final
Scheduled 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.
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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.
(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
CD Rate 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 CD Rate 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).
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The "CD Rate 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
Commercial Paper Rate 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 Commercial
Paper Rate 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 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)
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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 "Commercial Paper Rate 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 Prospectus
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 Federal
Funds Rate 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 Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate 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 Federal Funds Rate 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 "Federal Funds Rate Calculation Date" pertaining to any
Federal Funds Rate Determination Date shall be the next succeeding Business Day.
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(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 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 its 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 specified 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).
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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 Certificates-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 Treasury Rate 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 Treasury Rate 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 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
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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 "Treasury Rate 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 Trust 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
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exchange between the specified currency for such Certificate and the other
currency or composite currency (the "Indexed Currency") 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, 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 and/or the related Trust Agreement;
provided that any right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the Company'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;
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(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 as set forth in the applicable Prospectus Supplement.
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 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 Depositary (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).
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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 Depositary'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
Depositary'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 Depositary 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 Depositary.
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 in 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, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. 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 part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Company as
follows: The Depository Trust Company is a limited-purpose trust company
organized under the laws of the State of New
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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 participating
organizations and to facilitate the clearance and settlement of securities
transactions among the institutions that have accounts with such Depositary
("participants") in such securities through electronic book-entry changes in the
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. Such Depositary'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 Depositary. Access to such Depositary'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 Company that it intends to follow such procedures.
Upon the issuance of a Global Security, the Depositary for
such Global Security will credit, on its book-entry registration and transfer
system, the respective principal amounts or notional amounts, if applicable, 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 Company 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 Depositary 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 Depositary for a Global Security, or its
nominee, is the owner of such Global Security, such Depositary or such nominee,
as the case may be, will be considered the sole 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
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary 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 Depositary'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 Depositary or its nominee, as the case may
be, as the Certificateholder of such Global Security. None of the Company, the
Adminis-
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trative 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 Company expects that the Depositary 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 any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company 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 Depositary 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 Company within ninety days, the
Company will issue individual Definitive Certificates in exchange for the Global
Security or Securities representing such Certificates. In addition, the Company
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 individual Definitive Certificates of such Class in
exchange for the Global Security or Securities representing such Certificates.
Further, if the Company 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 Company and the
Depositary of 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 or notional amount, if applicable, 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 Company or in the related Prospectus Supplement, 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 Company or in the related Prospectus Supplement
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.
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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.
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 Company (or an affiliate thereof) in the secondary market and
assigned to a Trust as described in the applicable Prospectus Supplement. Each
Underlying Security will represent an obligation issued or guaranteed by a
foreign government, political subdivision or agency or instrumentality thereof.
Any pool of such publicly offered foreign government debt securities may include
both registered and unregistered offerings. Each Underlying Security, or
Underlying Securities in the case of debt securities with a common obligor, that
represents ten percent or more of the total Underlying Securities with respect
to any Series of Certificates as of the date of the related Prospectus
Supplement ("Concentrated Underlying Securities") will represent an obligation
issued or guaranteed by a foreign government, one of its political subdivisions
or an agency or instrumentality of the foregoing which has offered debt
securities in the United States pursuant to a registration statement filed with
the Commission containing information required by Schedule B of the Securities
Act ("Schedule B"), that qualifies as a "seasoned" issuer under Commission
practice and which issuer or guarantor the Company reasonably believes (based on
publicly available information) is eligible to use Schedule B as of the time of
any offering of Certificates hereunder. The Underlying Securities may include
obligations of any or all of the following Foreign Governments (which may
include obligations guaranteed by the following): Austria, Australia, Canada,
Canadian Provinces, Denmark, Finland, France, Germany, Ireland, Japan, Norway,
Italy, Spain, Sweden and the United Kingdom. The Prospectus Supplement for any
series will set forth the Foreign Government obligations included in the related
Trust.
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 Company is permitted to deposit
in a Trust and does not purport to be a complete description of any Underlying
Security and is qualified in its entirety by reference to the applicable
Prospectus Supplement, Underlying Security prospectus and Underlying Securities
themselves.
Underlying Securities
General. Unless otherwise specified in the related Prospectus
Supplement, none of the Underlying Securities will have been issued pursuant to
an indenture and no trustee is provided
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for with respect to any Underlying Security. Generally, there will be a fiscal
agent (each, a "Fiscal Agent") for the Foreign Government Issuer with respect to
the Underlying Securities whose actions will be governed by a fiscal agency
agreement. A Fiscal Agent does not have the same responsibilities or duties to
act on behalf of the holders of a Foreign Government's debt securities as would
a trustee. Unless otherwise specified in the related Prospectus Supplement, the
due and punctual payment of each Underlying Security and the due and timely
performance of all obligations with respect thereto will be backed by the full
faith and credit of the related Foreign Government Issuer or unconditionally
guaranteed by the related Foreign Government Guarantor, as the case may be.
Contractual Restrictions. There will generally be few, if any,
contractual restrictions on the Foreign Government Issuers or Foreign Government
Guarantors in respect of the Underlying Securities. The Underlying Securities by
their terms and provisions may, however, restrict certain actions of the related
Foreign Governments and may also require, among other things, the creation or
maintenance of reserves or a sinking fund or contain an undertaking or pledge of
the Foreign Government not to encumber its assets to secure any other external
indebtedness without providing like security for the related Underlying
Securities. Certain actions in respect of the debt securities of Foreign
Governments may also be subject to proper executive, legislative or
administrative approval.
The Prospectus Supplement used to offer any Series of
Certificates will describe material covenants or undertakings in relation to any
[Concentrated Underlying Security] and, as applicable, will describe material
covenants or undertakings which are common to any pool of Underlying Securities.
There can be no assurance that any such provision will protect the Trust as a
holder of the Underlying Securities against losses. In the event of a breach of
any such covenant or undertaking, it may not be possible to force any action in
respect of the Underlying Securities or to obtain an enforceable judgment
against a Foreign Government.
Events of Default. Debt securities issued by foreign
governments generally provide that any one of a number of specified events will
constitute an event of default with respect to such securities. 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 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, which failure is materially adverse to security
holders and continues for a specified period after notice thereof; (iii) the
declaration of a moratorium on payment of interest or principal in respect of
external indebtedness; and (iv) 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 (including other
external indebtedness) or the acceleration by or on behalf of the holders
thereof of such securities.
Each Underlying Security 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
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Securities with respect to any Concentrated Underlying Security ("Underlying
Security Events of Default") and applicable remedies with respect thereto. With
respect to any Trust comprised of 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 an 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 an 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.
Remedies. Generally, upon the occurrence of an event of
default, the holders of not less than a specified percentage of the outstanding
securities of a Foreign Government may enforce their rights under the
securities, including in some cases, the right to declare all or a portion of
the principal and accrued interest on the outstanding securities immediately due
and payable, subject to the issuer's right to cure, if applicable. A fiscal
agency agreement will not typically provide for the agent to enforce the rights
of the security holders as would an indenture trustee. Consequently, any rights
in respect of the Underlying Securities must be pursued through the Trustee as a
holder thereof in the manner prescribed with respect to the Underlying
Securities. There can be no assurance that the Trustee will be able to enforce
any contractual obligation against a Foreign Government. Additionally, where
action may be taken in respect of the Underlying Securities only by a specified
percentage of the holders of the Outstanding Debt Securities, the Trustee's
ability to influence such action will be limited by the proportion of such
securities held by the Trust.
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, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the 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 issuer to redeem the
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
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be redeemed, if any, in whole or in part, at the option of the 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 Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to 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.
Publicly Available Information
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 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.
Certain Foreign Government Issuers have obtained no-action
letters from the Commission which condition a Foreign Government Issuer's
eligibility to continue to use shelf procedures for delayed offerings and
incorporation of certain documents by reference on such Foreign Government
Issuer periodically filing with the Commission on Form 18-K under the Exchange
Act. However, a Foreign Government Issuer is not required to use these delayed
offering procedures to offer securities in the United States and is not subject
to the reporting requirements of the Exchange Act by reason of having filed a
registration statement under Schedule B. Foreign Government Issuers are subject
to the reporting requirements of the Exchange Act only if, and for so long as,
their securities are listed on a U.S. exchange. With respect to any Foreign
Government Issuer whose obligations represent ten percent or more of the total
Underlying Securities of a Trust, the applicable Prospectus Supplement will set
forth whether the prospectus offering the related Underlying Securities states
that such obligor is subject to the informational requirements of the Exchange
Act or if such obligor files periodic reports with the Commission on a voluntary
basis. The precise source and nature of publicly available information and where
and how it may be obtained with respect to any such Foreign Government Issuer
will vary, and, as described above will be set forth in the applicable
Prospectus Supplement with respect to any such obligor. If any Foreign
Government Issuer of Concentrated Underlying Securities ceases to file periodic
reports with the Commission, the Company, on behalf of the related Trust, will
continue to be subject to the reporting requirements of
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the Exchange Act, but certain information with respect to such Foreign
Government Issuer may be unavailable.
Other Deposited Assets
In addition to the Underlying Securities, the Company 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 Certificates 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.
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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 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.
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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 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
deposited in such Reserve Account 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 Company 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 such collections from time
to time prior to any applicable Distribution Date 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 Supplement, 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
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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 Losses 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.
DESCRIPTION OF THE TRUST AGREEMENT
General
The following summary of certain provisions of the Trust
Agreement and the Certificates do 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
Company 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 Company 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 Company in exchange for certain assets to be deposited in
the Trust (Section 2.05). 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
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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 Company 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).
Each of the Company 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 Agreement.
Upon a breach of any such representation of the Company or any such
Administrative Agent, as the case may be, which materially and adversely affects
the interests of the Certificateholders, the Company or any such Administrative
Agent, respectively, will be obligated to cure the breach in all material
respects (Section 2.04).
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
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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 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 3.07),
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 but unpaid thereon
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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 3.07). Only if and to the extent provided in the
applicable Prospectus Supplement, the Administrative Agent or Trustee, as so
provided, will 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 3.11).
Advances in Respect of Delinquencies
Unless otherwise specified in the applicable Prospectus
Supplement, the Administrative Agent, if any, specified therein or the Trustee
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 or the Trustee will advance on or
before each
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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 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 (as defined in the Prospectus Supplement) and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's or the Trustee'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 or Trustee'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 Account for such Series to the extent that such
Administrative Agent or Trustee 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 or Trustee
from excess funds in the Certificate Account for any Series, such Administrative
Agent or Trustee 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 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee 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 Company
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 Company, an affiliate of either thereof, the Deposited Asset
Provider or any third party and may have other normal business relationships
with the Trustee, the Company, their affiliates or the Deposited Asset Provider.
The "Deposited Asset Provider" is the relevant person who sold the applicable
Deposited Asset to the Company.
The Trust Agreement will provide that an Administrative Agent,
if any, 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
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assumed the Administrative Agent's obligations and duties under the Trust
Agreement with respect to such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the Company nor any director, officer, employee,
or agent or the Administrative Agent or the Company 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 Company and any director, officer,
employee or agent of the Administrative Agent or the Company 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 Company will be under any
obligation to 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 Company 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 6.02). 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.
Administrative Agent Termination Events;
Rights Upon Administrative Agent Termination Event
Unless otherwise provided in the related Prospectus
Supplement, "Administrative Agent Termination Events," if applicable, under the
Trust Agreement with respect to any given Series of Certificates will consist 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 Company, or to the Administrative
Agent, the Company 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
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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 Company, or to the
Administrative Agent, the Company 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. 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, if applicable,
under the Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Company or the Trustee may, and at the direction of holders of
such Certificates evidencing not less than the "Required Percentage--
Administrative Agent Termination" (as defined in the Prospectus Supplement, if
applicable) of the Voting Rights, the Trustee will, terminate all the 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 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
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may be greater than the compensation payable to such Administrative Agent under
the Trust Agreement with respect to such Series.
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" (as defined in the Prospectus Supplement) 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 10.02). 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 10.02).
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 Company 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 Company, 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
Company, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" (as defined in the
Prospectus Supplement) 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
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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.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) 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
Company, 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 5.20).
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 Company 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;
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(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 4.03).
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
[If so 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
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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.
The Trust Agreement may also provide for delivery to the
Company, 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.
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--
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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 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 7.04). 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 7.01).
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 Company, any Administrative Agent and their respective affiliates.
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LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, the Company 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 (as
defined below) 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.
50
<PAGE>
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
Company 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.
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 Company 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.
As set forth in the applicable Prospectus Supplement, certain
of the Underlying Securities may be denominated in a currency other than the
Specified Currency. Although payments in respect of principal and interest on
the Certificates will be made in the Specified Currency, such payments may be
based in whole or in part upon receipt by the related Trust of payments in the
Underlying Securities Currency. An investment in Certificates supported by
Underlying Securities denominated in a currency other than the Specified
Currency entails significant risks not associated with an investment in
securities supported by obligations denominated in the same currency as the
currency of payment on such securities. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the
Specified Currency and the Underlying Securities Currency and the possibility of
the imposition or modification of foreign exchange controls with respect to
either the Specified Currency or the Underlying Securities Currency.
51
<PAGE>
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 Company'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
52
<PAGE>
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.
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 Company 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.
53
<PAGE>
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 Company. 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
Company from time to time. Any agent involved in the offer or sale of
Certificates will be named, and any commissions payable by the Company 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
Company 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.
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
Company to indemnification by the Company 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 Company or its affiliates in the ordinary
course of business.
Lehman Brothers Inc. is an affiliate of the Company.
Lehman Brothers Inc.'s participation in the offer and sale of Certificates
complies with the requirements of Section 2720 of the Conduct Rules 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
54
<PAGE>
rated below investment grade may be retained by the Company 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.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be
passed upon for the Company and the underwriters by Weil, Gotshal & Manges LLP,
New York, New York or other counsel identified in the applicable Prospectus
Supplement.
55
<PAGE>
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in the Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or Lehman Brothers Inc. The Prospectus
does 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 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 the date of the Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement..................................................3
Available Information..................................................3
Incorporation of Certain Documents by Reference........................4
Reports to Certificateholders..........................................4
Important Currency Information ........................................5
Risk Factors...........................................................5
The Company............................................................8
Use of Proceeds........................................................9
Formation of the Trust.................................................9
Maturity and Yield Considerations.....................................10
Description of Certificates...........................................12
Description of Deposited Assets and Credit Support....................31
Description of the Trust Agreement....................................38
Limitations on Issuance of Bearer Certificates........................50
Currency Risks........................................................51
Plan of Distribution..................................................53
Legal Opinions........................................................55
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the SEC
registration and filing fees, are estimated:
SEC Registration Fee......................................... $303.03*
Legal Fees and Expenses...................................... $**
Accounting Fees and Expenses................................. $**
Trustee's Fees and Expenses
(including counsel Fees)................................... $**
Blue Sky Qualification Fees
and expenses.............................................. $**
Printing and Engraving Fees.................................. $**
Rating Agency Fees........................................... $**
Miscellaneous................................................ $**
---
Total......................................................... $**
- ------------------
* $100,144.83 was previously paid
** To be provided by amendment
Item 15. Indemnification of Directors and Officers.
Section 145 of the General corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or witness or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses, costs and fees (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with such action suit or proceeding if the person indemnified acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. If the person indemnified is not wholly successful in such action,
suit or proceeding, but is successful, on the merits or otherwise, in one or
more but less than all claims, issues or matters in such proceeding, he or she
may be indemnified against expenses actually and reasonably incurred in
connection with each successfully resolved claim, issue or matter. In the case
of an action or suit by or in the right of the corporation, no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Section 145 provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred
<PAGE>
to above or in the defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The Certification of Incorporation of the Registrant provides that no
Director of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a Director;
provided, however, that this limitation of liability of a Director shall not
apply with respect to (i) any breach of the Director's duty of loyalty to the
Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) any
liability arising under Section 174 of the General Corporation Law of the State
of Delaware and (iv) for any transaction from which the Director derives an
improper personal benefit. The Bylaws of the Registrant require that the
Registrant indemnify each of its Directors and officers, who serve as a Director
or officer of the Registrant, or as a director, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Registrant, to the fullest extent permitted under and in
accordance with the laws of the State of Delaware.
Reference is made to Section 6 of the form of Underwriting Agreement
filed as Exhibit 1.1 hereto for provisions relating to the indemnification of
directors, officers and controlling persons against certain liabilities
including liabilities under the Securities Act of 1933, as amended.
Item 16. Exhibits:
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Lehman ABS Corporation as currently
in effect
**3.2 Bylaws of Lehman ABS Corporation as currently in effect
4.1 Form of Trust Agreement, with form of Certificate attached thereto.
5.1 Opinion of Weil, Gotshal & Manges LLP as to legality (including
consent of such firm)
8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax matters
(including consent of such firm)
23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5.1
and 8.1)
24.1 Power of Attorney (included on Signature Page)
25.1(a) Statement of eligibility of Trustee
- -----------------
* To be filed by amendment.
** Previously filed; incorporated by reference.
<PAGE>
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change of such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933 each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
B. Filing Incorporating Subsequent Exchange Act Documents By Reference.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
C. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant, as the case may be, will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
D. Undertaking in respect of the eligibility of the Trustee.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned hereby certifies on behalf of Lehman ABS Corporation (the
"Company") that he has reasonable grounds to believe that the Company meets all
of the requirements for filing on Form S-3 and the Company has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 25th day of
July, 1997.
LEHMAN ABS CORPORATION
By: /s/ Mark L. Zusy
----------------------
Mark L. Zusy
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby severally constitutes
and appoints Mark L. Zusy his true and lawful attorney-in-fact, for him and in
his name, place and stead, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to cause the same
to be filed with the Securities and Exchange Commission, hereby granting to said
attorney-in-fact full power and authority to do and perform each and every act
and thing whatsoever requisite or desirable to be done and about the premises as
fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorney-in-fact may do or cause to be done by virtue of these presents.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Position Date
- --------- -------- ----
/s/ Theodore P. Janulis President July 25, 1997
- ------------------------
Theodore P. Janulis (Principal Executive Officer);
and Director
/s/ Charles B. Hintz Chief Financial Officer July 25, 1997
- ------------------------
Charles B. Hintz (Principal Financial Officer)
/s/ David Goldfarb Controller July 25, 1997
- ------------------------
David Goldfarb
/s/ James J. Sullivan Director July 25, 1997
- ----------------------
James J. Sullivan
/s/ Mark L. Zusy Director July 25, 1997
- ----------------------
Mark L. Zusy
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of
Lehman ABS Corporation as currently
in effect
**3.2 Bylaws of Lehman ABS Corporation
as currently in effect
4.1 Form of Trust Agreement, with form of
Certificate attached
5.1 Opinion of Weil, Gotshal & Manges LLP
as to legality (including consent of
such firm)
8.1 Opinion of Weil, Gotshal & Manges LLP
as to certain tax matters (including
consent of such firm)
23.1 Consent of Weil, Gotshal & Manges LLP
(included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on Signature Page
to Registration Statement)
25.1(a) Statement of eligibility of Trustee
- ----------------
* Incorporated by reference from the Registration Statement.
** Previously filed; incorporated by reference.
Exhibit 1.1
Lehman ABS Corporation
[Corporate] [US Government]
[Foreign Government] Bond-Backed Certificates, Series [ ]
[ ], 199[ ]
FORM OF
-------
UNDERWRITING AGREEMENT
----------------------
Lehman ABS Corporation
3 World Financial Center
New York, New York 10285
Dear Sirs:
We [Lehman Brothers Inc.][name of other underwriters](the
"Underwriter[s]") understand that Lehman ABS Corporation, a Delaware corporation
(the "Depositor"), proposes to form one or more trusts (the "Trusts"), which
will issue and sell $[_______] aggregate certificate amount of its [Corporate]
[US Government] [Foreign Government] Bond-Backed Certificates, Series [___] (the
"Certificates"). The Certificates shall have the following terms:
Initial Aggregate Certificate Final Scheduled
Designation [Principal][Notional]Amount Interest Rate Distribution Date
- ----------- --------------------------- ------------- -----------------
Class [ ] $[ ]1 [ ]% [ ]
Class [ ] $[ ]2 [ ]% [ ]
[list others]
- --------
1[Describe distributions]
2[Describe distributions]
<PAGE>
This Agreement relates to 100% of the [principal] [notional]
amount of the Class [___] Certificates, [and] 100% of the [principal] [notional]
amount of the Class [ ] Certificates [and] [set forth other Classes of
Certificates] (the "Offered Certificates"). The distribution of the Offered
Certificates will be effected by us from time to time in one or more negotiated
transactions, or otherwise, at varying prices to be determined, in each case, at
the time of sale. We may effect such transactions by selling the Offered
Certificates to or through dealers, and such dealers may receive from us, for
whom they act as agent, compensation in the form of underwriting discounts,
concessions or commissions.
Subject to the terms and conditions set forth or incorporated
by reference herein, and in reliance upon the representations and warranties set
forth in the document entitled "Lehman ABS Corporation -- [Corporate] [US
Government] [Foreign Government] Bond-Backed Certificates -- Underwriting
Agreement Basic Provisions," a copy of which is attached hereto (the "Basic
Provisions"), we will offer the Offered Certificates to the public from time to
time in negotiated transactions or otherwise at varying prices to be determined
at the time of sale.
We will pay for the Offered Certificates upon delivery of such
Certificates at our offices, at [200 Vesey Street, New York, New York
10285-1000] [addresses of other underwriters], at [10:00 A.M.] (New York City
time) on [_____], 199[ ], or at such other time and place as we shall mutually
agree (the "Closing Date"). The purchase price shall equal [__]% of the
aggregate [principal] [notional] amount of the Offered Certificates, Class [__],
[and] [__]% of the aggregate [principal] [notional] amount of the Offered
Certificates, Class [__] [and] [set forth any other Classes], in each case
[excluding] [including] accrued interest.
All of the provisions contained in the Basic Provisions are
herein incorporated by reference in their entirety and shall be deemed to be a
part of this Underwriting Agreement to the same extent as if such provisions had
been set forth in full herein. Unless otherwise defined herein, terms defined in
the Basic Provisions and the Series Trust Agreement are used herein as therein
defined.
Please accept this offer by having an authorized officer sign
a copy of this Underwriting Agreement in the space set forth below and returning
the signed copy, or by sending a written acceptance in the following form, to us
at [200 Vesey Street, New York, New York 10285-1000] [or specify other address]:
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"We hereby accept your offer, set forth in the Underwriting
Agreement, dated [ ], 199[ ], to purchase the Offered Certificates on the terms
set forth therein."
Very truly yours,
[LEHMAN BROTHERS INC.]
By: ___________________________
Name:
Title:
[Signature block for other Underwriters, if any]
Agreed and Accepted:
LEHMAN ABS CORPORATION
By: ______________________
Name:
Title:
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Lehman ABS Corporation
----------------------
[Corporate] [US Government]
[Foreign Government] Bond-Backed Certificates
FORM OF
-------
UNDERWRITING AGREEMENT BASIC PROVISIONS
---------------------------------------
The basic provisions set forth herein are intended to be
incorporated by reference in an underwriting agreement (an "Underwriting
Agreement") of the type referred to in Paragraph 2 hereof. With respect to any
particular Underwriting Agreement, the Underwriting Agreement, together with the
provisions hereof incorporated therein by reference, is herein referred to as
this "Agreement". Terms defined in the Underwriting Agreement and the Series
Trust Agreement (as hereinafter defined) are used herein as therein defined.
Lehman ABS Corporation, a Delaware corporation (the
"Depositor"), proposes to form one or more trusts (the "Trusts"), which will
issue and sell from time to time a series (a "Series") of its Trust certificates
registered under the registration statement referred to in Paragraph 1(a) hereof
(the "Certificates"). The primary assets (the "Primary Assets") of each Trust
will consist of a pool of [[___]% [Debentures] due [due date] issued by [name of
issuer]]. [Specify any other type of assets, including U.S. government or
foreign government bonds.] Each Certificate will evidence an undivided
beneficial ownership interest in a Trust. The Offered Certificates will be
issued by a Trust, created under a trust agreement, the Series [___] Trust
Agreement (the "Series Trust Agreement"), dated as of [
], 199[ ], between the Depositor [, Administrative Agent] and [name of bank],
as trustee (the "Series Trustee"). The Certificates will have the designations,
denominations, interest rates, distribution dates, final scheduled distribution
dates and selling prices set forth in the Underwriting Agreement.
I. The Depositor represents, warrants and agrees that:
A. A registration statement on Form S-3 (No.
[_______]) with respect to the Offered Certificates has been prepared by the
Depositor and filed with the Securities and Exchange Commission (the
"Commission"), and complies as to form in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Commission
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thereunder, including Rule 415, and has become effective under the Act. As used
in this Agreement, (i) "Preliminary Prospectus" means each prospectus included
in that registration statement, or amendments or supplements thereof, before the
registration statement became effective under the Act, including any prospectus
filed with the Commission pursuant to Rule 424(a) of the Rules and Regulations;
(ii) "Registration Statement" means that registration statement and all exhibits
thereto, as amended or supplemented to the date of this Agreement; (iii) "Basic
Prospectus" means the applicable prospectus included in the Registration
Statement; and (iv) "Prospectus" means the Basic Prospectus, together with any
prospectus supplement specifically relating to the Offered Certificates (a
"Prospectus Supplement"), as filed with, or mailed for filing to, the Commission
pursuant to paragraphs (b) or (c) of Rule 424 of the Rules and Regulations;
B. The Registration Statement and the Prospectus,
at the time the Registration Statement became effective and on the date of this
Agreement, complied, and (in the case of any amendment or supplement to any such
document filed with the Commission after the date as of which this
representation is being made) will comply, as to form in all material respects
with the requirements of the Act, the Rules and Regulations; and the
Registration Statement and the Prospectus do not, and (in the case of any
amendment or supplement to any such document filed with the Commission after the
date as of which this representation is being made) will not, contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided however, that the Depositor makes no representation or warranty as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Depositor by the Underwriter[s] specifically for inclusion therein;
C. The Depositor is not in violation of its
corporate charter or by-laws or in default under any agreement, indenture or
instrument the effect of which violation or default would be material to the
Depositor; the execution, delivery and performance of this Agreement and the
Series Trust Agreement and the consummation of the transactions contemplated
therein have been, and at the Closing Date (as defined in Paragraph 4 hereof)
the Series Trust Agreement pursuant to which the Offered Certificates will be
issued, and other operative documents will have been authorized by all necessary
corporate action and compliance by the Depositor with the provisions of this
Agreement; the Offered Certificates and the Series Trust Agreement will not
conflict with, result in the creation or imposition of any material lien, charge
or encumbrance upon any of the assets of the Depositor, pursuant to the terms
of, or constitute a default under, any material agreement, indenture or
instrument, or result in a violation of the corporate charter or by-laws of the
Depositor or any order, rule or regulation of any court or governmental
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<PAGE>
agency having jurisdiction over the Depositor or its properties; and, except as
required by the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and applicable state securities laws, no consent, authorization
or order of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance of this Agreement and each
of the Series Trust Agreement;
D. Except as described in the Registration
Statement and the Prospectus, there has not been any material adverse change or
any adverse development that materially affects, the business, properties,
financial condition or results of operations of the Depositor from the dates as
of which information is given in the Registration Statement and the Prospectus;
E. The Series Trust Agreement has been duly and
validly authorized, executed and delivered by the Depositor and is a valid and
legally binding obligation of the Depositor enforceable against the Depositor in
accordance with each of its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency or other laws affecting the enforcement of
creditors rights generally or by general principles of equity; and on the
Closing Date, (i) the Offered Certificates will have been validly authorized
and, upon payment therefor as provided in this Agreement, will be validly issued
and outstanding, and will constitute legally binding obligations of the
Depositor entitled to the benefits of the Series Trust Agreement relating to the
Offered Certificates and (ii) the Offered Certificates, the Series Trust
Agreement and other operative documents will conform to the descriptions thereof
contained in the Prospectus;
F. The Depositor has been duly incorporated, is
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership of property or the
conduct of its business requires such qualification and has all corporate power
and authority necessary to own or hold its properties and to conduct the
business in which it is engaged, except such jurisdictions, if any, in which the
failure to be so qualified will not have a material adverse effect on its
business or properties;
G. Except as described in the Prospectus, there is
no litigation or governmental proceeding pending or, to the knowledge of the
Depositor, threatened against the Depositor that might result in any material
adverse change in the financial condition, results of operation, business or
prospects of the Depositor or that is required to be disclosed in the
Registration Statement;
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<PAGE>
H. There are no contracts or other documents that
are required to be filed as exhibits to the Registration Statement by the Act or
by the Rules and that have not been filed as exhibits to the Registration
Statement or incorporated therein by reference as permitted by the Rules and
Regulations, or that are required to be summarized in the Prospectus that are
not so summarized; provided, however, that the Depositor makes no representation
or warranty with respect to any contract or document, except this Agreement, to
which any Underwriter is a party;
I. The Trust is not an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended, or under the
control of an investment company;
J. At the Closing Date, the Offered Certificates
will have been rated by a nationally recognized statistical rating agency (as
such term is used in Rule 15c3-1 under the Exchange Act) in the certificate
rating categories as described in the Prospectus relating to the Offered
Certificates.
K. This Agreement has been duly authorized,
executed and delivered by the Depositor;
L. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or of any
court, governmental agency or body or official (except with respect to the state
securities or Blue Sky laws of various jurisdictions), required in connection
with the valid authorization, issuance and sale of the Certificates pursuant to
this Agreement, and the Series Trust Agreement has been or will be taken or
obtained on or prior to the Closing Date specified in the Series Trust
Agreement;
M. At the applicable Closing Date, any assets
included in the related Trust will meet the criteria for selection described in
the Prospectus;
N. At the applicable Closing Date, the
representations and warranties made by the Depositor in the Series Trust
Agreement will be true and correct;
O. At the time of the execution and delivery of the
Series Trust Agreement, the Depositor will be the beneficial owner of the
Primary Assets being transferred to the Series Trustee pursuant thereto, free
and clear of any lien or other encumbrance, and will not have assigned to any
person any of its right, title or interest in the Primary Assets or in the
Series Trust Agreement or the Offered Certificates being issued pursuant
thereto; and
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P. At the time of the execution and delivery of the
Series Trust Agreement, the Depositor will have the power and authority to
transfer the Primary Assets to the Trust and to transfer the Offered
Certificates to [each of] the Underwriter[s] and, upon execution and delivery to
the Series Trustee of the Series Trust Agreement and delivery to [each of] the
Underwriter[s] of the Offered Certificates, the Primary Assets constituting a
portion of the Trust will have been duly and validly assigned to the Trust in
accordance with the terms of the Series Trust Agreement.
II. The obligation of the Underwriter[s] to purchase, and the
Trust to sell, the Offered Certificates is subject to the execution and delivery
of the Underwriting Agreement, completed so as to specify the firm[s] that will
be the Underwriter[s], the principal or notional amount, as applicable, of the
Offered Certificates to be purchased by the Underwriter[s], the purchase price
to be paid by the Underwriter[s] for the Offered Certificates, the public
offering price of the Offered Certificates, certain terms thereof and the
Underwriter['s][s'] compensation therefor and any terms of the Offered
Certificates not already specified in the Series Trust Agreement (including, but
not limited to, designations, denominations, interest rates and final scheduled
distribution dates). The Underwriting Agreement will specify any details of the
terms of the offering of Offered Certificates that, pursuant to the Rules and
Regulations, should be reflected in a post-effective amendment to the
Registration Statement or a Prospectus Supplement relating to the offering of
the Offered Certificates.
III. The Series Trustee shall not be obligated to deliver any
of the Offered Certificates except upon payment for all the Offered Certificates
to be purchased pursuant to this Agreement as hereinafter provided.
IV. Payment for the Offered Certificates shall be made at the
location set forth in the Underwriting Agreement, by 11:00 A.M. New York City
time, on the fifth business day following the date of the Underwriting
Agreement, or at such other location, time and date as shall be agreed upon in
the Underwriting Agreement or otherwise. This date and time are sometimes
referred to as the "Closing Date." The Offered Certificates, in definitive form,
duly executed and authenticated, shall at the direction of the Underwriter[s] be
delivered by the Depositor, for safekeeping, against delivery of a safekeeping
receipt, to the Underwriter[s] at the offices of the Underwriter[s] in [New
York, New York], on the business day prior to the Closing Date, registered in
such names and denominations as the Underwriter[s] shall request in writing at
least four business days prior to the Closing Date. Upon notice given to the
Depositor at least four business days prior to the Closing Date, the Depositor
shall not deliver the Offered Certificates to the Underwriter[s] for safekeeping
on the business day prior to the Closing Date, but shall instead deliver the
Offered Certificates
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<PAGE>
to the Underwriter[s] on the Closing Date for the account of the Underwriter[s]
against payment to or upon the order of the Depositor of the purchase price in
Federal Reserve or other immediately available funds. Such Offered Certificates
shall be made available for checking and packaging by the Underwriter[s] not
less than two business days prior to the Closing Date at such place in [New
York, New York], as the Underwriter[s] and the Depositor may agree. Time shall
be of the essence, and delivery at the times and places specified pursuant to
this Agreement is a further condition of the obligation of the Underwriter[s]
hereunder.
V. The Depositor agrees:
A. To furnish promptly to the Underwriter[s]
and to counsel for the Underwriter[s] one signed copy of the Registration
Statement as originally filed with the Commission, and each amendment or
supplement thereto filed prior to the date of the Underwriting Agreement or
relating to or covering the Offered Certificates, and a copy of each Prospectus
filed with the Commission, including all consents and exhibits filed therewith;
B. To deliver promptly to the Underwriter[s]
such number of conformed copies of the Registration Statement (excluding
exhibits other than this Agreement) and each Prospectus as the Underwriter[s]
may reasonably request;
C. To file promptly with the Commission, during
such period following the date of the Underwriting Agreement in which any
Prospectus is required by law to be delivered, any amendment or supplement to
the Registration Statement or any Prospectus that may, in the judgment of the
Depositor or the Underwriter[s], be required by the Act or requested by the
Commission and approved by the Underwriter[s];
D. Prior to filing with the Commission during
the period referred to in (c) above any amendment or supplement to the
Registration Statement or any Prospectus, to furnish a copy thereof to the
Underwriter[s] and to counsel for the Underwriter[s], and the Depositor shall
not file any such amendment or supplement to which the Underwriter[s] shall
reasonably object;
E. To advise the Underwriter[s] promptly (i)
when any post-effective amendment to the Registration Statement relating to or
covering the Offered Certificates becomes effective, (ii) of any request or
proposed request by the Commission for an amendment or supplement to the
Registration Statement or to any Prospectus (insofar as the amendment or
supplement relates to or covers the Offered Certificates) or for any
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<PAGE>
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any order
directed to any Prospectus or the initiation or threat of any such stop order
proceeding, (iv) of receipt by the Depositor of any notification with respect to
the suspension of the qualification of the Offered Certificates for sale in any
jurisdiction or the initiation or threat of any Proceeding for that purpose and
(v) of the happening of any event that makes untrue any statement of a material
fact made in the Registration Statement or any Prospectus or that requires the
making of a change in the Registration Statement or any Prospectus in order to
make any material statement therein not misleading;
F. If, during the period referred to in (c)
above, the Commission shall issue a stop order suspending the effectiveness of
the Registration Statement, to make every reasonable effort to obtain the
lifting of that order at the earliest possible time;
G. To make generally available to the holders
of the Certificates (the "Certificateholders"), as soon as practicable, an
earnings statement conforming with requirements of Section 11(a) of the Act and
Rule 158 thereunder;
H. To endeavor to qualify the Offered
Certificates for offer and sale under the securities laws of such jurisdictions
as the Underwriter[s] may reasonably request, provided, however, that this
Paragraph 5(h) shall not obligate the Depositor or the Trust to file any general
consent to service of process or to qualify to do business in any jurisdiction
where they are now not qualified or as dealers in securities in any jurisdiction
in which they are not so qualified;
I. To pay or cause to be paid (i) the costs
incident in the preparation, printing and filing under the Act of the
Registration Statement and any amendments thereof and supplements and exhibits
thereto, (ii) the costs of distributing the Registration Statement as originally
filed and each amendment and post-effective amendment thereof (including
exhibits), any Preliminary Prospectus, each Prospectus and any amendment or
supplement to the Prospectus as provided in this Agreement; (iii) the costs of
printing and distributing this Agreement, the Series Trust Agreement and other
operative documents; (iv) the costs of filings, if any, with the National
Association of Securities Dealers, Inc.; (v) fees paid to any rating agency in
connection with the rating of the Offered Certificates; (vi) the fees and
expenses of qualifying the Certificates under the securities laws of the several
jurisdiction as provided in Paragraph 5(h) hereof and of preparing and printing,
if so requested by the Underwriter[s], a Preliminary Blue Sky Survey and Legal
Investment Survey concerning the legality of the Certificates, including the
Offered Certificates, as an investment (including fees and disbursements of
counsel to the Underwriter[s] in connection
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therewith); and (vii) all other costs and expenses incident to the performance
of the Depositor's obligations under this Agreement; provided, however, that,
except as provided in Paragraph 9, the Underwriter[s] shall pay [its] [their]
own costs and expenses, including the fees and expenses of [its] [their]
counsel, any transfer taxes on the Offered Certificates that [it] [they] may
sell and the expenses of advertising any offering of the Offered Certificates
made by the Underwriter[s];
J. To file or cause the Series Trustee to file
on behalf of the Trust, on a timely basis, any documents and any amendments
thereof as may be required to be filed by it pursuant to the Exchange Act; and
K. To cause the Series Trustee while the
Certificates are outstanding to:
1. furnish to the Underwriter[s], as
soon as available, copies of all reports filed with the Commission and
copies of each notice published or mailed to holders of the Offered
Certificates pursuant to the Series Trust Agreement; and
2. furnish to the Underwriter[s],
such other information with respect to the Trust or its financial
condition or results of operations, as the Underwriter[s] may
reasonably request, including but not limited to information necessary
or appropriate to the maintenance of a secondary market in the Offered
Certificates.
VI. A. The Depositor shall indemnify and hold harmless
the Underwriter[s] and each person, if any, who controls any Underwriter within
the meaning of the Act from and against any loss, claim, damage or lability,
joint or several, and any action in respect thereof, to which the Underwriter[s]
or controlling person[s] may become subject, under the Act or otherwise, insofar
as such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or any
Prospectus or arises out of, or is based upon, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse the
Underwriter[s] and such controlling person[s] for any legal and other expenses
reasonably incurred by the Underwriter[s] or controlling person[s] in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action; provided, however, that the Depositor shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any
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Preliminary Prospectus, the Registration Statement or any Prospectus in reliance
upon and in conformity with written information furnished to the Depositor by
the Underwriter[s] specifically for inclusion therein; and provided further
that, as to any Preliminary Prospectus, this indemnity agreement shall not inure
to the benefit of any Underwriter or any person controlling any Underwriter on
account of any loss, claim, damage, liability or action arising from the sale of
Offered Certificates to any person by that Underwriter if that Underwriter
failed to send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in such Prospectus, unless such failure resulted from non-compliance by the
Depositor with Paragraph 5(b). The foregoing indemnity is in addition to any
liability that the Depositor may otherwise have to any Underwriter or any person
or entity controlling such Underwriter.
B. The Underwriter[s] shall indemnify and hold
harmless the Depositor, each of its directors, each of its officers who signed
the Registration Statement, and any person who controls the Depositor within the
meaning of the Act from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which the Depositor or any
such director, officer or controlling person may become subject, under the Act
or otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or any Prospectus, or arises out of, or is based upon, the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Depositor by the Underwriter[s]
specifically for inclusion therein, and shall reimburse the Depositor for any
legal and other expenses reasonably incurred by the Depositor or any such
director, officer or controlling person investing or defending or preparing to
defend against any such loss, claim, damage, liability or action. The foregoing
indemnity agreement is in addition to any liability that any Underwriter may
otherwise have to the Depositor or any of its directors, officers or controlling
persons.
C. Promptly after receipt by an indemnified
party under this Paragraph of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this paragraph, notify the indemnifying
party in writing of the claim or commencement of that action, provided that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party otherwise than under this Paragraph. If
any
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<PAGE>
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this paragraph for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided that the Underwriter[s] shall have the right to employ counsel
to represent the Underwriter[s], if (i) in the reasonable judgment of the
Underwriter[s], there may be legal defenses available to the Underwriter[s]
different from or in addition to those available to the Depositor, or there is a
conflict of interest between the Underwriter[s], on one hand, and the Depositor,
on the other, or (ii) the Depositor shall fail to select counsel, and in such
event the fees and expenses of such separate counsel shall be paid by the
Depositor. In no event shall the Depositor be liable for the fees and expenses
of more than one separate firm of attorneys for the Underwriter[s] and the
controlling persons in connection with any other action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
D. If the indemnification provided for in this
Paragraph 6 shall for any reason be unavailable to an indemnified party under
Paragraph 6(a) or 6(b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Depositor on the one hand and the Underwriter[s] on the other
from the offering of the Offered Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Depositor on the one hand and the
Underwriter[s] on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Depositor on the one hand and the Underwriter[s] on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Offered Certificates (before
deducting expenses) received by the Depositor bear to the total underwriting
discounts and commissions received by the Underwriter[s] with respect to such
offering, in each case as set forth in the table on the cover page of the
Prospectus Supplement. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
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alleged omission to state a material fact relates to information supplied by the
Depositor or the Underwriter[s], the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Depositor and the Underwriter[s] agree that it would
not be just and equitable if contributions pursuant to this Paragraph 6(d) were
to be determined by pro rata allocation [(even if the Underwriters were treated
as one entity for such purpose)] or by any other method of allocation that does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Paragraph 6(d) shall be deemed to include, for purposes of this Paragraph 6(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Paragraph 6(d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Offered Certificates underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
as provided in this Paragraph 6(d) are several in proportion to their respective
underwriting obligations and not joint.
E. The indemnity agreements contained in this
Paragraph and the representations, warranties and agreements of the Depositor in
Paragraph 1 and Paragraph 5 hereof, shall survive the delivery of the Offered
Certificates, and the provisions of this Paragraph and of Paragraph 5(j) shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
VII. The obligations of the Underwriter[s] under this
Agreement may be terminated by the Underwriter[s], in [its] [their] absolute
discretion by notice given to and received by the Depositor prior to the
delivery of and payment for the Offered Certificates, if, during the period
beginning on the date of this Agreement to and including the Closing Date, (a)
trading in securities generally on the New York Stock Exchange, Inc. is
suspended or minimum prices are established on that Exchange, or (b) a banking
moratorium is declared by Federal or New York State authorities, or (c) the
United States is or becomes engaged in hostilities that result in the
declaration of a national emergency, or (d) any rating of the Offered
Certificates shall be lowered by the nationally recognized statistical rating
agency (as such term is used in Rule 15c3-1 under the Exchange Act) that
initially rated the Certificates.
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VIII. The obligations of the Underwriter[s] under this
Agreement with respect to the Offered Certificates are subject to the accuracy,
on the date of this Agreement and on the Closing Date, of the representations
and warranties of the Depositor contained herein, to the performance by the
Depositor of its obligations hereunder, and to each of the following additional
terms and conditions applicable to the Offered Certificates:
A. At or before the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued, and prior to that time no stop order proceeding shall have been
initiated or threatened by the Commission; any request of the Commission for
inclusion of additional information in the Registration Statement or any
Prospectus or otherwise shall have been complied with; and after the date of
this Agreement the Depositor shall not have filed with the Commission any
amendment or supplement to the Registration Statement or any Prospectus to which
the Underwriter[s] shall have reasonably objected;
B. The Underwriter[s] shall not have discovered
and disclosed to the Depositor on or prior to the Closing Date that the
Registration Statement or any Prospectus contains an untrue statement of a fact
that, in the opinion of counsel to the Underwriter[s], is material or omits to
state a fact that, in the opinion of such counsel, is material and is required
to be stated therein or is necessary to make the statements therein not
misleading;
C. All corporate proceedings and other legal
matters incident to the authorization, form and validity of this Agreement, the
Offered Certificates, the Series Trust Agreement, other operative documents and
the form of the Registration Statement, each Prospectus (other than financial
statements and other financial data) and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all respects to Weil, Gotshal & Manges, LLP as counsel for the
Underwriter[s], and the Depositor shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters;
D. Counsel to the Depositor shall have
furnished to the Underwriter[s] their opinion, dated the Closing Date, in form
and substance satisfactory to the Underwriter[s];
E. Counsel to the Series Trustee shall have
furnished to the Underwriter[s] their opinion, dated as of the applicable
Closing Date, in form and substance satisfactory to the Underwriter[s];
15
<PAGE>
F. The Underwriter[s] shall have received such
opinion or opinions, dated the Closing Date, with respect to the incorporation
of the Depositor, the validity of the Registration Statement, the Prospectus and
other related matters as the Underwriter[s] may require, and the Depositor shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters;
G. The Underwriter[s] shall have received a
certificate or certificates signed by such of the principal executive, financial
and accounting officers of the Depositor as the Underwriter[s] may request,
dated the applicable Closing Date, in which such officers, to the best of their
knowledge after reasonable investigation, shall state that (i) the
representations and warranties of the Depositor in this Agreement are true and
correct; (ii) the Depositor has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Date; (iii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated; (iv) subsequent to the respective dates as of
which information is given in the Prospectus, and except as set forth or
contemplated in the Prospectus, there has not been any material adverse change
in the general affairs, capitalization, financial condition or results of
operations of the Depositor; (v) except as otherwise stated in the Prospectus,
there are no material actions, suits or proceedings pending before any court or
governmental agency, authority or body or, to their knowledge, threatened, which
could have a material effect upon the Depositor or upon the transactions
contemplated by this Agreement; and (vi) attached thereto are true and correct
copies of a letter from the rating agency or agencies rating the Certificates
subject to this Agreement confirming that, unless otherwise specified in the
applicable Underwriting Agreement that the Certificates have been rated in the
same rating categories established by such agency or agencies as the rating of
the Underlying Securities and that such rating has not been lowered since the
date of such letter;
H. If applicable, the Underwriter[s] shall
have received letters dated the Closing Date from counsel rendering opinions to
any nationally recognized statistical rating organization rating the
Certificates, to the effect that the Underwriter[s] may rely upon their opinion
to such rating organization, as if such opinion were rendered to the
Underwriter[s];
I. The Underwriter[s] shall have received a
certificate of the Series Trustee, signed by one or more duly authorized
officers of the Series Trustee, dated the applicable Closing Date, as to the due
acceptance of the Series Trust Agreement by the Series Trustee and the due
authorization and delivery of the Certificates by the Series Trustee thereunder;
and
16
<PAGE>
J. The Depositor will furnish the Underwriter
[s] with such conformed copies of such opinions, certificates, letters and
documents as the Underwriter[s] reasonably requests.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance satisfactory to counsel for the
Underwriter[s].
IX. If the sale of the Offered Certificates shall not be
consummated because any condition to the Underwriter['s][s'] obligations set
forth in Paragraph 8 hereof is not satisfied or because of any refusal,
inability or failure on the part of the Depositor to perform any agreement
herein or comply with any provision hereof other than by reason of default of
the Underwriter[s], the Depositor shall reimburse the Underwriter[s] for the
reasonable fees and expenses of their counsel and for such other out-of-pocket
expenses as shall have been incurred in connection with this Agreement and the
proposed purchase of the Offered Certificates, and upon demand the Depositor
shall pay the full amount thereof to the Underwriter[s].
X. The Depositor shall be entitled to act and rely upon any
request, consent, notice or agreement by Lehman Brothers Inc. as, or on behalf
of, the Underwriter[s]. Any notice by the Depositor to the Underwriter[s] shall
be sufficient if given in writing or by telegraph addressed to Lehman Brothers
Inc., 200 Vesey Street, New York, New York 10285, and any notice by the
Underwriter[s] to the Depositor shall be sufficient if given in writing or by
telegraph addressed to the Depositor at 3 World Financial Center, New York, New
York 10285, Attention of the Secretary.
XI. This Agreement shall be binding upon the Underwriter[s],
the Depositor and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the indemnity agreement of the Underwriter[s] contained in Paragraph 6 hereof
shall be deemed to be for the benefit of directors of the Depositor, officers of
the Depositor who have signed the Registration Statement and any person
controlling the Depositor. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this
Paragraph, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
XII. For purposes of this Agreement, "business day" means any
day on which the New York Stock Exchange, Inc. is open for trading.
17
<PAGE>
XIII. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
XIV. This Agreement may be executed in one or more
counterparts, and, if executed in more than one counterpart, the executed
counterparts shall together constitute a single instrument.
18
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
of
LEHMAN ABS CORPORATION
Pursuant to Sections 228, 242 and 245
of the General Corporation Law of the
State of Delaware
The undersigned, on behalf of Lehman ABS Corporation a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, hereby certifies:
1. The name of the corporation is Lehman ABS Corporation
(hereinafter called the "Corporation"). The name under which the Corporation was
originally incorporated was Shearson Lehman Asset-Backed Securities Corporation
and the date of filing of the original Certificate of Incorporation of the
Corporation with the Secretary of the State of Delaware was January 29, 1988.
2. A Certificate of Amendment to the Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
April 28, 1988.
3. A Certificate of Amendment to the Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
September 4, 1990.
4. This Restated Certificate of Incorporation, which restates,
integrates and amends the Certificate of Incorporation of the Corporation as
heretofore amended and supplemented, was duly adopted by the Board of Directors
of the Corporation in accordance with the provisions of Section 242 and Section
245 of the General Corporation Law of the State of Delaware and by written
consent of the sole stockholder of the Corporation in accordance with the
provisions of Section 242, Section 245 and Section 228 of the General
Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation supersedes the
original Certificate of Incorporation as heretofore amended.
<PAGE>
6. The Certificate of Incorporation as heretofore amended is
hereby amended and restated in its entirety as follows:
FIRST. The name of the corporation is LEHMAN ABS
CORPORATION (the "Corporation").
SECOND. The address of the Corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage in any of the following
acts or activities:
(a) to authorize, issue, sell, deliver,
purchase and invest in (and enter into agreements in connection with), and/or to
engage in the establishment of one or more trusts (each, a "Trust") which will
issue and sell, bonds, notes, debt or equity securities, obligations, and other
securities and instruments (in one or more series, each of which series may
consist of one or more classes) ("Securities"), which Securities will be
collateralized or otherwise secured or backed by, or otherwise represent
interests in, among other things (A) one or more pools of Receivables (as
defined in Article Third (b) below); (B) pass-through certificates (the
"Pass-Through Certificates") evidencing a fractional undivided ownership
interest in one or more grantor trusts that own or hold, among other things, one
or more pools of Receivables, or participations or certificates of participation
or beneficial ownership in one or more pools of Receivables ("Participation
Certificates"); or (C) other collateral (the Receivables, the Pass-Through
Certificates, Participation Certificates and other collateral pledged as
security for or otherwise supporting the Securities and the proceeds thereof are
collectively referred to herein as the "Collateral"); in each case the
Securities of a series which are distributed through one or more public
offerings (with the exception of the Subordinated Securities (as defined in
Article THIRD (c) of such series, which may or may not be rated) shall, when
issued, be rated in one of the four highest rating categories by any one or more
nationally recognized rating agencies;
2
<PAGE>
(b) in connection with the issuance and sale
of the Securities or otherwise, to purchase or otherwise acquire, own, hold,
transfer, convey, pledge, assign, sell (or otherwise dispose of), service,
finance, refinance or otherwise deal in or with the Pass-Through Certificates,
the Participation Certificates and the Receivables (and any assets to which
Receivables relate) and related Collateral and to enter into contractual
arrangements, transactions and agreements with respect to the Receivables and
with the providers or obligors respecting such Collateral, including agreements
with originators of Receivables, sellers or servicers of Receivables or dealers
in any assets to which the Receivables relate; for purposes of this Certificate
of Incorporation, the term "Receivables" means the right to payment under, and
other rights of a holder with respect to, various promissory notes, leases, loan
agreements, installment sales contracts, drafts (including bank and commercial
drafts), trade documents, certificates of participation, accounts receivable,
accounts, account balances, certificates of beneficial ownership, bankers'
acceptances and other agreements and instruments evidencing indebtedness or
payment obligations, any or all of which may be secured or unsecured, that arise
in connection with one or more of the following: (i) the sale or lease of
automobiles, trucks or other motor vehicles, equipment, merchandise and other
personal property and financings or re-financings secured thereby, (ii) credit
card purchases or cash advances, (iii) the sale, licensing or other commercial
provision of services, rights, intellectual properties and other intangibles,
(iv) trade financing, with or without whole or partial guarantees of payment by
the Export-Import Bank of the United States or any comparable domestic, foreign
or international authority, (v) loans secured by first or junior mortgages on
real estate, (vi) loans to employee stock ownership plans, and (vii) any and all
other commercial transactions and commercial, sovereign, student and consumer
loans and indebtedness;
(c) to arrange or otherwise provide for
support for any series of Securities to be issued by the Corporation or any
Trust by various forms of credit enhancement including collections and/or
distributions on the Receivables which are to be remitted to certain accounts to
be established under the indenture or participation, pooling or other similar
agreement relating to such series, cash deposits, insurance policies, guaranteed
investment contracts, investment agreements, letters of credit, minimum payment
agreements, guarantees and other forms of credit
3
<PAGE>
enhancement including arrangements whereby, for a given series, payments on one
or more classes of Securities ("Subordinated Securities") are subordinated to,
and constitute additional security for, payments due on one or more other
classes of Securities in such series;
(d) to invest certain proceeds from
Receivables and related Collateral as determined by the
Corporation's Board of Directors;
(e) to authorize, issue, sell and deliver
instruments evidencing the Corporation's indebtedness which is completely
subordinated to any Securities, and to enter into agreements by which the
Corporation incurs such indebtedness; and
(f) to engage in any lawful act or activity
and to exercise any powers permitted to corporations organized under the General
Corporation Law of Delaware (currently codified at Title 8 of the Delaware Code)
(as may be amended, herein referred to as the "General Corporation Law of
Delaware") that are incidental to and necessary or convenient for the
accomplishment of the above mentioned business and purposes.
FOURTH. The total number of shares which the Corporation shall
have authority to issue is 1,000 (one thousand) shares of Common Stock and the
par value of each of such shares is $0.25 (twenty-five cents).
FIFTH. The board of directors (the "Board of Directors") of
the Corporation is expressly authorized and empowered to adopt, alter or repeal
the by-laws of the Corporation (the "By-Laws"), subject to any limitations set
forth therein or in this Certificate of Incorporation, and subject to the power
of the stockholders to alter the Bylaws adopted by the Board of Directors.
SIXTH. (a) Elections of directors need not be by
written ballot except and to the extent provided in the By-
Laws of the Corporation.
(b) while the Corporation is solvent, the
Corporation shall not (i) commence a voluntary case or consent to an involuntary
case, for relief against the Corporation under Title 11 of the United States
Code, 11 U.S.C. ss.ss. 101 et seq., or file a petition or an answer or consent
to a petition seeking liquidation, reorganization or
4
<PAGE>
other relief under any applicable law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial part of its property, or
make any assignment for the benefit of creditors, or, except as may be required
by any fiduciary obligation of the Board of Directors or as may be required by
applicable law, admit in writing its inability to pay its debts generally as
they become due, or take any corporate action in furtherance of any such action;
(ii) dissolve or liquidate, in whole or in part, merge or consolidate with or
into any other entity, or convey or transfer all or substantially all of its
properties and assets to any other entity, except a otherwise provided in
Article EIGHTH; (iii) incur, assume or guarantee any indebtedness for borrowed
money or for the deferred purchase price of goods or services, except as
specifically provided herein; or (iv) engage in any other action that bears upon
whether the separate identity of the Corporation and its parent will be
respected, or the assets of the Corporation will be consolidated with those of
its parent under applicable Federal or state bankruptcy or insolvency law; in
each such case without the unanimous consent of the Board of Directors,
including the Independent Directors, and the Independent Officer (each as
defined in (c) below).
(c) At all times, at least one-third of the
directors serving on the Board of Directors and any Executive Committee of the
Board of Directors ("Independent Directors") and at least one executive officer
of the Corporation ("Independent Officer") shall be Independent Persons (as
defined below) (except in the event of the resignation, death or removal of any
such person in which event the vacancy shall be filled by another Independent
Person). For purposes hereof, the term "Independent Person" means an individual
who is not, and has not been within the preceding 12 months, (i) an owner of any
shares of the common stock of the Corporation, or 10% or more of the voting
securities of any Controlling Entity (as defined below), nor (ii) a director,
officer or employee of any Controlling Entity; provided, however, that any such
director and any such executive officer may be the same individual; provided,
further, that the Independent Person serving as an executive office and/or
director of the Corporation may, if such individual satisfies the remaining
requirements of the definition of "Independent Person", have retired from
employment by a Controlling Entity (other than
5
<PAGE>
the direct parent of the Corporation) during the 12-month period preceding such
individual's becoming an executive officer and/or director of the Corporation,
and such individual may continue to receive compensation from a Controlling
Entity (other than the direct parent of the Corporation) for services performed
as an independent contractor, provided that such individual is not dependent on
such compensation to maintain such individual's customary standard of living.
For purposes hereof, the term "Controlling Entity" means any entity other than
the Corporation (A) which owns beneficially, directly or indirectly, 10% or more
of the outstanding shares of common stock of the Corporation, or which is
otherwise in control of the Corporation, (B) of which 10% or more of the
outstanding voting securities are owned beneficially, directly or indirectly, by
any entity described in clause (A) above or (C) which otherwise controls or is
otherwise controlled by any entity described in clause (A) above; provided that
for purposes of this definition the term "control" and "controlled by" shall
have the meanings assigned to them in Rule 405 under the Securities Act of 1933,
as amended.
SEVENTH. No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
liability of a director (i) for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for any act or omission of the
director that is not taken in good faith or which involves the intentional
misconduct or a violation of law with such director's knowledge, or if such
director, at the time of the act or omission, has reasonable cause to believe
that the same is unlawful, (iii) under Section 174 of Title 8 of the Delaware
Code, or (iv) for any transaction from which such director derived an improper
personal benefit. If the General Corporation Law of Delaware is amended after
the date of the filing of this Certificate of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of Delaware as so amended.
EIGHTH. Notwithstanding any other provision of
this Certificate of Incorporation and any provision of law
that otherwise so empowers the Corporation, the Corporation
6
<PAGE>
shall not, without the prior written consent of any trustee ("Trustee") from
time to time under any indenture ("Indenture") or under any participation,
pooling, trust or other similar agreement ("Pooling Agreement") between the
Corporation and a Trustee pursuant to which the Corporation shall issue or
facilitate the issuance of Securities, do any of the following:
(a) engage in any business or activity other
than the business and activities which the Corporation is
permitted to engage in under Article THIRD;
(b) dissolve or liquidate, in whole or in
part, in accordance with applicable state non-bankruptcy
law; or
(c) consolidate or merge with or into any
other entity, or permit any entity to consolidate or merge with or into the
Corporation, or, except as permitted under any such Indenture or Pooling
Agreement, convey transfer or lease its properties and assets substantially as
an entirety to any entity, unless --
(1) The corporation formed by such consolidation or
into which the Corporation is merged or the entity which
acquires by conveyance or transfer, or which leases, the
properties and assets of the Corporation substantially as an
entirety (i) shall be a corporation organized and existing
under the laws of the United States of America, any State
thereof or the District of Columbia, (ii) shall have a
certificate of incorporation containing provisions identical
to the provisions of Article THIRD, Article SIXTH, this
Article EIGHTH, and Article ELEVENTH hereof, and (iii) shall
expressly assume in writing the due and punctual payment of
all obligations of the Corporation in connection with the
indebtedness of the Corporation; and
(2) immediately after giving effect to such
transaction, no default or event of default shall have
occurred and be continuing under any Indenture or any Pooling
Agreement.
NINTH. For the management of the business and for
the conduct of the affairs of the Corporation and in further
definition, limitation and regulation of the powers of the
7
<PAGE>
Corporation and of its directors and stockholders, it is further provided:
(a) The number of directors of the
Corporation shall not be less than three or more than nine, with the exact
number to be determined in accordance with the By-Laws of the Corporation.
(b) Meetings of stockholders may be held
within or without the State of Delaware, as the By-Laws may provide. The books
of the Corporation may be kept, subject to any applicable statutory provision,
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
(c) The Corporation shall at all times have
a sufficient number of officers and employees to manage its
operations.
(d) The Corporation shall at all times
(a)(i) maintain the Corporation's principal executive office separate and apart
from that of any Controlling Entity and conspicuously identified as the
Corporation's office and (ii) pay fair market rent for its executive office
space located in the offices of any Controlling Entity, (b) maintain the
Corporation's books, financial statements, accounting records and other
corporate documents and records separate from those of any Controlling Entity or
any other entity, (c) not commingle the Corporation's assets with those of any
Controlling Entity or any other entity, (d) maintain the Corporation's bank
accounts, payroll and books of account separate from those of any Controlling
Entity, (e) act solely in its corporate name and through its own authorized
officers and agents, (f) make investments directly or by brokers engaged and
paid by the Corporation or its agents (provided that if any such agent is an
affiliate of the Corporation it shall be compensated at a fair market rate for
its services), (g) separately manage the Corporation's liabilities from those of
any Controlling Entity, and pay its own liabilities, including all
administrative expenses, from its own separate assets, and (h) pay from the
Corporation's assets all obligations and indebtedness of any kind incurred by
the Corporation. The Corporation shall abide by all corporate formalities,
including the maintenance of current minute books, and the Corporation shall
cause its financial statements to be prepared in accordance with generally
accepted accounting
8
<PAGE>
principles in a manner that indicates the separate existence of the Corporation
and its assets and liabilities. The Corporation shall not commingle its assets
with those of any Controlling Entity or any other entity. The Corporation shall
(i) pay all its liabilities, (ii) not assume the liabilities of any Controlling
Entity and (iii) not guarantee the liabilities of any Controlling Entity. The
Corporation shall not acquire obligations or securities of, or make loans or
advances to, any Controlling Entity, except for any obligations or loans fully
supported as to principal and interest by an unaffiliated third-party. The
officers and directors of the Corporation (as appropriate) shall make decisions
with respect to the business and daily operations of the Corporation independent
of and not be dictated by any Controlling Entity.
TENTH. Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the General Corporation Law of Dela- ware or on
the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of the General
Corporation Law of Delaware, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
ELEVENTH. The Corporation shall not, without the
prior written consent of each Trustee under any Indenture or
any Pooling Agreement, and of each of its Independent Direc-
9
<PAGE>
tors and its Independent Officer, and of each nationally recognized rating
agency which has rated the outstanding Securities, amend, alter, change or
repeal Article THIRD, Article SIXTH, Article EIGHTH, paragraphs (c) and (d) of
Article NINTH or this Article ELEVENTH of this Certificate of Incorporation.
Subject to the foregoing, the Corporation reserves the right to amend, alter,
change or repeal any provisions contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders, directors and officers herein are granted subject to this
reservation.
IN WITNESS WHEREOF, this Certificate has been signed and
attested the 1st day of February, 1993 and the undersigned hereby affirms, under
penalties of perjury, that the statements made herein are true and correct.
/s/ Brian R. Zipp
-----------------------
Name: Brian R. Zipp
Title: Chairman
Attest:
/s/ Michael J. O'Hanlon
-----------------------
Name: Michael J. O'Hanlon
Title: Assistant Secretary
10
Exhibit 4.1
================================================================================
FORM OF
SERIES SUPPLEMENT
[CORPORATE] [US GOVERNMENT]
[FOREIGN GOVERNMENT] BOND-BACKED CERTIFICATES
SERIES [199[ ]] [200[ ]] - [____]
among
LEHMAN ABS CORPORATION,
as Depositor
[[___________], as Administrative Agent]
and
[name of bank],
as Trustee
BOND-BACKED CERTIFICATES
Dated as of [____], [199[ ]] [200[ ]]
================================================================================
<PAGE>
TABLE OF CONTENTS
Section 1. Incorporation of Standard Terms.................. 2
Section 2. Definitions...................................... 2
Section 3. Designation of Trust and Certificates............ 9
Section 4. Satisfaction of Conditions to Initial
Execution and Delivery of Trust Certificates..... 10
Section 6. Distributions.................................... 11
Section 7. Allocation of Realized Losses and Trust
Expenses......................................... 12
Section 8. Advances......................................... 12
Section 9. Trustee's Fees................................... 12
[Section 10. Optional Redemption.............................. 12]
[Section 11. Optional Exchange................................ 13]
Section 12. Events of Default................................ 14
[Section 13. Early Termination................................ 14]
[Section 14. Reports of Independent Public Accountants........ 14]
Section 15. Additional Recipients of Reports to
Certificateholders............................... 14
Section 16. Miscellaneous.................................... 14
Section 17. Notices.......................................... 14
Section 18. Governing Law.................................... 16
Section 19. Counterparts..................................... 16
[Section 20. Termination of the Trust......................... 16]
[Section 21. Sale of Underlying Securities.................... 16]
[Section 22. Amendments....................................... 16]
<PAGE>
[Section 23. Voting of Underlying Securities, Modification
of Indenture..................................... 17]
SCHEDULE I SERIES [199[ ]] [200[ ]] - [ ] UNDERLYING
SECURITIES [DEPOSITED ASSET] SCHEDULE
[SCHEDULE II DESCRIPTION OF THE RETAINED INTEREST]
EXHIBIT A STANDARD TERMS FOR TRUST AGREEMENTS
EXHIBIT B FORM OF TRUST CERTIFICATE[S]
EXHIBIT C FORM OF MARKET AGENT AGREEMENT
<PAGE>
BOND-BACKED CERTIFICATES
SERIES SUPPLEMENT
Series [199[ ]] [200[ ]] - [______]
SERIES SUPPLEMENT, Series [199[ ]] [200[ ]] - [_], dated as of
[________] (the "Series Supplement"), by and [among] [between] LEHMAN ABS
CORPORATION, as Depositor (the "Depositor"), [[_______], as Administrative Agent
(the "Administrative Agent"),] and [name of bank], as Trustee (the "Trustee").
W I T N E S S E T H:
-------------------
WHEREAS, the Depositor desires to create the Trust designated
herein (the "Trust") by executing and delivering this Series Supplement, which
shall incorporate the terms of the Standard Terms for Trust Agreements, dated as
of [___________, ____] (the "Standard Terms"; together with this Series
Supplement, the "Trust Agreement"), by and [between] [among] the Depositor [,
the Administrative Agent] and the Trustee, as modified by this Series
Supplement;
WHEREAS, the Depositor desires to deposit the Underlying
Securities [and] [specify other assets deposited into Trust] ([collectively,
with the Underlying Securities,] the "Deposited Assets") set forth on Schedule I
attached hereto [(the "Underlying Securities Schedule")] [(the "Deposited Assets
Schedule")] into the Trust;
WHEREAS, in connection with the creation of the Trust and the
deposit therein of the [Underlying Securities] [Deposited Assets] [, the
Retained Interest (the "Retained Interest")] and [specify other credit support,
for example, letters of credit, surety bond, swaps, calls, etc.], it is desired
to provide for the issuance of trust certificates (the "Certificates")
evidencing undivided interests in the Trust; and
WHEREAS, the Trustee has joined in the execution of the
Standard Terms and this Series Supplement to evidence the acceptance by the
Trustee of the Trust;
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants expressed herein, it is hereby
<PAGE>
agreed by and between the Depositor [, the Administrative Agent]
and the Trustee as follows:
Section 1. Incorporation of Standard Terms. Except as
otherwise provided herein, all of the provisions of the Standard Terms, a copy
of which is attached hereto as Exhibit A, are hereby incorporated herein by
reference in their entirety and this Series Supplement and the Standard Terms
shall form a single agreement between the parties. In the event of any
inconsistency between the provisions of this Series Supplement and the
provisions of the Standard Terms, the provisions of this Series Supplement will
control with respect to the Series [199[ ]] [200[ ]]-[___] Certificates and the
transactions described herein.
Section 2. Definitions. (a) Except as otherwise specified
herein or as the context may otherwise require, the following terms shall have
the respective meanings set forth below for all purposes under this Series
Supplement. (Section 2(b) below sets forth terms listed in the Standard Terms
which are not applicable to this Series.) Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Standard Terms.
["Accounting Date" shall mean:]
["Administrative Agent" shall mean:]
["Administrative Fee" shall mean:]
["Allocation Ratio" shall mean:]
"Allowable Expense Amount" shall mean:
["Available Funds" shall mean: [specify if different
than the Standard Terms]]
["Basic Documents" shall mean:]
["Business Day" shall mean: [specify if different than
the Standard Terms]]
"Calculation Agent" shall mean:
["Certificate Account" shall mean: [specify if
different than the Standard Terms]]
"Class A-[ ] Certificates" shall mean the Certificates, in the
form attached hereto as Exhibit B, to be issued by the Trust representing a
proportionate undivided beneficial interest
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<PAGE>
in certain distributions to be made by the Trust and having the
characteristics described herein and in the Certificates.
"Closing Date" shall mean:
"Collection Period" shall mean:
"Corporate Trust Office" shall mean:
"Credit Support" shall mean:
"Credit Support Instrument" shall mean:
"Credit Support Provider" shall mean:
["Currency" shall mean: [specify if different than
Standard Terms]]
"Cut-off Date" shall mean:
"Depository" shall mean: [The Depository Trust
Company].
"Distribution Date" shall mean:
["Eligible Account" shall mean: [specify if different
than Standard Terms]]
"Eligible Expense" shall mean:
["Eligible Investments" shall mean: [specify if
different than Standard Terms]]
"Event of Default" shall mean:
["Exchange Rate Agent" shall mean:]
["Exchange Request" shall have the meaning specified in
Section 11(b) hereof.]
["Extraordinary Trust Expense" shall mean: [specify if
different than Standard Terms]]
"Final Scheduled Distribution Date" shall mean:
"Fixed Pass-Through Rate" shall mean:
"Floating Pass-Through Rate" shall mean:
"Guaranteed Investment Contract" shall mean:
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<PAGE>
["Initial Accrued Interest" shall mean [specify if
different than the Standard Terms]]
["Interest Strip" shall mean, on any Distribution Date,
accrued and unpaid interest on the outstanding principal balance of the
Certificates, computed at an annual rate of [ ]%.]
["Letter of Credit" shall mean:]
["Limited Guarantor" shall mean:]
["Limited Guaranty" shall mean:]
["Liquidation Price" shall mean the price at which the
Market Agent sells the Underlying Securities on behalf of the
Trustee.]
["Liquidation Proceeds" shall mean: [specify if
different than Standard Terms]]
"Market Agent" shall mean: [Lehman Brothers Inc.]
"Market Agent Agreement" shall mean the agreement between
[Lehman Brothers Inc.] and the Trustee, substantially in the form attached
hereto as Exhibit C.
"[Minimum Sales Price" shall mean either (i) the Redemption
Price, if the Trust is entitled to receive (and the Purchaser will not receive)
the interest due on the Underlying Securities on the Redemption Date, or (ii)
the sum of the Redemption Price and the interest due on the Underlying
Securities on the Redemption Date, if the Trust will not be entitled to receive
(and the Purchaser will receive) the interest due on the Underlying Securities
on the Redemption Date].
"Minimum Wire Denomination" shall mean:
"Notional Amount" shall mean:
["Optional Exchange" shall mean the exchange of the
Certificates by the Trust pursuant to Section [ ] hereof.?]
["Optional Exchange Date" shall mean:]
["Optional Redemption" shall mean:]
["Ordinary Expenses" shall mean: [specify if different
than the Standard Terms]]
"Pass-Through Rate" shall mean: [____]%
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<PAGE>
"Permitted Investments" shall mean:
["Plan of Distribution" shall mean:]
["Prepaid Ordinary Expenses" shall mean: [specify if
different than Standard Terms]]
"Prospectus Supplement" shall mean the Prospectus Supplement,
dated [________________], relating to the Certificates.
"Purchase Price" shall mean:
["Purchaser" shall mean:]
["Purchaser Default" shall mean:]
"Rating Agency" shall mean: .
["Rating Agency Condition" shall mean: [specify if
different from Standard Terms]]
"Record Date" shall mean:
["Redemption Date" shall mean: [any Distribution Date
occurring on or after the Distribution Date in [ ] on which
the proceeds of an Optional Redemption are distributed to
Certificateholders].]
["Redemption Price" shall mean:]
["Redemption Request" shall mean:]
["Required Interest" shall mean: [specify if different
from Standard Terms]]
["Required Percentage--Amendment" shall mean: [specify
if different than the Standard Terms]]
["Required Percentage--Administrative Agent
Termination" shall mean:]
["Required Percentage--Definitive Certificate" shall
mean: [specify if different than the Standard Terms]]
["Required Percentage--Direction of Trustee" shall
mean: [specify if different than the Standard Terms]]
["Required Percentage--Remedies" shall mean: [specify
if different than the Standard Terms]]
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<PAGE>
["Required Percentage--Removal of Trustee" shall mean:
[specify if different than the Standard Terms]]
["Required Percentage--Waiver" shall mean [specify if
different than the Standard Terms]]
["Required Premium" shall mean: [specify if different
than the Standard Terms]]
["Required Principal" shall mean: [specify if different
than the Standard Terms]]
"Required Rating" shall mean:
["Requisite Reserve Amount:" shall mean:]
"Reserve Account" shall mean [___________]]
["Retained Interest" shall mean:]
["Sale Procedure" shall mean: [specify if different
than the Standard Terms]]
["Scheduled Final Distribution Date" shall mean: ]
"Series" shall mean: Series [199[ ]] [200[ ]]-[ ].
["Special Distribution Date" shall mean:]
"Special Purpose Corporation" shall mean any corporation that
pursuant to its charter and by laws:
1. is required to limit its purpose to those
actions that are incidental to structured financing, including, issuing,
selling, delivering, purchasing and investing in (and entering into agreements
in connection with) bonds, notes, debt or equity securities, obligations and
other securities and instruments which will be secured or backed by among other
things (a) one or more pools of receivables, (b) passed-through certificates
evidencing a fractional undivided ownership interest in one more grantors trusts
that own or hold among other things, one or more pools of receivables or
participations or certificates of participation or beneficial ownership in one
or more pools of receivables or (c) other collateral, in each case the
securities of a series which are distributed through one or more public
offerings of such series;
2. in connection with the issuance or sale
of securities or otherwise, is authorized to purchase or otherwise
6
<PAGE>
acquire, own, hold, transfer, convey, pledge, assign, sell, service, finance,
refinance or otherwise deal in or with the passed-through certificates,
participation certificates, receivables and related collateral and to enter into
contractual arrangements with respect thereto;
3. while the corporation is solvent, is not
permitted to commence a voluntary case, or consent to an involuntary case for
relief against the corporation under Title 11 of the United States Code, 11
U.S.C." 101 et seq., or file a petition or answer or consent to a petition
seeking (liquidation, reorganization or other relief under any applicable law or
any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of
debtors, or consent to the appointment of a receiver, a liquidators, an
assignee, a trustee, a sequestrator for the corporation or a substantial part of
its property, or make any assignment for the benefit of creditors, or, except as
may be required by any fiduciary obligation of the board of directors or as may
be required by any applicable law, admit in writing its inability to pay its
debts generally as they become due or take any corporate action in furtherance
of any such action without the unanimous consent of the board of directors,
which shall include a certain set number of independent directors whose vote is
required to take any such action;
4. will not, without the prior written
consent of any trustee or custodian, from time to time, under amy indenture or
under any participation, pooling or other similar agreement to which the
corporation is a party, do any of the following: (a) engage in any business or
activity other than the business activities which the corporation is permitted
to engage in under its articles of incorporation, (b) dissolve or liquidate, in
whole or in part in accordance with applicable state non-bankruptcy law or (c)
consolidate or merge with or into any other entity or permit any entity to
consolidate or merge with or into the corporation except those permitted under
any indenture or pooling agreement to which the corporation is a party; and
5. shall at all times (a)(i) maintain the
Corporation's principal executive offices separate and apart from that of a
controlling entity and conspicuously identified as the corporation's office and
(ii) pay fair market rent for its executive office space located in the offices
of any controlling entity, (b) maintain the corporation's books, financial
statements, accounting records and other corporate documents and records
separate from those of any controlling entity or any other entity, (c) not
commingle the corporation's assets with those of any controlling entity or any
other entity, (d) maintain the corporation's bank accounts, payroll and books of
account
7
<PAGE>
separate from those of any controlling entity or any entity, (e) act solely in
its corporate name and through its own unauthorized officers and agents, (f)
make investments directly or by brokers engaged and paid by the corporation or
its agents (provided that if any such agent is an Affiliate of the corporation
it shall be compensated at a fair market rate for its services), (g) separately
manage the corporation's liabilities from those of any controlling entity, and
pay its own liabilities, including all administrative expenses, from its own
separate assets, and (h) pay from the corporation's assets all obligations and
indebtedness of any kind incurred by the corporation.
The corporation is also required by its charter to abide by
all corporate formalities, including the maintenance of current minute books,
and the corporation must cause its financial statements to be prepared in
accordance with generally accepted accounting principles in manner that
indicates the separate existence of the corporation and its assets and
liabilities and the corporation must not commingle its assets with those of any
controlling entity or other entity. The corporation is also required to (i) pay
all its liabilities, (ii) not assume the liabilities of any controlling entity
and (iii) not guarantee the liabilities of any controlling entity. The
corporation shall not acquire obligations or securities of, or make loans or
advances to, any controlling entity, except for any obligations or loans fully
supported as to principal and interest by an unaffiliated third-party. The
officers and directors of the corporation (as appropriate) must make decisions
with respect to the business and daily operations of the corporation independent
of and not to be dictated by any controlling entity.
"Specified Currency" shall mean:
["Sub-Administration Agreement" shall mean:]
["Sub-Administration Agent" shall mean:]
["Surety Bond" shall mean:]
["Swap Agreement" shall mean:]
["Swap Counterparty" shall mean:]
["Swap Distribution Amount" shall mean:]
["Swap Guarantee" shall mean:]
["Swap Guarantor" shall mean:]
["Swap Receipt Amount" shall mean:]
8
<PAGE>
["Swap Termination Payment" shall mean:]
"Trustee" shall mean:
"Underlying Securities" shall mean: [____________]
"Underlying Securities Indenture" shall mean the indenture
pursuant to which the Underlying Securities were issued.
"Underlying Securities Issuer" shall mean [______].
"Underlying Securities Trustee" shall mean:
"Voting Rights" shall mean:
(b) The terms listed below are not applicable to this
Series.
[List terms defined in the Standard Terms not
applicable to this Series Supplement]
Section 3. Designation of Trust and Certificates. (a)
The trust created hereby shall be known as the "[Corporate] [US
Government] [Foreign] Bond-Backed Certificates Trust, Series
[199[ ]] [200[ ]]-[_]-[_]. The Certificates evidencing certain
undivided ownership interests therein shall be known as
"[Corporate] [US Government] [Foreign] Bond-Backed Certificates,
Series [199[ ]] [200[ ]]-[_]-[_], [and the Retained Interest
evidencing certain undivided ownership interests in the remainder
of the [Underlying Securities] [Deposited Assets] (as described
on Schedule II hereto) shall be known as the "Series [199[ ]]
[200[ ]]-[_]-[_] Retained Interest"] [and] [specify other
assets].
(b) The Certificates shall be held through the Depository in
book-entry form and shall be substantially in the form attached hereto as
Exhibit B. The Certificates shall be issued in minimum denominations of $[____]
and integral multiples of $[___] in excess thereof, except that one Certificate
[of each Class] may be issued in a different denomination. Except as provided in
the Standard Terms, the Trust shall not issue additional Certificates or incur
any [additional] indebtedness.
[(c) The Retained Interest will be uncertificated and shall be
as described in Schedule II attached hereto. The Retained Interest will be
issued to the Depositor and may be transferred by the Depositor to another party
at the sole option of the Depositor without the consent of the
Certificateholders or any other party. The beneficial ownership interest in the
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<PAGE>
Retained Interest will be recorded on the records of the Trustee. On each
Distribution Date, payments will be made on the Retained Interest by wire
transfer to the account(s) of holder(s) thereof on the related Record Date as
specified in written instructions to the Trustee. Notwithstanding any other
provision of this Agreement, the Trustee shall not agree to any amendment or
modification of this Agreement (including the Standard Terms) which would
adversely affect in any material respect the holder of the Retained Interest
without the consent of the holder of the Retained Interest.]
[(d) Describe other assets.]
Section 4. Satisfaction of Conditions to Initial
Execution and Delivery of Trust Certificates. The Trustee hereby
acknowledges receipt, on or prior to the Closing Date, of:
(i) [the Underlying Securities] [the Deposited Assets]
set forth on the [Underlying Securities Schedule] [Deposited
Assets Schedule]; and
(ii) all documents required to be delivered to the Trustee
pursuant to Section 2.01 of the Standard Terms.
Section 5. [Representations and Warranties of
Administrative Agent.
(a) the Administrative Agent is a [__________] duly
organized, validly existing and in good standing under the
laws of the [____________];
(b) the execution and delivery of this Series Supplement by
the Administrative Agent and its performance of and compliance with the
terms of this Series Supplement will not violate the Administrative
Agent's articles of incorporation or by-laws or constitute a default
(or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach or acceleration
of, any material contract, agreement or other instrument to which the
Administrative Agent is a party or which may be applicable to the
Administrative Agent or any of its assets;
(c) the Administrative Agent has the full power and authority
to enter into and consummate all transactions contemplated by this
Series Supplement, has duly authorized the execution, delivery and
performance of this Series Supplement and has duly executed and
delivered this Series Supplement. This Series Supplement, upon its
execution and delivery by the Administrative Agent and assuming due
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<PAGE>
authorization, execution and delivery by the Depositor and the Trustee,
will constitute a valid, legal and binding obligation of the
Administrative Agent, enforceable against it in accordance with the
terms hereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other laws
relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered a proceeding in equity or at law); and
(d) the Administrative Agent is not in violation, and the
execution and delivery of this Series Supplement by the Administrative
Agent and its performance and compliance with the terms of this Series
Supplement will not constitute a violation, of any order or decree of
any court or any order or regulation of any federal, state, municipal
or governmental agency having jurisdiction over the Administrative
Agent or its properties, which violation would reasonably be expected
to have a material and adverse effect an the condition (financial or
otherwise) or operations of the Administrative Agent or its properties
or on the performance of its duties hereunder.] [RESERVED]
Section 6. Distributions. (a) On each Distribution
Date [other than the Redemption Date or Optional Exchange Date],
the Trustee shall apply Available Funds in the Certificate
Account as follows [(subject to Section 6(e) below)]:
[Set forth to whom and the order of priority of payments with
respect to Required Interest, Interest Strip, Retained Interest
Required Principal, premium, Trustee Fees and other amounts payable
under the terms of the Trust.]
[(b) On the Redemption Date, if applicable, the Trustee shall
apply Available Funds in the Certificate Account as follows:
[Set forth to whom and the order of priority of payments with
respect to Required Interest, Interest Strip, Retained Interest
Required Principal, premium, Trustee Fees and other amounts payable
under the terms of the Trust.]
[(c) On any Optional Exchange Date, if applicable, the Trustee
shall distribute to the Depositor, or any of its Affiliates as
Certificateholders, Underlying Securities having a principal amount equal to the
principal amount of Class [____] Certificates tendered to the Trustee in
accordance with Section
11 hereof.]
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<PAGE>
[(d) The Liquidation Proceeds or other amounts recovered in
respect of the Underlying Securities following a default by the Underlying
Securities Issuer under the Underlying Securities Indenture shall, be allocated
as follows:
[------].]
[(e) Amounts recovered in respect of the Underlying Securities
following a default by the Underlying Securities Issuer under the Underlying
Securities Indenture shall be distributed in accordance with the provisions of
Section 5(a).]
Section 7. Allocation of Realized Losses and Trust
Expenses. Realized Losses on the Underlying Securities shall be
allocated among the Classes of Trust Certificates as follows:
[_______]. Administrative Fees, Eligible Expenses, Allowable
Expense Amounts and Extraordinary Trust Expenses shall be
allocated as follows: [____________________].
Section 8. Advances. [Advances shall be made by the
[Trustee][Administrative Agent] pursuant to Section 4.04 of the
Trust Agreement as follows: [_________________________.] [Not
applicable.]
Section 9. Trustee's Fees. As compensation for its
services hereunder, the Trustee shall be entitled to compensation
calculated as follows: [Specify Trustee Fees, Ordinary expenses
and Extraordinary Trust Expenses]
[Section 10. Optional Redemption. (a) On each
Distribution Date on or after the Distribution Date in [____],
the Certificates may be redeemed in their entirety by the Trust
at the request of the [____] at the Redemption Price. [Specify
any other substantial restrictions on the timing, exercise or
other matters with respect to any optional redemption.] In
addition, the Certificateholders will receive accrued interest to
but excluding the Redemption Date.
(b) The [____] may provide notice to the Trustee (a
"Redemption Request") no less than [__] days prior to a Distribution Date
occurring on or after the Distribution Date in [________] that it requests an
Optional Redemption of all of the Certificates on such Redemption Date.
(c) Upon receiving such Redemption Request, the Trustee will
immediately direct the Market Agent to sell in compliance with the Sales
Procedures the Underlying Securities at a price not less than the Minimum Sales
Price. The Market Agent will inform the Trustee no later than [__] days prior to
the Redemption Date that it has sold the Underlying Securities on behalf of the
Trust at such a sales price (the "Liquidation
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<PAGE>
Price"), and the Trustee will notify Certificateholders and the New York Stock
Exchange of the Optional Redemption no less than [__] days prior to the
Redemption Date. The settlement of the liquidation of the Underlying Securities
will occur no earlier than [two] Business days prior to the Redemption Date, and
all liquidation proceeds will be deposited directly into the Certificate Account
established by the Trustee.
(d) If the Market Agent is unable to sell the Underlying
Securities at a price equal to or greater than the Redemption Price, the Market
Agent will so notify the Trustee no later than [__] days prior to the requested
Redemption Date. The Trustee will so notify the requesting [____], and such
Redemption Request will be deemed not effective with respect to such
Distribution Date and the Certificates, [the Retained Interest] and the [____]
shall continue to remain outstanding.
(e) Deliveries of the Underlying Securities by the Trust to
the purchaser of the Underlying Securities (the "Purchaser") will only be made
against payment by the Purchaser in immediately available funds. Such payment
must occur no later than [10:00 a.m. New York City Time] on the Redemption Date.
In the event that the Purchaser fails to make such payment by such time (a
"Purchase Default"), the sale shall be voided and the Optional Redemption will
be deemed not to be effective with respect to such Distribution Date, and the
Certificates, [the Retained Interest] and the [____] shall continue to remain
outstanding; provided, however, that if such Purchaser is the [____] or an
affiliate thereof, the [____] 's rights with respect to the [____] shall be
deemed surrendered.
(f) The Trustee shall not consent to any amendment or
modification of this Agreement (including the Standard Terms) which would alter
the timing or amount of any payment of the Redemption Price.
(g) The Trustee shall not be obligated to determine whether an
Optional Redemption complies with the provisions of the Investment Company Act
of 1940, as amended, or the rules or regulations promulgated thereunder.]
[Section 11. Optional Exchange. (a) [Specify the
conditions whereby a holder may exchange the Certificates for the
Underlying Securities and Other Deposited Assets, if any.]
(b) The [__________] must provide notice to the Trustee (an
"Exchange Request") no less than [30] days (or such shorter period acceptable to
the Trustee) but not more than [45] days prior to an Optional Exchange Date that
it requests an Optional Exchange of Certificates on such Optional Exchange Date.
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<PAGE>
(c) The Trustee shall not be obligated to determine whether an
Optional Exchange complies with the applicable provisions for exemption under
Rule 3a-7 of the Investment Company Act of 1940, as amended, or the rules or
regulations promulgated thereunder.]
Section 12. Events of Default. Within 30 days of the
occurrence of an Event of Default, the Trustee will give notice to the
Certificateholders, [the name of any other person to receive notice] [and] [the
holder of the Retained Interest], transmitted by mail, of all such uncured or
unwaived Events of Default known to it.
[Section 13. Early Termination. The [Administrative Agent]
[Depositor] may, at its sole option, purchase the Underlying Securities and
effect an early termination of the Trust Certificates on any Distribution Date
on or after the date on which the aggregate principal amount of such Underlying
Securities is reduced to less than [ten percent (10%)] [specify other amount] of
the aggregate principal amount of the Underlying Securities as of the Cut-off
Date. The purchase price payable by the [Administrative Agent] [Depositor] in
such event shall be not less than the aggregate principal amount of such
Underlying Securities on the date of purchase.]
[Section 14. Reports of Independent Public
Accountants. Reports of the Trustee's [and the Administrative
Agent's] independent public accountants shall be provided as
specified in Section [___] of the Trust Agreement beginning in
calendar year 1998.]
Section 15. Additional Recipients of Reports to
Certificateholders. The Trustee shall forward reports to
Certificateholders pursuant to Section 4.03 of the Trust
Agreement to: [Specify who will receive reports].
Section 16. Miscellaneous.
[(a) Notwithstanding anything in the Standard Terms to
the contrary, the Trustee, upon written direction by the
Depositor, will execute the Certificates.]
[Specify all provisions of the Standard Terms that do
not apply to this Series Supplement]
Section 17. Notices. All directions, demands and notices
hereunder or under the Standard Terms shall be in writing and shall be delivered
as set forth below (unless written notice is otherwise provided to the Trustee).
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<PAGE>
If to the Depositor, to:
Lehman ABS Corporation
3 World Financial Center
New York, New York 10285
Attention: Mark Zusy
Telephone: (212) 526-4428
Facsimile: (212) 528-6664
[If to the Administrative Agent, to:
________________________
________________________
________________________
Attention:______________
Telephone:______________
Facsimile:______________]
If to the Trustee, to:
________________________
________________________
________________________
Attention:______________
Telephone:______________
Facsimile:______________
If to the Rating Agencies, to:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: CBO/CLO Monitoring Department
Telephone: (212) 553-1494
Facsimile: (212) 553-0355
and to:
Standard & Poor's
25 Broadway
New York, New York 10004
Attention: Structured Finance Surveillance
Group
Telephone: (212) 208-1191
Facsimile: (212) 208-0053
If to the New York Stock Exchange, to:
New York Stock Exchange, Inc.
20 Broad Street
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<PAGE>
New York, New York 10005
Attention: Michael Hyland
Telephone: (212) 656-5868
Facsimile: (212) 656-6919
Section 18. Governing Law. THIS SERIES SUPPLEMENT AND THE
TRANSACTIONS DESCRIBED HEREIN SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF
LAWS PROVISIONS THEREOF.
Section 19. Counterparts. This Series Supplement may
be executed in any number of counterparts, each of which shall be
deemed to be an original, and all such counterparts shall
constitute but one and the same instrument.
[Section 20. Termination of the Trust. The Trust
shall terminate: [specify termination events other than those
specified in the Standard Terms.]
[Section 21. Sale of Underlying Securities. In the event of
the occurrence of (i) a payment default on the Underlying Securities or (ii) an
acceleration of the date of maturity of the Underlying Securities, the Trustee,
upon receiving notice of such payment default or acceleration of the maturity of
the Underlying Securities shall immediately direct the Market Agent to sell the
Underlying Securities in accordance with the Sales Procedures. The settlement of
the liquidation of the Underlying Securities shall occur promptly after the date
of receipt of such notice by the Trustee, and the Liquidation Proceeds, if any,
shall be deposited into the Certificate Account for distribution to the Class
[___] and Class [___] Certificateholders in accordance with the Allocation
Ratio. The Trustee shall only deliver the Underlying Securities to the purchaser
of such Underlying Securities against payment in same day funds deposited into
the Certificate Account.
[Section 22. Amendments. Notwithstanding anything in
the Trust Agreement to the contrary, in addition to the other restrictions on
modification and amendment contained therein, the Trustee shall 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 any class of
Certificates without the consent of the holders of [100%] of such class of
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. Further, no amendment shall be permitted which
would adversely
16
<PAGE>
affect in any material respect the interests of any Class of Certificateholders
without confirmation by each Rating Agency that such amendment will not result
in a downgrading or withdrawal of its rating of such Certificates.]
[Section 23. 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 the Underlying Securities as
permitted by the Depository and except as otherwise limited by the Trust
Agreement. In the event that the Trustee receives a request from the Depository,
the Underlying Securities Trustee or the Underlying Securities Issuer for its
consent to any amendment, modification or waiver of the Underlying Securities,
the Underlying Securities 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 Certificateholder of
record as of such date. The Trustee shall request instructions from the
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 Certificates) as the 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, after weighing the votes of the Class [___]
Certificateholders and the votes of the Class [___] Certificateholders according
to the Allocation Ratio; provided, however, that, notwithstanding anything in
the Trust Agreement to the contrary, the Trustee shall at no time vote on 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 or result in the imposition of tax upon the
Certificateholders, (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 a default under the
Underlying Securities or an event which with the passage of time would become an
event of default under the Underlying Securities and with the unanimous consent
of all outstanding Class [___] and Class [___] 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 Underlying
securities Indenture and only with the consent of Certificateholders
representing [100%] of the Class [___] Certificates and [100%] of the Class
[___] Certificates. The
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<PAGE>
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 [___] and
Class [___] Certificateholders of such offer promptly. The Trustee must reject
any such offer unless the Trustee is directed by the affirmative vote of the
holders of [100%] of the Class [___] and Class [___] Certificates to accept such
offer and the Trustee has received the tax opinion described above.
If an event of default under the Underlying Securities
Indenture occurs and is continuing, and if directed by all of the outstanding
Class [___] and Class [___] 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.]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series
Supplement to be duly executed by their respective authorized officers as of the
date first written above.
LEHMAN ABS CORPORATION,
as Depositor
By:______________________________
Name:
Title:
[Name of Bank],
not in its individual capacity
but solely as Trustee on behalf
of the Series [199[ ]] [200[ ]] -
[____] Certificateholders
By:______________________________
Name:
Title:
[[ _________________________],
as Administrative Agent
By:______________________________
Name:
Title:]
19
<PAGE>
SCHEDULE I
SERIES [199[ ]] [200[ ]] - [ ]
UNDERLYING SECURITIES [DEPOSITED ASSET] SCHEDULE
------------------------------------------------
Underlying Securities:
Underlying Securities Issuer:
CUSIP Number:
Principal Amount Deposited:
Original Issue Date:
Principal Amount of
Underlying Securities
Originally Issued:
Principal Amount of
Underlying Securities Deposited:
Maturity Date:
Principal Payment Date:
Interest Rate:
Interest Payment Dates:
Initial Accrued Interest:
Redemption Dates:
Redemption Prices:
Priority:
Security:
Rating as of Closing Date:
Form of Underlying Securities:
[Retained Interest:]
<PAGE>
SCHEDULE II
SERIES [199[ ]] [200[ ]] - [ ]
DESCRIPTION OF THE RETAINED INTEREST
------------------------------------
<PAGE>
EXHIBIT A
Standard Terms for Trust Agreements
-----------------------------------
(begins on next page)
<PAGE>
Exhibit A
to Series Supplement
================================================================================
FORM
of
STANDARD TERMS FOR TRUST AGREEMENTS
between
LEHMAN ABS CORPORATION,
as Depositor
and
THE BANK OF NEW YORK,
as Trustee
BOND-BACKED CERTIFICATES
Dated as of July __, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
PRELIMINARY STATEMENT........................................................ 1
ARTICLE I
Definitions and Assumptions.................................................. 1
SECTION 1.01. Definitions.......................................... 1
SECTION 1.02. Rules of Construction................................ 21
SECTION 1.03. ..................................................... 22
ARTICLE II
Declaration of Trusts; Issuance of Certificates;
Purpose and Classification of Trusts......................................... 23
SECTION 2.01. Creation and Declaration of Trusts:
Assignment of Underlying Securities.................. 23
SECTION 2.02. Acceptance by Trustee................................ 25
SECTION 2.03. Representations and Warranties of the
Depositor............. .............................. 26
SECTION 2.04. Breach of Representation, Warranty or
Covenant............................................. 27
SECTION 2.05. Agreement to Authenticate and Deliver
Certificates......................................... 27
ARTICLE III
Administration of each Trust........................... 27
SECTION 3.01. Administration of each Trust......................... 27
SECTION 3.02. Collection of Certain Underlying
Security Payments.................................... 28
SECTION 3.03. Certificate Account.................................. 28
SECTION 3.04. Liquidation of the Underlying
Securities........................................... 29
SECTION 3.05. Investment of Funds in the Accounts.................. 30
SECTION 3.06. Maintenance of Credit Support........................ 30
SECTION 3.07. Realization Upon Defaulted Underlying
Securities........................................... 31
SECTION 3.08. Retained Interest.................................... 32
SECTION 3.09. Access to Certain Documentation...................... 33
SECTION 3.10. Reports by the Depositor............................. 33
SECTION 3.11. Charges and Expenses................................. 34
i
<PAGE>
Page
ARTICLE IV
Distributions and Reports to
Certificateholders................................... 35
SECTION 4.01. Distributions........................................ 35
SECTION 4.02. Distributions on Certificates........................ 35
SECTION 4.03. Reports to Certificateholders........................ 38
SECTION 4.04. Advances ......................................... 39
SECTION 4.05. Allocation of Realized Losses and
Trust Expenses....................................... 40
SECTION 4.06. Compliance with Withholding
Requirements......................................... 41
SECTION 4.07. Optional Exchange.................................... 42
ARTICLE V
The Certificates......................................... 43
SECTION 5.01. The Certificates..................................... 43
SECTION 5.02. Execution, Authentication and
Delivery............................................. 44
SECTION 5.03. Temporary Certificates............................... 45
SECTION 5.04. Registration; Registration of Transfer
and Exchange......................................... 47
SECTION 5.05. Mutilated, Destroyed, Lost and Stolen
Certificates......................................... 52
SECTION 5.06. Persons Deemed Owners................................ 53
SECTION 5.07. Cancellation......................................... 53
SECTION 5.08. Global Securities.................................... 54
SECTION 5.09. Notices to Depository................................ 55
SECTION 5.10. Definitive Certificates.............................. 55
SECTION 5.11. Currency of Distributions in Respect
of Certificates...................................... 56
SECTION 5.12. Conditions of Authentication and
Delivery of New Series............................... 57
SECTION 5.13. Appointment of Paying Agent.......................... 59
SECTION 5.14. Authenticating Agent................................. 60
SECTION 5.15. Voting Rights with Respect to
Underlying Securities................................ 61
SECTION 5.16. Actions by Certificateholders........................ 62
SECTION 5.17. Events of Default.................................... 63
SECTION 5.18. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit...................... 63
SECTION 5.19. Control by Certificateholders........................ 63
SECTION 5.20. Waiver of Past Defaults.............................. 64
SECTION 5.21. Right of Certificateholders to Receive
Payments Not to Be Impaired.......................... 65
SECTION 5.22. Remedies Cumulative.................................. 65
ii
<PAGE>
Page
ARTICLE VI
The Depositor........................................... 65
SECTION 6.01. Liability of the Depositor........................... 65
SECTION 6.02. Limitation on Liability of the
Depositor............................................ 65
SECTION 6.03. Depositor May Purchase Certificates.................. 67
SECTION 6.04. Merger or Consolidation of the
Depositor............................................ 67
SECTION 6.05. No Liability of the Depositor with
Respect to the Underlying Securities;
Certificateholders to Proceed Directly
Against the Issuer(s)................................ 67
ARTICLE VII
Concerning the Trustee.................................. 68
SECTION 7.01. Duties of Trustee.................................... 68
SECTION 7.02. Between Trustee and Sub-Administrative
Agents............................................... 72
SECTION 7.03. Certain Matters Affecting the Trustee................ 73
SECTION 7.04. Trustee Not Liable for Recitals in
Certificates or Underlying Securities................ 75
SECTION 7.05. Trustee May Own Certificates......................... 75
SECTION 7.06. Trustee's Fees and Expenses.......................... 75
SECTION 7.07. Eligibility Requirements for Trustee................. 77
SECTION 7.08. Resignation or Removal of the Trustee;
Appointment of Successor Trustee..................... 77
SECTION 7.09. Appointment of Office or Agency...................... 79
SECTION 7.10. Representations and Warranties of
Trustee.............................................. 79
SECTION 7.11. Indemnification of Trustee by the
Depositor; Contribution.............................. 81
SECTION 7.12. Indemnification of Depositor by
Trustee.............................................. 82
SECTION 7.13. No Liability of the Trustee with
Respect to the Underlying Securities;
Certificateholders to Proceed Directly
Against the Issuer(s)................................ 83
SECTION 7.14. The Depositor To Furnish Trustee with
Names and Addresses of
Certificateholders................................... 83
SECTION 7.15. Preservation of Information.......................... 83
SECTION 7.16. Reports by Trustee................................... 83
SECTION 7.17. Trustee's Application for Instructions
from the Depositor................................... 84
ARTICLE VIII
iii
<PAGE>
Page
Market Agent................................................................. 85
SECTION 8.01. Market Agent......................................... 85
ARTICLE IX
Termination.................................................................. 85
SECTION 9.01. Termination upon Liquidation of All
Underlying Securities................................ 85
ARTICLE X
Miscellaneous Provisions..................................................... 86
SECTION 10.01. Amendment ........................................ 86
SECTION 10.02. Limitation on Rights of
Certificateholders.................................. 88
SECTION 10.03. GOVERNING LAW....................................... 89
SECTION 10.04. Notices ........................................ 90
SECTION 10.05. Notice to Rating Agencies........................... 90
SECTION 10.06. Severability of Provisions.......................... 91
SECTION 10.07. Grant of Security Interest.......................... 92
SECTION 10.08. Nonpetition Covenant................................ 93
SECTION 10.09. No Recourse ........................................ 93
SECTION 10.10. Article and Section References...................... 93
SECTION 10.11. Counterparts........................................ 94
SECTION 10.12. Trust Indenture Act Controls........................ 94
iv
<PAGE>
STANDARD TERMS FOR TRUST AGREEMENTS dated as
of July __, 1997, among LEHMAN ABS CORPORATION, a
Delaware corporation, as Depositor, and THE BANK OF
NEW YORK, a New York banking corporation, as Trustee.
PRELIMINARY STATEMENT
The Depositor and the Trustee have duly authorized the
execution and delivery of these Standard Terms for Trust Agreements (the
"Standard Terms") to provide for one or more Series (and one or more Classes
within each such Series) of Certificates, issuable from time to time as provided
in these Standard Terms.
Each such Series (inclusive of any Classes specified within
such Series) of Certificates will be issued only under a separate Series
Supplement to these Standard Terms, duly executed and delivered by the Depositor
and the Trustee. With respect to each Series, the applicable Series Supplement,
together with these Standard Terms, shall be known as the "Trust Agreement."
All representations, covenants and agreements made herein by
each of the Depositor and the Trustee are for the benefit and security of the
Certificateholders and, to the extent provided in the applicable Series
Supplement, for the benefit and security of any Credit Support Provider or any
other party as specified therein;
The Depositor is entering into these Standard Terms, and the
Trustee in accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
ARTICLE I
Definitions and Assumptions
---------------------------
SECTION 1.01. Definitions. Except as otherwise specified
-----------
herein or in the applicable Series Supplement or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Trust Agreement.
"Account": As defined in Section 3.05.
-------
1
<PAGE>
"Accounting Date": With respect to any Series, if applicable,
---------------
as defined in the related Series Supplement.
"Administrative Fees": With respect to any Series, if
-------------------
applicable, as defined in the related Series Supplement.
"Advance": As defined in Section 4.04.
-------
"Affiliate": With respect to any specified Person, any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Allowable Expense Amounts": With respect to any Series, as
-------------------------
defined in the related Series Supplement.
"Authenticating Agent": As defined in Section 5.14.
--------------------
"Authorized Newspaper": A newspaper in an official language of
--------------------
the country of publication customarily published at least once a day, and
customarily published for at least five days in each calendar week, and of
general circulation in such city or cities specified in the related Series
Supplement with respect to the Certificates of any Series. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same city
meeting the foregoing requirements and in each case on any Business Day in such
city.
"Available Funds": Unless otherwise specified in the
---------------
applicable Series Supplement, for any Distribution Date in respect of a given
Series or Class, the sum of (i) all amounts actually received on or with respect
to the Underlying Securities (including Liquidation Proceeds and investment
income on amounts in the Accounts) with respect to such Series during the
related Collection Period, (ii) all amounts received pursuant to any Credit
Support Instruments with respect to such Series for such Distribution Date and
(iii) all other amounts, if any, specified by the applicable Series Supplement.
"Basic Documents": With respect to any Series, if applicable,
---------------
as defined in the related Series Supplement.
2
<PAGE>
"Bearer Certificate": Any Certificate (with or without
------------------
Coupons), title to which passes by delivery only, but exclusive of any Coupons.
"Beneficial Owner": Shall mean, with respect to Certificates
----------------
held through a Depository, the beneficial owner of a Certificate. For purposes
only of Section 5.16, the Trustee shall be obligated to treat a Person who
claims to be a beneficial owner of a Certificate as a "Beneficial Owner" within
the meaning of the Series Supplement only if such Person has first delivered to
the Trustee, (i) a certificate or other writing executed by such Person stating
the full name and address of such Person, the principal distribution amount of
the Certificate with respect to which such Person claims to be the Beneficial
Owner, and the Participant in the Depository ("such Person's Participant")
through which such Person holds its beneficial ownership interest in the
Certificates and (ii) a certificate or other writing executed by such Person's
Participant confirming that such Person's Participant holds on its own books and
records Certificates for the account of such Beneficial Owner and identifying
the principal distribution amount held for such Beneficial Owner.
"Business Day": With respect to any Place of Distribution
------------
specified in the related Series Supplement, any day that is not a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies in such Place of Distribution are authorized or obligated by law,
regulation or executive order to close or any day which is not a Business Day
with respect to the Underlying Securities, except as otherwise specified in the
related Series Supplement and any Business Day specified with respect to the
Underlying Securities.
"Calculation Agent": With respect to any Series, if
-----------------
applicable, as defined in the related Series Supplement.
"Call Premium Percentage": With respect to any Series (or
-----------------------
Class with such Series), if applicable, as defined in the related Series
Supplement.
"Certificate Account": As defined in Section 3.03.
-------------------
"Certificateholder": Any Holder of a Certificate.
-----------------
"Certificate Owners": As defined in Section 5.08.
------------------
"Certificate Principal Balance": With respect to an
-----------------------------
Outstanding Certificate, as determined at any time, the maximum
3
<PAGE>
amount that the Holder thereof is entitled to receive as distributions allocable
to principal payments on the Underlying Securities. The Certificate Principal
Balance, if any, of any Class within a given Series (other than those Classes,
if any, specified in the related Series Supplement), as of any date of
determination, shall be equal to the aggregate initial Certificate Principal
Balance thereof less the sum of (i) all amount allocable to prior distributions
made to such Class in respect to principal of the Underlying Securities, (ii)
any reductions attributable to Certificates surrendered in exchange for
Underlying Securities, as and to the extent provided in the applicable Series
Supplement and (iii) any reductions in the Certificate Principal Balance thereof
deemed to have occurred in connection with allocations of (A) Realized Losses in
respect of principal of the Underlying Securities and (B) expenses of the Trust,
if any, only to the extent specified in the applicable Series Supplement, each
as allocated to such Class pursuant to the applicable Series Supplement.
"Certificate Register" and "Certificate Registrar": As
--------------------
respectively defined in Section 5.04.
"Certificates": Any trust certificates authorized by, and
------------
authenticated and delivered under, this Trust Agreement.
"Class": With respect to any Series, any one of the classes of
-----
Certificates of such Series, each consisting of Certificates having identical
terms.
"Clearing Agency": An organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Closing Date": With respect to any Series, the day on which
------------
Certificates of such Series are first executed, authenticated and delivered, as
specified in the related Series Supplement.
"Code": The Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Collection Period": With respect to any Distribution Date for
-----------------
a Series (or Class within such Series), the period specified in the related
Series Supplement.
"Commission": The Securities and Exchange Commission, as from
----------
time to time constituted, created under the Exchange Act or, if at any time
after the execution and delivery of this Trust Agreement such Commission is not
existing and performing the
4
<PAGE>
duties now assigned to it, then the body then performing such
duties.
"Corporate Trust Office": The principal corporate trust office
----------------------
of the Trustee located at the address set forth in the related Series Supplement
or such other addresses as the Trustee may designate from time to time by notice
to the Holders and the Depositor, or the principal corporate trust office of any
successor Trustee (or such other addresses as a successor Trustee may designate
from time to time by notice to the Holders and the Depositor).
"Coupon": Any interest coupon appertaining to a Bearer
------
Certificate.
"Coupon Certificate": Any Bearer Certificate authenticated and
------------------
delivered with one or more Coupons appertaining thereto.
"Credit Support": With respect to any Series (or any Class
--------------
within such Series), a Letter of Credit, Surety Bond, swap agreement, put or
call option or other asset intended to support or ensure the timely or ultimate
distributions of amounts due in respect of all or certain of the Underlying
Securities for such Series or Class, which in each case is specified as such in
the related Series Supplement.
"Credit Support Instrument": The instrument or document
-------------------------
pursuant to which the Credit Support for a given Series (or any Class within
such Series) is provided, as specified in the applicable Series Supplement.
"Credit Support Provider": With respect to any Series (or any
-----------------------
Class with such Series), the Person, if any, that will provide any Credit
Support with respect to all or a portion of the Underlying Securities for such
Series or Class as specified in the applicable Series Supplement.
"Currency": Dollars or Foreign Currency.
--------
"Cut-off Date": With respect to any Series, the date specified
------------
as such in the related Series Supplement. For purposes of this Trust Agreement,
any Underlying Security acquired by the Depositor after the applicable Cut-off
Date but prior to the applicable Closing Date and included in the related Trust
as of such Closing Date shall be deemed to have been Outstanding as of such
Cut-off Date and references to the principal balance of such Underlying Security
as of such Cut-off Date shall be deemed to be
5
<PAGE>
to the principal balance of such Underlying Security as of the
date on which it was acquired by the Depositor.
"Definitive Certificates": As defined in Section 5.08.
-----------------------
"Depositor": Lehman ABS Corporation, a Delaware corporation,
---------
and, if a successor Person shall have become the Depositor pursuant to any
applicable provisions of this Trust Agreement, "Depositor" shall mean such
successor Person. With respect to any provisions of this Trust Agreement that
relate to the provisions of the Trust Indenture Act, "Depositor" shall include
any obligor on the Certificates as the term obligor is defined in the Trust
Indenture Act.
"Depositor Order" or "Depositor Request": A written order or
---------------
request, respectively, signed in the name of the Depositor by any of its
President or Vice Presidents.
"Depository": With respect to the Certificates of any Series
----------
(or Class within such Series) issuable in whole or in part in the form of one or
more Global Securities, the Person designated as Depository by the Depositor
pursuant to Section 5.01 and specified in the related Series Supplement until a
successor Depository shall have become such pursuant to the applicable
provisions of this Trust Agreement, and thereafter "Depository" shall mean or
include each Person who is then a Depository hereunder, and if at any time there
is more than one such Person, "Depository" as used with respect to the
Certificates of any such Series or Class shall mean the Depository with respect
to the Certificates of that Series or Class.
"Depository Agreement": If applicable, the agreement pursuant
--------------------
to which the Depository will agree to act as Depository with respect to any
Series (or Class within such Series) of Certificates in accordance with Section
5.08.
"Discount Certificate": Any Certificate that is issued with
--------------------
"original issue discount" within the meaning of Section 1273(a) of the Code and
any other Certificate designated by the Depositor as issued with original issue
discount for United States Federal income tax purposes.
"Distribution Date": With respect to any Series (or Class
-----------------
within such Series) of Certificates, each date specified as a "Distribution
Date" for such Series (or Class) in the related Series Supplement.
6
<PAGE>
"Dollar" or "$" or "USD": Such currency of the United States
------
as at the time of payment is legal tender for the payment of public and private
debts.
"Eligible Account": Either (i) an account or accounts
----------------
maintained with a Federal or State chartered depository institution or trust
company the long term unsecured debt obligations of which are rated by the
Rating Agency the higher of (x) at least the then current long-term rating of
the Certificates or (y) in one of its two highest long-term rating categories
(unless otherwise specified in the Series Supplement) at the time any amounts
are held in deposit therein or (ii) a trust account(s) maintained as a
segregated account(s) and held by a Federal or State chartered depository
institution or trust company in trust for the benefit of the Certificateholders;
provided, however, that such depository institution or trust company has a
long-term rating in one of the four highest categories by the Rating Agency.
"Eligible Expense": With respect to any Series, as specified
----------------
in the related Series Supplement.
"Eligible Investments": With respect to any Series, unless
--------------------
otherwise specified in the related Series Supplement, any one or more of the
following obligations or securities; provided, however, that the total stated
return specified by the terms of each such obligation or security is at least
equal to the purchase price thereof; and provided, further, that no such
instrument may carry the symbol "R" in its rating:
(i) direct obligations of, and obligations fully
guaranteed by, the United States, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Federal
Farm Credit System or any agency or instrumentality of the United
States the obligations of which are backed by the full faith and credit
of the United States of America; provided, however, that obligations
of, or guaranteed by, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association or the Federal Farm Credit System
shall be Eligible Investments only if, at the time of investment, it
has the rating specified in such Series Supplement for Eligible
Investments;
(ii) demand and time deposits in, certificates of
deposit of, or banker's acceptances issued by any depository
institution or trust company (including the Trustee or any agent of the
Trustee acting in their respective commercial
7
<PAGE>
capacities) incorporated under the laws of the United States or any
State and subject to supervision and examination by Federal and/or
State banking authorities so long as the commercial paper and/or the
short-term debt obligations of such depository institution or trust
company (or, in the case of a depository institution which is the
principal subsidiary of a holding company, the commercial paper or
other short-term debt obligations of such holding company) at the time
of such investment or contractual commitment providing for such
investment have the rating specified in such Series Supplement for
Eligible Investments; provided, however, that such rating shall be no
lower than the rating on the Underlying Securities at the time of
purchase of the investments;
(iii) repurchase agreements with respect to (a) any
security described in clause (i) above or (b) any other
security issued or guaranteed by an agency or instrumentality of the
United States, with an entity having the credit rating specified in
such Series Supplement for Eligible Investments;
(iv) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United
States or any State that have the rating specified in such Series
Supplement for Eligible Investments at the time of such investment or
contractual commitment providing for such investment; provided,
however, that such rating shall be no lower than the rating on the
Underlying Securities; and provided, further, that securities issued by
any particular corporation will not be Eligible Investments to the
extent that investment therein will cause the then outstanding
principal amount of securities issued by such corporation and held as
part of the Trust for such Series to exceed 10% of the aggregate
outstanding principal balances and amounts of all the Underlying
Securities and Eligible Investments held as part of the Trust for such
Series;
(v) commercial paper having at the time of such
investment the rating specified in the Series Supplement for
Eligible Investments; and
(vi) a Guaranteed Investment Contract if and only if
specified in the related Series Supplement, provided that
the Rating Agency Condition is met.
8
<PAGE>
"Event of Default": With respect to any Series (or Class
----------------
within such Series) of Certificates, as specified in the related Series
Supplement.
"Exchange Act": The Securities Exchange Act of 1934, as
------------
amended.
"Exchange Rate Agent": With respect to any Series (or Class
-------------------
within such Series) of Certificates, if applicable, the Depositor or its agent
so specified in the related Series Supplement.
"Executive Officer": Any one of the duly elected or appointed
-----------------
qualified and acting officers of any entity executing a certificate.
"Extraordinary Trust Expense": Unless otherwise specified in
---------------------------
the related Series Supplement, 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 this
Trust Agreement.
"Final Scheduled Distribution Date": With respect to any
---------------------------------
Certificate, the date on which all the unpaid principal of (and premium, if any,
on) such Certificate is scheduled, without giving effect to any prepayment,
exchange or early termination, to become due and payable as provided therein and
in the applicable Series Supplement.
"Fixed Pass-Through Rate": With respect to any Fixed Rate
-----------------------
Certificate, as defined in the related Series Supplement.
"Fixed Rate Certificate": A Certificate that provides
----------------------
for a payment of interest at a Fixed Pass-Through Rate.
"Floating Pass-Through Rate": With respect to any Floating
--------------------------
Rate Certificate, as defined in the related Series Supplement.
"Floating Rate Certificate": A Certificate that provides for
-------------------------
the payment of interest at a Floating Pass-Through Rate determined periodically
by reference to a formula specified in the related Series Supplement.
"Foreign Currency": A currency issued by the government of any
----------------
country other than the United States or a
9
<PAGE>
composite currency the value of which is determined by reference to the values
of the currencies of any group of countries.
"Global Security": A Registered Certificate or Bearer
---------------
Certificate evidencing all or part of a Series (or Class within such Series) of
Certificates, issued to the Depository for such Series or Class in accordance
with Section 5.08 and bearing the legend prescribed therein.
"Grant": To sell, convey, assign, transfer, create, grant a
-----
lien upon and a security interest in and right of set-off against, deposit, set
over and confirm to the Trustee pursuant to these Standard Terms and a related
Series Supplement; and the terms "Granted" and "Granting" have the meanings
correlative to the foregoing. A Grant of any Underlying Securities or of any
other instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal,
premium, if any, and interest payments in respect of such Underlying Securities
and all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the Granting party or otherwise,
and generally to do and receive anything that the Granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"Guaranteed Investment Contract": With respect to any Series
------------------------------
(or Class within such Series), a guaranteed investment contract or surety bond
provided for in the related Series Supplement, Granted as part of the Trust or
to the Trustee for the benefit of the Certificateholders for such Series,
providing for the investment of funds in a related Account or related Accounts
and insuring a minimum or a fixed rate of return on the investment of such
funds, which contract or surety bond shall be an obligation of an insurance
company or other entity whose rating is no lower than the rating on the
Underlying Securities and shall satisfy any other requirements specified in such
Series Supplement.
"Holder": With respect to a Registered Certificate, the
------
Registered Holder thereof and, with respect to a Bearer Certificate or a Coupon,
the bearer thereof.
"Independent": When used with respect to any specified Person
-----------
means that the Person (1) is in fact independent of the Depositor and of any
Affiliate, (2) does not have any direct or
10
<PAGE>
indirect material financial interest in the Depositor or in any Affiliate and
(3) is not connected with the Depositor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
"Initial Accrued Interest": With respect to any Series, shall
------------------------
mean, with respect to each Underlying Security, the amount of interest which
accrued thereon from the Underlying Security Interest Payment Date of such
Underlying Security next preceding the deposit of such Underlying Security
hereunder (or, in the event that such Underlying Security Interest Payment Date
is the first Underlying Security Interest Payment Date to occur after the
original issuance of such Underlying Security, from the dated date thereof) to,
but excluding, the Closing Date.
"Issuer": Shall mean, with respect to an Underlying Security,
------
the issuer thereof (including, if applicable, the guarantor of the Underlying
Security) as identified in Schedule I to the Series Supplement.
"Letter of Credit": With respect to any Series or Class within
----------------
such Series, the letter of credit, if any, providing for the payment of all or a
portion of amounts due in respect of such Series or Class, issued to the Trustee
for the benefit of the Holders of such Series or Class, issued by the related
Credit Support Provider, all as specified in the related Series Supplement.
"Limited Guarantor": With respect to the Underlying Securities
-----------------
relating to any series (or Class within such Series), a Person specified in the
related Series Supplement as providing a guarantee or insurance policy or other
credit enhancement supporting the distributions in respect of such Series (or
Class) as and to the extent specified in such Series Supplement.
"Limited Guaranty": With respect to any Series or Class within
----------------
such Series, any guarantee of or insurance policy or other comparable form of
credit enhancement with respect to amounts required to be distributed in respect
of such Series or Class or payments under all or certain of the Underlying
Securities relating to such Series or Class, executed and delivered by a limited
Guarantor in favor of the Trustee, for the benefit of the Certificateholders, as
specified in the related Series Supplement.
"Liquidation Proceeds": The amounts received by the Trustee in
--------------------
connection with (i) the liquidation of a defaulted Underlying Security or
collateral, if any, related thereto or
11
<PAGE>
(ii) the repurchase, substitution or sale of a Underlying
Security.
"Market Agent": Shall mean the market agent or market agents
------------
appointed pursuant to Section 8.01, and its or their successors or assigns.
"Market Agent Agreement": With respect to any Series shall
----------------------
mean the Market Agent Agreement, dated as of the Closing Date, between the
Trustee and the Market Agent, the form of which will be attached to the Series
Supplement, and any similar agreement with a successor Market Agent, in each
case as from time to time amended or supplemented.
"Minimum Wire Denomination": If applicable, with respect to
-------------------------
any Series, as defined in the related Series Supplement.
"Moody's": Shall mean Moody's Investors Service Inc. and any
-------
successors thereto.
"Notional Amount": With respect to any Class of Certificates,
---------------
if applicable, the initial notional amount specified in the related Series
Supplement on which distributions of interest may be determined at the
applicable Pass-Through Rate, as the same may be adjusted as specified in such
Series Supplement.
"Officer's Certificate": A certificate signed by anyone (or,
---------------------
if specified in these Standard Terms or any Series Supplement, more than one)
Executive Officer of the Depositor, and delivered to the Trustee.
"Opinion of Counsel": A written opinion of counsel, who may,
------------------
except as otherwise expressly provided in this Trust Agreement, be counsel for
the Depositor acceptable to the Trustee, except that any opinion of counsel
relating to the qualification of any account required to be maintained pursuant
to this Trust Agreement as an Eligible Account must be an opinion of counsel who
is in fact Independent of the Depositor.
"Optional Exchange Date": With respect to any Series (or Class
----------------------
with such Series), as defined, if applicable, in the related Series Supplement.
"Ordinary Expenses": The Trustee's customary fee for its
-----------------
services as Trustee, including but not limited to (i) the costs and expenses of
preparing, sending and receiving all
12
<PAGE>
reports, statements, notices, returns, filings, solicitation of consent or
instructions, or other communications required by this 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 distributions, (iii) the costs
and expenses of the Trust's or Trustee's counsel, accountants and other experts
for ordinary or routing 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.
"Outstanding": With respect to Certificates of a specified
-----------
Series (or Class within such Series), as of any date of determination, all such
Certificates theretofore authenticated and delivered under these Standard Terms
and the related Series Supplement except:
(i) Certificates theretofore cancelled by the
Certificate Registrar or delivered to the Certificate
Registrar for cancellation; and
(ii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Trust Agreement, unless proof satisfactory to the Trustee is presented
that any such Certificates are held by a bona fide purchaser in whose
hands such Certificates are valid obligations of the Trust;
provided, however, that in determining whether the Holders of the required
percentage of the aggregate Voting Rights of the Certificates have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Certificates beneficially owned by the Depositor, the Trustee, or any Affiliate
thereof shall be disregarded and deemed not to be Outstanding, and the Voting
Rights to which its Holder would otherwise be entitled shall not be taken into
account in determining whether the requisite percentage of aggregate Voting
Rights necessary to effect any such consent or take any such action has been
obtained except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Certificates with respect to which the Depositor has provided
the Trustee an Officer's Certificate stating that such Certificates so owned
shall be so disregarded. Certificates so owned that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and
13
<PAGE>
that the pledgee is not, to the knowledge of the Trustee, the Depositor, or any
Affiliate of any thereof. The principal amount or notional amount, as
applicable, of a Discount Certificate that shall be deemed to be Outstanding for
the determination referred to in the foregoing proviso shall be the Certificate
Principal Balance or Certificate Notional Amount, as applicable, with respect
thereto as of the date of such determination, and the principal amount or
notional amount, as applicable, of a Certificate denominated in a Foreign
Currency that shall be deemed to be Outstanding for purposes of the
determination referred to in the foregoing provision shall be the amount
calculated pursuant to Section 5.11(c).
"Participant": A broker, dealer, bank, other financial
-----------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Pass-Through Rate": With respect to any Series (or Class
-----------------
within such Series) of Certificates (except certain Discount Certificates and
Certificates entitled to nominal or no interest distributions) the annual rate
at which interest accrues on the Certificates of such Series (or Class), which
may be a fixed rate or a floating rate of interest, determined upon the basis
and in the manner specified in the related Series Supplement.
"Paying Agent": As defined in Section 5.13.
------------
"Percentage Interest": With respect to a Certificate of any
-------------------
Series or Class within a Series, the portion of such Series or Class evidenced
by such Certificate, expressed as a percentage, equal to the product of (x) a
fraction, the numerator of which is the initial Certificate Principal Balance or
Notional Amount, as applicable, represented by such Certificate and the
denominator of which is the aggregate initial Certificate Principal Balance or
Notional Amount, as applicable, of all the Certificates of such Series or Class
and (y) 100.
"Permitted Investments": If applicable, with respect
---------------------
to any Series, as defined in the related Series Supplement.
"Person": Any individual, corporation, partnership, limited
------
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
14
<PAGE>
"Place of Distribution": With respect to any Series (or Class
---------------------
within such Series) of Certificates, the place or places where the principal of
(and premium, if any) and interest on the Certificates or such Series (or Class)
are distributable as specified in the related Series Supplement.
"Predecessor Certificate": With respect to any particular
-----------------------
Certificate, every previous Certificate evidencing all or a portion of the same
interest as that evidenced by such particular Certificate; and for the purpose
of this definition, any Certificate authenticated and delivered under Section
5.05 in lieu of a lost, destroyed or stolen Certificate shall be deemed to
evidence the same interest as the lost, destroyed or stolen Certificate.
"Prepaid Ordinary Expenses": Unless otherwise specified in
-------------------------
the Series Supplement, the amount (if any) paid by the Depositor to the Trustee
on or before the Closing Date to cover Ordinary Expenses, as specified in the
related Series Supplement.
"Proceeding": Any suit in equity, action at law or
----------
other judicial or administrative proceeding.
"Purchase Price": If applicable, as specified in the
--------------
related Series Supplement.
"Rating Agency": With respect to any Series (or Class within
-------------
such Series), each nationally recognized rating organization specified in the
related Series Supplement that initially rates the Certificates of such Series
(or Class).
"Rating Agency Condition": With respect to any action or
-----------------------
occurrence, unless otherwise specified in the applicable Series Supplement, that
each Rating Agency shall have been given 10 days (or such shorter period
acceptable to each Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Depositor and the Trustee in writing that such
action or occurrence will not result in a reduction or withdrawal of the then
current rating of any Certificate of the applicable Series.
"Realized Losses": With respect to any defaulted and
---------------
liquidated Underlying Security, the excess, if any, of (x) the principal amount
of such Underlying Security plus accrued and unpaid interest thereon, plus
expenses incurred by the Trustee in connection with the practices and procedures
referred to in Section 3.07(b) to the extent reimbursable under these Standard
15
<PAGE>
Terms and the related Series Supplement, over (y) Liquidation Proceeds with
respect thereto.
"Record Date": With respect to any Distribution Date for any
-----------
Series (or Class within such Series) of Registered Certificates, the date
specified in the related Series Supplement.
"Registered Certificate": Any Certificate registered as to
----------------------
principal, premium, if any, and interest in the Certificate Register.
"Registered Holder": The Person in whose name a Registered
-----------------
Certificate is registered in the Certificate Register on the applicable Record
Date.
"Required Interest": Unless otherwise specified in the related
-----------------
Series Supplement, with respect to the Outstanding Certificates of any Series or
any Class thereof, the accrued and undistributed interest on the Certificate
Principal Balance or Notional Amount of such Outstanding Certificates (or the
amount due under any related Coupons), computed at the applicable Pass- Through
Rate.
"Required Percentage--Amendment": Unless otherwise specified
------------------------------
in the related Series Supplement, if a Rating Agency Condition is specified in
the related Series Supplement and such Rating Agency Condition is met, or, if a
Rating Agency Condition is not so specified in the related Series Supplement,
66-2/3% of the aggregate Voting Rights of Certificates of such Series, and 100%
otherwise.
"Required Percentage--Definitive Certificates": Unless
--------------------------------------------
otherwise specified in the related Series Supplement, 66 2/3% of the aggregate
Voting Rights of Certificates of such Series.
"Required Percentage--Direction of Trustee": Unless otherwise
-----------------------------------------
specified in the related Series Supplement, 66 2/3% of the aggregate Voting
Rights of Certificates of such Series.
"Required Percentage--Remedies": Unless otherwise specified in
-----------------------------
the related Series Supplement, 66-2/3% of the aggregate Voting Rights of
Certificates of such Series.
"Required Percentage--Removal of Trustee": Unless otherwise
---------------------------------------
specified in the related Series Supplement, more than 50% of the aggregate
Voting Rights of Certificates of such Series.
16
<PAGE>
"Required Percentage--Waiver": Unless otherwise specified in
---------------------------
the related Series Supplement, 66-2/3% of the aggregate Voting Rights of
Certificates of such Series.
"Required Premium": If applicable, unless otherwise specified
----------------
in the related Series Supplement, with respect to the Certificates of any Series
or any Class thereof, an amount equal to the product, as determined on any
Distribution Date with respect to such Series and Class, of (i) the Required
Principal for such Series and Class and (ii) the Call Premium Percentage for
such Series and Class.
"Required Principal": As determined for any Distribution Date
------------------
for a given Series (or Class within such Series), unless otherwise specified in
the related Series Supplement, the amounts on deposit in the Certificate Account
allocable to principal payments on the Underlying Securities (including from
Credit Support, if any, and Advances, if any, but excluding amounts in respect
of principal payments to the extent that Advances with respect thereto were
distributed as Required Principal on a prior Distribution Date) and required to
be distributed in respect of the Certificates of such Series (or Class) in
accordance with the terms of such Certificates and such related Series
Supplement.
"Required Rating": With respect to any Series (or Class within
---------------
such Series), the rating category (or categories) specified in the Series
Supplement that, as a condition to the issuance of such Series or Class, is (or
are) the lowest category (or categories) in which the Certificates of such
Series or Class may be categorized by the Rating Agency.
"Requisite Reserve Amount": As of any date with respect to any
------------------------
Series (or Class within such Series) of Certificates, the amount, if any,
required to be maintained in the Reserve Account, if any, for such Series or
Class as specified in or determined pursuant to the related Series Supplement.
"Reserve Account": An Eligible Account, if any, created and
---------------
maintained pursuant to Section 3.06 and specified in the related Series
Supplement.
"Responsible Officer": With respect to the Trustee, any
-------------------
officer within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the
17
<PAGE>
above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's actual
knowledge of and familiarity with the particular subject.
"Retained Interest": If applicable, with respect to any
-----------------
Underlying Security, an ownership interest in and a right to a portion of the
payments thereon by the obligor thereof, as specified in the related Series
Supplement, held by the Person so specified in such Series Supplement.
"Sale Procedures": Unless otherwise specified in the Series
---------------
Supplement, shall mean that, with respect to any sale of one or more Underlying
Securities, the Market Agent, on behalf of the Trust, shall sell such Underlying
Security or Underlying Securities to the highest bidders among not less than two
solicited bidders for such Underlying Securities (one of which bidders may
include Lehman Brothers Inc. or any Affiliate thereof; provided, however, that
neither Lehman Brothers Inc. nor any of its Affiliates will be under any
obligation to bid, and which 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 a single Underlying Security, a portion of the Underlying
Securities or all of the Underlying Securities being sold or any other basis
selected in good faith by the Market Agent.
"S&P": Shall mean Standard & Poor's, a division of The
---
McGraw-Hill Companies, Inc. and any successor thereof.
"Series": A separate series of Certificates issued pursuant to
------
these Standard Terms and a related Series Supplement, which series may be
divided into two or more Classes, as provided in such Series Supplement.
"Series Supplement": An agreement incorporating these Standard
-----------------
Terms that authorizes the issuance of a particular Series (and each Class within
such Series) of Certificates.
"Special Distribution Date": If applicable, with respect to
-------------------------
any Series, as defined in the related Series Supplement and the related
Certificates.
"Specified Currency": As defined in the related Series
------------------
Supplement.
"Standard Terms": As defined in the preliminary statement to
--------------
this Agreement.
18
<PAGE>
"Sub-Administration Account": As defined in Section 7.02.
--------------------------
"Sub-Administration Agreement": The written contract,
----------------------------
if any, between the Trustee and a Sub-Administrative Agent and
any successor Trustee or Sub-Administrative Agent relating to the
administration of certain Underlying Securities as provided in
Section 7.02.
"Sub-Administration Agent": Any Person with which the Trustee
------------------------
has entered into a Sub-Administration Agreement and which meets the
qualifications of a Sub-Administrative Agent pursuant to Section 7.02.
"Surety Bond": If so specified in the Series Supplement, with
-----------
respect to any Series (or Class within such Series) of Certificates, the surety
bond providing for the distribution under certain circumstances specified in
such Series Supplement of amounts to the Certificateholders of such Series (or
Class), which surety bond will be issued to the Trustee for the benefit of such
Certificateholders by the related Credit Support Provider, all as specified in
such Series Supplement.
"Swap Agreement": If so specified in the Series Supplement,
--------------
with respect to any Series, shall mean the ISDA Master Agreement dated as of the
Closing Date by and between the Trust and the Swap Counterparty, and the form of
Schedule which is attached as an exhibit thereto, as the same may be amended or
supplemented by any attached Confirmations from time to time as provided herein
and therein.
"Swap Counterparty": If so specified in the Series Supplement,
-----------------
with respect to any Series, shall be specified in the Series Supplement.
"Swap Distribution Amount": If so specified in the Series
------------------------
Supplement, with respect to any Series, shall mean all amounts then due and
owing to the Swap Counterparty pursuant to the Swap Agreement, other than Swap
Termination Payments.
"Swap Guarantee": If so specified in the Series Supplement,
--------------
with respect to any Series, shall mean, the Guarantee issued by the Swap
Guarantor in favor of the Trust substantially in the form attached as an exhibit
to the Swap Agreement.
"Swap Guarantor": If so specified in the Series Supplement,
--------------
with respect to any Series, shall be specified in the Series Supplement.
19
<PAGE>
"Swap Receipt Amount": If so specified in the Series
-------------------
Supplement, with respect to any Series, shall mean all amounts due and owing to
the Trust pursuant to the Swap Agreement, other than Swap Termination Payments.
"Swap Termination Payment": If so specified in the Series
------------------------
Supplement, with respect to any Series, means the amount payable by the Swap
Counterparty to the Trust, or by the Trust to the Swap Counterparty, pursuant to
Section 6(e) of the Swap Agreement.
"Trust": With respect to any Series, the segregated asset or
-----
pool of assets subject hereto, constituting the trust created hereby and by the
related Series Supplement and to be administered hereunder and thereunder,
consisting of those Underlying Securities and the Credit Support, if applicable,
and all sums distributed in respect thereof that are specified as being part of
the Trust for such Series in the related Series Supplement, all for the benefit
of the Certificateholders of such Series as of any particular time.
"Trust Agreement": With respect to each Series of
---------------
Certificates, these Standard Terms and all amendments hereof and, unless the
context otherwise requires, the related Series Supplement and all amendments
thereto.
"Trustee": With respect to any Series, the Person so specified
-------
in the applicable Series Supplement, until a successor Person shall have become
the Trustee pursuant to the applicable provisions of these Standard Terms and
the applicable Series Supplement, and thereafter "Trustee" shall mean such
successor Person.
"Trust Indenture Act": The Trust Indenture Act of 1939, as
-------------------
amended, as the same is in force and effect as of the date hereof.
"Underlying Security" or "Underlying Securities": With respect
-------------------
to any Series, the asset or assets Granted as part of the Trust for such Series
or acquired (or, in the case of an agreement, entered into) by the Trustee for
the benefit of the Holders of such Series, and, if and to the extent provided in
the applicable Series Supplement, for the benefit of any Credit Support
Provider, all as identified in the Schedule I to the related Series Supplement.
The Underlying Securities for any such Series or the related Trust shall not
constitute Underlying Securities for any other Series or any other Trust.
20
<PAGE>
"Underlying Security Interest Payment Date": Shall mean, with
-----------------------------------------
respect to an Underlying Security, each date specified in Schedule I to a Series
Supplement as a date on which interest is scheduled, as of the Closing Date, to
be payable by or on behalf of the Issuer on such Underlying Security in
accordance with its terms.
"Underlying Security Payment Date": Shall mean a Schedule
--------------------------------
Underlying Security Payment Date and any other date on which interest, principal
and/or redemption premium is payable on an Underlying Security in accordance
with its terms.
"Uniform Commercial Code": The Uniform Commercial Code as in
-----------------------
effect in the relevant jurisdiction or, with respect to the State of Louisiana,
the equivalent body of statutory and common law.
"United States": The United States of America (including the
-------------
States), its territories, its possessions and other areas subject to its
jurisdiction.
"Voting Rights": With respect to any Series (or Class within
-------------
such Series) of Certificates, the portion of the aggregate voting rights of the
Certificates of such Series or Class which shall be allocated to any Certificate
as specified in the applicable Series Supplement.
SECTION 1.02. Rules of Construction. Unless the
---------------------
context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect in the United States from time to time;
(iii) "or" is not exclusive;
(iv) the words "herein", "hereof", "hereunder" and other
words of similar import refer to this Trust Agreement as a whole and
not to any particular Article, Section or other subdivision:
(v) "including" means including without limitation;
and
21
<PAGE>
(vi) words in the singular include the plural and words
in the plural include the singular.
SECTION 1.03. Compliance Certificates and Opinions; Record
--------------------------------------------
Date. (a) Upon any application or request by the Depositor to the Trustee to
- ----
take any action under any provision of this Trust Agreement other than the
initial issuance of the Certificates, the Depositor shall furnish to the Trustee
an Officer's Certificate stating that, in the opinion of the signer thereof, all
conditions precedent, if any, provided for in this Trust Agreement relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Trust Agreement relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for this Trust Agreement (other than a
certificate provided pursuant to Section 3.10(d)) shall include:
(1) a statement that the individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of such
individual, such condition or covenant has been complied with.
(b) The Depositor may at its option by delivery of an
Officer's Certificate to the Trustee set a record date to determine the Holders
of any subclass of Certificates entitled to give any consent, request, demand,
authorization, direction, notice, waiver or other act. Notwithstanding Section
316(c) of
22
<PAGE>
the Trust Indenture Act, such record date shall be the record date specified in
such Officer's Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection therewith. If such a
record date is fixed, such consent, request, demand, authorization, direction,
notice, waiver or other act may be given before or after such record date, but
only the Holders of record of Certificates of the applicable subclass at the
close of business on such record date shall be deemed to be Certificateholders
of such subclass for the purposes of determining whether Holders of the
requisite aggregate principal amount of Outstanding Certificates of such
subclass have authorized or agreed or consented to such consent, request,
demand, authorization, direction, notice, waiver or other act, and for that
purpose the aggregate principal amount of the Outstanding Certificates of such
subclass shall be computed as of such record date; provided, however, that no
such consent, request, demand, authorization, direction, notice, waiver or other
act by the Holders of Certificates of such subclass on such record date shall be
deemed effective unless it shall become effective pursuant to the provisions of
this Trust Agreement not later than one year after the record date.
ARTICLE II
Declaration of Trusts; Issuance of Certificates;
Purpose and Classification of Trusts
------------------------------------
SECTION 2.01. Creation and Declaration of Trusts: Assignment
----------------------------------------------
of Underlying Securities. (a) The Depositor, concurrently with the execution and
- ------------------------
delivery hereof, does hereby agree to Grant to the Trustee, on behalf and for
the benefit of the Certificateholders of each given Series of Certificates and
without recourse, all the right, title and interest of the Depositor, including
any security interest therein for the benefit of the Depositor, in, to and under
the Underlying Securities attributable to each such Series (except for the
Underlying Securities attributable to such Series which are not Granted by the
Depositor, as specified in Schedule II to the applicable Series Supplement), now
existing or hereafter acquired, in each case as identified on the applicable
Schedule I, and all other assets included or to be included in the respective
Trust for the benefit of the Certificateholders of each such Series. Each such
Grant will include all interest, premium (if any) and principal received by or
on behalf of the Depositor of, on or with respect to any such Underlying
Securities due after the applicable Cut-off Date, and, unless
23
<PAGE>
otherwise specified in the Series Supplement, will exclude (i) all interest,
premium (if any) and principal of, on or with respect to any such Underlying
Securities due on or before the applicable Cut-off Date and (ii) any Retained
Interest in any such Underlying Security.
(b) In connection with each Grant referred to in the preceding
paragraph, the Depositor shall, not later than the applicable Closing Date,
either (i) deposit the Underlying Securities for a given Series (except for the
Underlying Securities attributable to such Series which are to be acquired from
a Person other than the Depositor, as specified on the Underlying Securities
Schedule to the applicable Series Supplement) with the Trustee by physical
delivery of such Underlying Securities, duly endorsed, to the Trustee or (ii)
have delivered such Underlying Securities to a Clearing Agency, in which event
(A) the Trustee has accepted delivery of such Underlying Securities through such
Clearing Agency, and (B) the Underlying Securities have been credited to a trust
account of the Trustee, or its authorized agent, and the Trustee shall have the
right to hold and maintain such Underlying Securities on deposit with such
Clearing Agency for all purposes of this Trust Agreement.
(c) Unless otherwise specified in the applicable Series
Supplement, the Grant of such Underlying Securities by the Depositor for a given
Series accomplished hereby and by such Series Supplement is absolute and is
intended by the parties hereto as a sale.
(d) In the case of each delivery of Underlying Securities
to the Trustee, the Depositor shall be deemed thereby to represent and warrant
to the Trustee that:
(i) the Depositor is duly authorized to so deliver
such Underlying Securities;
(ii) the Underlying Securities so delivered are
genuine;
(iii) at the time of delivery of the Underlying Securities,
such Underlying Securities are free and clear of any lien, pledge,
encumbrance, right, charge, claim or other security interest; and
(iv) such delivery is irrevocable and free of any continuing
claim by the Depositor except such as the Depositor may have as a
Certificateholder of a Certificate;
24
<PAGE>
The above representations and warranties shall survive the
delivery of such Underlying Securities and the Certificates in respect thereof.
The Depositor shall further be deemed by such delivery to have made the
representations that, to the best of its knowledge, as of the Closing Date, no
default or event of default with respect to the Underlying Securities has
occurred and is continuing.
(e) Unless otherwise specified in the related Series
Supplement, it is the intention of all of the parties hereto that the transfer
of the Trust property hereunder and under any Series Supplement shall constitute
a sale and the Trust created hereunder and thereunder shall constitute a fixed
investment trust for federal income tax purposes under Treasury Regulation
Section 301.7701-4, and all parties hereto and thereto agree to treat the Trust,
any distributions therefrom and the beneficial interest in the Certificates
consistently with such characterization. The provisions of this Trust Agreement
shall be interpreted consistently with such characterization.
(f) Unless otherwise specified in the related Series
Supplement, any Trust created hereunder shall not engage in any business or
activities other than in connection with, or relating to, the holding,
protecting and preserving of the Trust property and the issuance of the
Certificates, and other than those required or authorized by this Trust
Agreement or incidental to and necessary to accomplish such activities. Any
Trust created hereunder shall not issue or sell any certificates or other
obligations other than the Certificates or otherwise incur, assume or guarantee
any indebtedness for money borrowed.
SECTION 2.02. Acceptance by Trustee. With respect to each
---------------------
Series, the Trustee will acknowledge receipt by it, or by a custodian on its
behalf, of the related Underlying Securities and the related documents referred
to in Section 2.01, now existing or hereafter acquired, and declares that it
will hold such Underlying Securities and documents and all other documents
delivered to it pursuant to this Trust Agreement, and that it will hold all such
assets and such other assets (including Underlying Securities acquired from a
Person other than the Depositor) comprising the Trust for a given Series of
Certificates, in trust for the exclusive use and benefit of all present and
future Certificateholders of such Series and for the purposes and subject to the
terms and conditions set forth in this Trust Agreement.
SECTION 2.03. Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Trustee that as of the
Closing Date or as of such other date
25
<PAGE>
specifically provided herein or in the applicable Series
Supplement:
(i) the Depositor is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware;
(ii) with respect to each Series Supplement, to the Depositor's
knowledge, the information set forth in Schedule I attached thereto
with respect to each Underlying Security is true and correct in all
material respects at the date or dates, respecting which, such
information is furnished;
(iii) the execution and delivery of this Trust Agreement by the
Depositor and its performance of and compliance with the terms of this
Trust Agreement will not violate the Depositor's articles of
incorporation or By-laws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Depositor is a
party or which may be applicable to the Depositor or any of its assets;
(iv) the Depositor has the full power and authority to enter into
and consummate all transactions contemplated by this Trust Agreement,
has duly authorized the execution, delivery and performance of this
Trust Agreement and has duly executed and delivered this Trust
Agreement. This Trust Agreement, upon its execution and delivery by the
Depositor and assuming due authorization, execution and delivery by the
Trustee, will constitute a valid, legal and binding obligation of the
Depositor, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered a
proceeding in equity or at law); and
(v) any additional representations and warranties, if
any, that may be specified in the applicable Series
Supplement.
It is understood and agreed that the representations and
warranties of the Depositor set forth in this Section 2.03 shall survive
delivery of the respective documents to the Trustee
26
<PAGE>
and shall inure to the benefit of the Trustee on behalf of the
Certificateholders notwithstanding any restrictive or qualified endorsement or
assignment. Upon discovery by any of the Depositor or the Trustee of a breach of
any of the foregoing representations and warranties which materially and
adversely affects the interests of the Certificateholders, the party discovering
such breach shall give prompt written notice thereof to the other party.
SECTION 2.04. Breach of Representation, Warranty or Covenant.
----------------------------------------------
Within 90 days of the earlier of discovery by the Depositor or receipt of notice
by the Depositor of a breach of any representation or warranty of the Depositor
set forth in Section 2.03 that materially and adversely affects the interests of
the Certificateholders of a given Series of Certificates, the Depositor shall
cure such breach in all material respects.
SECTION 2.05. Agreement to Authenticate and Deliver
-------------------------------------
Certificates. With respect to each Series of Certificates and the related Trust,
- ------------
the Trustee hereby agrees and acknowledges that it will, concurrently with the
Grant to and receipt by it of the related Underlying Securities and delivery to
it by the Depositor of executed Certificates and Coupons, if any, of such
Series, cause to be authenticated and delivered to or upon the written order of
the Depositor, in exchange for the Underlying Securities and such other assets
constituting the Trust for a given Series, Certificates duly authenticated by or
on behalf of the Trustee in authorized denominations evidencing ownership of the
entire Trust for such Series, all in accordance with the terms and subject to
the conditions of Sections 5.02 and 5.14.
ARTICLE III
Administration of each Trust
----------------------------
SECTION 3.01. Administration of each Trust. (a) The
----------------------------
Trustee shall administer the Underlying Securities for each given Trust for the
benefit of the Certificateholders of the related Series. In engaging in such
activities, the Trustee shall follow or cause to be followed collection
procedures in accordance with the terms of these Standard Terms and the
applicable Series Supplement, the respective Underlying Securities and any
applicable Credit Support Instruments. With respect to each Trust, and subject
only to the above-described standards and the terms of these Standard Terms, the
related Series Supplement and the respective Underlying Securities and
applicable Credit Support Instruments, if any, the Trustee shall have full power
27
<PAGE>
and authority, acting alone or through Sub-Administrative Agents as provided in
Section 7.02, to do or cause to be done any and all things in connection with
such administration which it deems necessary to comply with the terms of these
Standard Terms and the applicable Series Supplement.
(b) The duties of the Trustee shall be performed in accordance
with applicable local, State and Federal law, and the Trustee shall make any and
all filings, reports, notices or applications with, and seek any comments and
authorizations from, the Commission and any State securities authority on behalf
of the Trust for each Series.
SECTION 3.02. Collection of Certain Underlying Security
-----------------------------------------
Payments. With respect to any Series or Class of Certificates, the Trustee shall
- --------
make reasonable efforts to collect all payments required to be made pursuant to
the terms of the Underlying Securities in a manner consistent with the terms of
this Trust Agreement, such Underlying Securities and any related Credit Support
Instruments.
SECTION 3.03. Certificate Account. (a) For each Series of
-------------------
Certificates, the Trustee shall establish and maintain one or more Eligible
Accounts (collectively, the "Certificate Account"), held in trust for the
benefit of the Certificateholders of such Series. The Trustee on behalf of such
Certificateholders shall possess all right, title and interest in all funds on
deposit from time to time in each Certificate Account and in all proceeds
thereof. With respect to each Series of Certificates, the Certificate Account
shall be under the sole dominion and control of the Trustee for the benefit of
the related Certificateholders. With respect to each Series of Certificates, not
later than the close of business on the Business Day on which the Trustee
receives such amounts in the form of immediately available funds (so long as
such funds are received by the Trustee by 3:00 p.m. New York City time, and on
the next Business Day otherwise), the Trustee shall deposit or cause to be
deposited in the Certificate Account all amounts received by it with respect to
the Underlying Securities, any Credit Support and all Liquidation Proceeds
related to such Series including:
(i) all payments on account of principal of such
Underlying Securities;
(ii) all payments on account of interest on such
Underlying Securities;
28
<PAGE>
(iii) all payments on account of premium (if any)
on such Underlying Securities;
(iv) any payments in respect of any such Credit
Support;
(v) any Advances made as required pursuant to
Section 4.04; and
(vi) any interest or investment income earned on
funds deposited in the related Accounts.
Unless otherwise specified in the applicable Series
Supplement, it is understood and agreed that payments in the nature of
prepayment or redemption penalties, late payment charges, default interest or
reinvestment income which may be received by the Trustee shall be deposited by
the Trustee in the Certificate Account and shall not be retained by the Trustee
for its own account.
If, at any time, the Certificate Account for any Series ceases
to be an Eligible Account, the Trustee shall within 5 Business Days (or such
longer period, not to exceed 30 calendar days, as to which the Rating Agency
Condition is met) establish a new Certificate Account meeting the conditions
specified above and the Trustee shall within five Business Days transfer any
cash and any investments on deposit in the Certificate Account to such new
Certificate Account, and from the date such new Certificate Account is
established, it shall be the Certificate Account for such Series.
(b) The Trustee shall give notice to the Depositor and the
Rating Agency of the location of each Eligible Account constituting the
Certificate Account and prior to any change thereof.
SECTION 3.04. Liquidation of the Underlying Securities. If
----------------------------------------
specified in the applicable Series Supplement, upon the occurrences of specified
events, the Trustee shall direct the Market Agent to sell the Underlying
Securities in compliance with the Sale Procedures and to deposit the Liquidation
Proceeds therefrom into the Certificate Account pursuant to Section 3.03(a)
hereof.
SECTION 3.05. Investment of Funds in the Accounts. The Trustee
-----------------------------------
on behalf of the Trust, may direct any depository institution maintaining the
Certificate Account or the Reserve Account, if any, for the applicable Series
and any other
29
<PAGE>
segregated Eligible Account the contents of which are held for the benefit of
Certificateholders of such Series (each, an "Account") to invest the funds
therein at the specific written direction of the Depositor in one or more
Eligible Investments bearing interest or sold at a discount, which shall be held
to maturity unless payable on demand and which funds shall not be reinvested
upon the maturity or demand for payment of such Eligible Investment. If the
Depositor does not provide any investment directions, funds held in any Account
will be invested in the Eligible Investments specified in clause (ii) of the
definition thereof. Investments of such funds shall be invested in Eligible
Investments that will mature so that such funds will be available for
distribution on the next Distribution Date. Except as otherwise provided in the
applicable Series Supplement, any earnings with respect to such Permitted
Investments shall be paid to the Certificateholders (and, if applicable, the
Retained Interest holder) pro rata in proportion to their interest in the
invested funds. In the event amounts on deposit in an Account are at any time
invested in an Eligible Investment payable on demand, the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the last day such
Eligible Investment may otherwise mature hereunder in an amount equal
to the lesser of (1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand same day payment of all amounts due thereunder upon
a determination by the Trustee that such Eligible Investment would not
constitute an Eligible Investment in respect at funds thereafter on
deposit in any Account.
SECTION 3.06. Maintenance of Credit Support. (a) On
-----------------------------
the applicable Closing Date, the Trustee at the written direction of the
Depositor or, if so specified in the applicable Series Supplement, the Depositor
shall, to the extent specified in the applicable Series Supplement, establish
and maintain, or enter into, as applicable, in the name of the Trustee, either
as a part of the related Trust or outside it, for the benefit of the
Certificateholders of the related Series, the Credit Support specified in the
applicable Series Supplement. To the extent specified in the applicable Series
Supplement, the Depositor will make or cause to be made any initial deposit to
the Certificate Account or any Reserve Account for the related Series as of the
Closing Date. Unless the Series Supplement for a given Series provides
otherwise, if a Reserve Account exists for such Series,
30
<PAGE>
collections with respect to the Underlying Securities for such Series not
distributed to the Certificateholders of such Series shall be deposited in the
Reserve Account. The Reserve Account, if any, shall be an asset of the Depositor
(and the income earned on any amounts held in the Reserve Account shall be
allocable to the Depositor, who agrees to include any such income in its gross
income for all federal, state and local income and franchise tax purposes) and
will not be a part of or otherwise be includible in the Trust but will be held
for the benefit of the Certificateholders.
(b) Amounts on deposit in the Reserve Account and amounts
available pursuant to any other Credit Support for such Series shall be applied
by the Trustee to make distributions of principal of and premium (if any) and
interest on the Certificates of such Series as required pursuant to Section 4.01
and the applicable Series Supplement to the extent that funds are not otherwise
available for such purpose. If specified in such Series Supplement, immediately
after each Distribution Date, amounts on deposit in the Reserve Account for such
Series in excess of a specified amount shall be paid to the Person so specified
in such Series Supplement.
SECTION 3.07. Realization Upon Defaulted Underlying
-------------------------------------
Securities. (a) The Trustee, on behalf of the Certificateholders, shall assert
- ----------
claims under each applicable Credit Support Instrument, and shall take such
reasonable steps as are necessary to receive payment or to permit recovery
thereunder with respect to any defaulted Underlying Securities, subject in all
cases to the provisions of Article VII hereof.
(b) Unless otherwise provided in the related Series
Supplement, if the Trustee, is unable to obtain full recovery in respect of a
defaulted Underlying Security and any related Credit Support Instrument pursuant
to Section 3.07(a), the Trustee shall follow or cause to be followed such normal
practices and procedures as it deems necessary or advisable to realize upon such
defaulted Underlying Security and such Credit Support Instrument, subject in all
cases to the provisions of Article VII hereof.
(c) If the Liquidation Proceeds of a defaulted Underlying
Security are less than the sum of (i) the outstanding principal balance of the
defaulted Underlying Security, (ii) interest accrued but unpaid thereon at the
applicable interest rate and (iii) the aggregate amount of expenses incurred by
the Trustee in connection with the practices and procedures referred to in
paragraph (b) of this Section 3.07 to the extent
31
<PAGE>
reimbursable under these Standard Terms and the related Series Supplement, the
Trust for the applicable Series shall recognize a Realized Loss equal to the
amount of such difference. Any such reimbursed Realized Loss shall be allocated
pursuant to Section 4.05 among the Certificateholders of such Series in the
manner and priority set forth in the related Series Supplement.
(d) With respect to any Underlying Securities, if specified in
a related Series Supplement, if any related document or instrument is found to
be missing or defective in any material respect, the Trustee shall immediately
notify the Depositor and the Underlying Securities Issuer who sold the
applicable Underlying Securities to the Depositor. If and to the extent
specified in the related Series Supplement, if the Underlying Securities Issuer
cannot cure such omission or defect within 60 days after receipt of such notice,
the Underlying Securities Issuer will be obligated, within 90 days of receipt of
such notice, to repurchase the related Underlying Securities from the Trustee at
the Purchase Price or provide a substitute for such Underlying Securities.
Neither the Trustee nor the Depositor shall be obligated to repurchase or
provide a substitute for such Underlying Securities if the Underlying Securities
Issuer defaults on its obligations. Unless otherwise specified in the related
Series Supplement, if applicable, the Underlying Securities Issuer's 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 3.08. Retained Interest. The Retained Interest, if
-----------------
any, in any Underlying Security shall initially be held by the Person so
specified in the related Series Supplement as and to the extent specified
therein. With respect to each Underlying Security, unless otherwise specified in
the related Series Supplement, the Retained Interest shall be deducted by the
Trustee from applicable collections in respect of such Underlying Security.
Unless otherwise provided in the applicable Series Supplement, collections in
respect of Retained Interest shall not be deposited in the Certificate Account
for the applicable Series and shall not constitute a part of the Trust for such
Series, but shall instead be distributed to the holder of such Retained
Interest; provided, however, that the Series Supplement for any Series with
respect to which there is a Retained Interest may provide that, notwithstanding
the terms contained herein, commingled amounts received in respect of assets
inclusive of Underlying Securities and Retained Interest may initially be
deposited in a separate and discrete account established by the Trustee and such
Series Supplement may provide for additional
32
<PAGE>
terms relating thereto. Unless otherwise provided in the applicable Series
Supplement, after deduction of all applicable fees as provided for in this Trust
Agreement, on each Distribution Date the Trustee shall allocate on a pari passu
basis any partial recovery on an Underlying Security between (a) the Retained
Interest, if any, and (b) distributions to Certificateholders of the applicable
Series.
SECTION 3.09. Access to Certain Documentation. The
-------------------------------
Trustee shall provide to any Federal, State or local regulatory authority that
may exercise authority over any Certificateholder access to the documentation
regarding the Underlying Securities required by applicable laws and regulations.
Such access shall be afforded without charge, but only upon reasonable request
and during normal business hours at the offices of the Trustee designated by it.
In addition, access to the documentation regarding the Underlying Securities
related to a given Series (or Class within such Series) will be provided to any
Certificateholder of such Series (or Class) upon reasonable request during
normal business hours at the offices of the Trustee designated by it at the
expense of the Certificateholder requesting such access.
SECTION 3.10. Reports by the Depositor. The Depositor
------------------------
shall:
(a) file with the Trustee, within 30 days after the Depositor
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Depositor is
required to file with the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act; or, if the Depositor is not required to file
information, documents or reports pursuant to either of such sections,
then to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed by the Commission, such of the
supplementary and periodic information, documents and reports which may
be required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may
be prescribed in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance
with the rules and regulations prescribed by the Commission, such
additional information, documents and reports with respect to
compliance by the Depositor with the
33
<PAGE>
conditions and covenants provided for in this Trust Agreement, as may
be required by such rules and regulations, certificates or opinions of
independent accountants, conforming to the requirements of Section
314(e) of the Trust Indenture Act;
(c) transmit to all Certificateholders, in the manner and to
the extent provided in Section 313(c) of the Trust Indenture Act, such
summaries of any information, documents and reports required to be
filed by the Company pursuant to subsections (a) and (b) of this
Section 3.10 as may be required by rules and regulations prescribed by
the Commission; and
(d) furnish to the Trustee, not less often than annually, a
certificate from the principal executive, financial or accounting
officer of the Depositor as to his or her knowledge of the Depositor's
compliance with all conditions and covenants under this Trust
Agreement. For purposes of this paragraph (d) such compliance shall be
determined without regard to any period of grace or requirement of
notice provided under this Trust Agreement.
Any reports, statements, documents or other information required to be furnished
by the Depositor to the Trustee pursuant to these Standard Terms or any Series
Supplement shall be deemed to have been delivered to the Trustee if the Trustee
is in possession of such reports, statements, documents or other information at
the time they are to be furnished pursuant to these Standard Terms or any Series
Supplement.
SECTION 3.11. Charges and Expenses. Except as otherwise
--------------------
provided in this Trust Agreement or the related Series Supplement, no amounts in
the nature of fees or charges shall be payable by or withheld from the Trust,
the Depositor or any other person. There shall be no recourse or claim against
the Trust or the property of the Trust for all or any part of any fees or
charges payable to any person.
ARTICLE IV
Distributions and Reports to Certificateholders
-----------------------------------------------
SECTION 4.01. Distributions. (a) On each Distribution
-------------
Date for a given Series of Certificates, the Trustee shall apply
Available Funds in the Certificate Account for such Series in the
manner and priority set forth in the Series Supplement for such
Series. In any event, however, any amounts collected during any
34
<PAGE>
period shall be distributed to the Certificateholders no later than the
Distribution Date immediately following the receipt thereof.
(b) All distributions on the Certificates shall be payable
only from Available Funds, and no provision of this Trust Agreement shall be
deemed to create any obligation on the part of the Trustee or the Depositor to
make any distribution from any other source.
SECTION 4.02. Distributions on Certificates. (a) Distributions
-----------------------------
on any Registered Certificate that are payable and are punctually paid or duly
provided for on any Distribution Date shall be distributed to the Person in
whose name such Registered Certificate (or one or more Predecessor Certificates)
is registered at the close of business on the related Record Date
notwithstanding the cancellation of such Registered Certificate upon any
transfer or exchange subsequent to such related Record Date.
The distribution of interest and principal on Registered
Certificates shall be made:
(i) if the Certificateholder is a Depository, to the
Depository, which shall credit the relevant Participant's
account at such Depository in accordance with the policies and
procedure of the Depository, or
(ii) if the Certificateholder is not a Depository, at
the Corporate Trust Office (except as otherwise specified in
the related Series Supplement) or, at the option of the
Trustee, by check mailed to the address of the Person entitled
thereto as such address shall appear in the Certificate
Register or, if provided in the related Series Supplement and
in accordance with arrangements satisfactory to the Trustee,
at the option of the Registered Holder by wire transfer to an
account designated by the Registered Holder. Notwithstanding
the foregoing paragraph, with respect to a Certificateholder
of Certificates not held in a Depository and having at least
the Minimum Wire Denomination, such payment shall be made by
wire transfer of immediately available funds to the account
designated by such Certificateholder in a written request
received by the Trustee not later than 10 days prior to such
Distribution Date; provided, however, that if a wire transfer
cannot be made for any reason, payment shall be made by check.
The Trustee shall not
35
<PAGE>
be required to send federal funds wires until any
corresponding payments which were not same day funds when
received by it have become same day funds.
In case a Coupon Certificate of any Series (or Class within
such Series) is surrendered in exchange for a Registered Certificate of such
Series or Class after the close of business (at an office or agency in a Place
of Distribution for such Series or Class) on any Record Date and before the
opening of business (at such office or agency) on the next succeeding
Distribution Date, such Coupon Certificate shall be surrendered without the
Coupon relating to such Distribution Date and interest will not be payable on
such Distribution Date in respect of the Registered Certificate issued in
exchange for such Coupon Certificate, but will be distributable only to the
Holder of such Coupon when due in accordance with the provisions of this Trust
Agreement.
(b) Interest on any Coupon Certificate that is distributable
and is punctually distributed or duly provided for on any Distribution Date
shall be distributed to the Holder of the Coupon that has matured on such
Distribution Date upon surrender of such Coupon on such Distribution Date at the
principal London office of the Trustee or at such other Place of Distribution
outside the United States specified in the related Series Supplement.
Interest on any Bearer Certificate (other than a Coupon
Certificate) that is distributable and is punctually distributed or duly
provided for on any Distribution Date shall be distributed to the Holder of the
Bearer Certificate upon presentation of such Bearer Certificate and notation
thereon on such Distribution Date at the principal London office of the Trustee
or at such other Place of Distribution outside the United States specified in
the related Series Supplement.
Unless otherwise specified in the related Series Supplement,
at the direction of the holder of any Bearer Certificate or Coupon Certificate
payable in Dollars, and subject to applicable laws and regulations,
distributions in respect of such Bearer Certificate or Coupon will be made by
check drawn on a bank in The City of New York or, in accordance with
arrangements satisfactory to the Trustee, by wire transfer to a Dollar account
maintained by such Holder with a bank outside the United States. If such
distribution at the offices of the Trustee or all Paying Agents, if any, outside
the United States becomes illegal or is effectively precluded because of the
imposition of exchange controls or similar restrictions on the
36
<PAGE>
full distribution or receipt of such amounts in Dollars, the Depositor will
appoint an office or agent in the United States at which such distribution may
be made. Unless otherwise specified in the related Series Supplement, at the
direction of the Holder of any Bearer Certificate or Coupon payable in a Foreign
Currency, distributions on such Bearer Certificate or Coupon will be made by a
check drawn on a bank outside the United States or, in accordance with
arrangements satisfactory to the Trustee, by wire transfer to an appropriate
account maintained by such Holder outside the United States. Except as provided
in this paragraph, no distribution on any Bearer Certificate or Coupon will be
made by mail to an address in the United States or by transfer to an account
maintained by the Holder thereof in the United States.
(c) Subject to the foregoing provisions of this Section 4.02,
each Certificate delivered under this Trust Agreement upon transfer of or in
exchange for or in lieu of any other Certificate shall carry the rights to
interest accrued and undistributed, and to accrue, that were carried by such
other Certificate.
(d) All computations of interest due with respect to any
Certificate of any Series or Class within such Series shall be made as specified
in the Series Supplement applicable to that particular Series or Class of
Certificates.
(e) With respect to any computations or calculations to be
made under these Standard Terms, the applicable Series Supplement and the
Certificates, except as otherwise provided, (i) all percentages resulting from
any calculation of accrued interest 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 (ii) all currency amounts will be rounded to the
nearest one-hundredth of a unit (with .005 of a unit being rounded upward).
(f) Unless specified otherwise in a Series Supplement, the
final distribution of principal and/or premium shall be made upon presentation
and surrender of such Certificates at the Corporate Trust Office.
SECTION 4.03. Reports to Certificateholders. Unless otherwise
-----------------------------
specified in the applicable Series Supplement, on the next Business Day
following each such Distribution Date the Trustee shall forward or cause to be
forwarded to the Depositor, each Certificateholder of such Series, to each
Rating Agency rating such Series and such other Persons as may be specified in
such Series Supplement, a statement setting forth:
37
<PAGE>
(i) the amounts received by the Trustee as of the last
such statement in respect of principal, interest and premium
on the Underlying Securities and the Swap Receipt Amount, if
any;
(ii) the Swap Distribution Amount, if any, for such
date;
(iii) the amount of the distribution on such Distribution
Date to Certificateholders of each Class of such Series allocable to
principal of and premium, if any, and interest on the Certificates of
each such Class; and the amount of aggregate unpaid interest accrued as
of such Distribution Date;
(iv) in the case of each Class of Floating Rate
Certificates of such Series, the respective Floating Pass- Through Rate
applicable to each such Class on such Distribution Date, as calculated
in accordance with the method specified in such Certificates and the
related Series Supplement;
(v) the amount of compensation received by the Trustee
for the period relating to such Distribution Date, and such other
customary information as the Trustee deems necessary or desirable, (or
that any such Certificateholder reasonably requests,) to enable such
Certificateholders to prepare their tax returns;
(vi) if the Series Supplement provides for Advances, the
aggregate amount of Advances, if any, included in such distribution,
and the aggregate amount of unreimbursed Advances, if any, at the close
of business on such Distribution Date;
(vii) the aggregate stated principal amount and, if
applicable, notional amount of the Underlying Securities related to
such Series, the current rating assigned by the Rating Agency thereon
and the current interest rate or rates thereon at the close of business
on such Distribution Date;
(viii) the aggregate Certificate Principal Balance (or
Notional Amount, if applicable) of each Class of such series at the
close of business on such Distribution Date, separately identifying any
reduction in such aggregate Certificate Principal Balance (or Notional
Amount) due to the allocation of any Realized Losses on such
Distribution Date or otherwise;
38
<PAGE>
(ix) as to any Series (or any Class within such Series)
for which Credit Support has been obtained, the amount or notional
amount of coverage of each element of Credit Support (and rating, if
any, thereof) included therein as of the close of business on such
Distribution Date.
In the case of information furnished pursuant to subclauses (iii) and (v) above,
the amounts shall be expressed as a dollar amount (or the 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 Trustee shall furnish to each Person who at
any time during each such calendar year was a Certificateholder a statement
containing the information set forth in subclauses (iii) and (v) above,
aggregated for such calendar year or the applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code as are from time to time in effect. The Trustee shall supply to
Certificateholders who so request all materials received by the Trustee from the
Underlying Securities Issuer.
SECTION 4.04. Advances. (a) Unless otherwise specified in the
--------
applicable Series Supplement, the Trustee shall have no obligation to make
Advances (as defined below) with respect to the Underlying Securities or in
favor of the Holders of any Series (or Class within such Series) of
Certificates.
(b) However, as and to the extent provided in the Series
Supplement for a given Series, and subject to the terms of paragraphs (b) and
(c) of this Section 4.04, on or prior to each Distribution Date, the Trustee
shall advance or cause to be advanced in immediately available funds for deposit
in the Certificate Account for such Series an advance (each, an "Advance") in an
amount equal, unless otherwise specified in the related Series Supplement, to
the aggregate of distributions of principal, premium (if any) and interest (net
of related administration fees and any Retained Interest) due on the Underlying
Securities for such Series (or Class) during the related Collection Period, to
the extent remaining unpaid at the time of such Advance. In satisfaction of its
obligation to make such Advances, the Trustee shall make such Advances from its
own funds. The Trustee may recover Advances from late collections received by
the Trustee on the applicable Underlying Securities, proceeds from any
applicable Credit Support, if any, and Liquidation Proceeds with respect to the
Underlying Securities
39
<PAGE>
for such Series or Class, as specified in the related Series Supplement, as to
which any such unreimbursed Advance was made.
(c) Notwithstanding any provision herein to the contrary, no
Advance shall be required to be made hereunder if the Trustee reasonably
believes that it will be unable to recover such Advance from related late
collections, Credit Support proceeds, if any, or Liquidation Proceeds with
respect to the applicable Underlying Securities. It is further understood and
agreed that the Trustee shall not be obligated to make any Advances in respect
of reductions in the amount of collections on the Underlying Securities due to
bankruptcy proceedings with respect to the Underlying Securities or the obligors
thereof.
(d) Notwithstanding any provision herein to the contrary,
unless otherwise provided in the Series Supplement for a given Series, any
Advances made in respect of any Underlying Securities related to such Series (or
Class within such Series) that are subsequently deemed by the Trustee to be
nonrecoverable from related late collections, Credit Support proceeds, if any,
or Liquidation Proceeds may be reimbursed to the Trustee through the application
of amounts on deposit in the Certificate Amount for such series allocable to any
of such Underlying Securities prior to the distributions of interest, premium
(if any) and principal with respect to the Certificates of such Series or Class.
SECTION 4.05. Allocation of Realized Losses and Trust
---------------------------------------
Expenses. With respect to any Series of Certificates, the manner and priority of
- --------
the allocation of Realized Losses, Administrative Fees, Eligible Expenses,
Allowable Expense Amounts and Extraordinary Trust Expenses, if any, on any
Distribution Date among the Classes, if any, of such Series shall be as set
forth in the related Series Supplement.
SECTION 4.06. Compliance with Withholding Requirements. (a)
----------------------------------------
Notwithstanding any other provision of this Trust Agreement to the contrary, the
Trustee shall comply with all Federal withholding requirements respecting
distributions to Certificateholders of interest or original issue discount that
the Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding.
(b) Each Certificateholder will provide the Trustee (and, so
long as the Certificates are held at a Depository in the form of Global
Securities, each Beneficial Owner of the Certificates will provide such
Depository and the Trustee) with
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evidence that there should not be any withholding tax assessed for Federal
income tax purposes in respect of distributions to such Certificateholder, such
evidence to take the form of a statement, on a duly executed and up-to-date
Internal Revenue Service Form W-8 (or successor form), Form W-9 (or successor
form), or Form 4224 (or successor form), as applicable, that identifies the
Beneficial Owner of the Certificate; provided, however, that for so long as the
Certificates are held at a Depository in the form of Global Securities, the
Certificateholder shall have no obligation to provide the Trustee with any such
evidence except to the extent it has received such evidence from Beneficial
Owners of the Certificates. The Trustee shall not be required to accept any such
Internal Revenue Service forms if it believes that they are not accurate (but
the Trustee shall not be required to make any independent investigation to
determine their accuracy).
(c) If any tax or other governmental charge shall become
payable by or on behalf of the Trustee, including any tax or governmental charge
required to be withheld from any payment by the Trustee under the provisions of
any applicable law or regulation with respect to any Underlying Securities or
the Certificates, such tax or governmental charge shall be payable by the
Certificateholder and may be withheld by the Trustee. The consent of
Certificateholder shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
distributions or Advances thereof to any Certificateholder pursuant to Federal
withholding requirements, the Trustee shall indicate in the statement required
pursuant to Section 4.03 the amount so withheld.
(d) The Depositor and the Trustee shall have the right to
refuse the surrender, registration of transfer or exchange of any Certificate
with respect to which such tax or other governmental charge shall be payable
until such payment shall have been made by the Certificateholder.
SECTION 4.07. Optional Exchange. (a) The terms and conditions,
-----------------
if any, upon which Certificates of any Series (or Class within such Series) may
be exchanged for a pro rata portion of the Underlying Securities of the related
Trust will be specified in the related Series Supplement; provided, however,
that any right of exchange shall be exercisable only to the extent that the
Depositor provides upon the Trustee's request an opinion of Counsel that (i)
such exchange would not be inconsistent with the Depositor's and the Trustee's
continued satisfaction of the applicable requirements for exemption under
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Rule 3a-7 (or other applicable rule or exemption) under the Investment Company
Act of 1940, as amended, and all applicable rules, regulations and
interpretations thereunder and (ii) such exchange would not affect the
characterization of the Trust as a "grantor trust" for federal income tax
purposes. Such terms may relate to, but are not limited to, the following:
(1) a requirement that the exchanging Holder tender to
the Trustee Certificates of each Class within such Series;
(2) a minimum Certificate Principal Balance or Notional
Amount, as applicable, with respect to Certificates being tendered for
exchange by a single Holder:
(3) a requirement that the Certificate Principal Balance or
National Amount, as applicable, of each certificate tendered for
exchange be an integral multiple of an amount specified in such Series
Supplement;
(4) specified dates during which a Holder may effect
such an exchange (each, an Optional Exchange Date);
(5) limitations on the right of an exchanging Holder to
receive any benefit upon exchange from any Credit Support or Underlying
Securities which are not debt Securities; and
(6) adjustments to the value of the proceeds of any exchange
based upon required prepayment of future expense allocations and the
establishment of a reserve for any anticipated Extraordinary Trust
Expenses.
(b) Unless otherwise provided in the applicable Series
Supplement, no Certificate may be exchanged pursuant to the preceding paragraph
unless the Trustee has received at least 30 days but not more than 45 days prior
to an Optional Exchange Date in accordance with delivery instructions specified
in the applicable Series Supplement (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 and the Certificate number or a description of the tenor and the
terms of such Registered Certificate, a statement that the option
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to elect exchange is being exercised thereby and an assurance 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 at
such telegram, telex, facsimile transmission or letter, and 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 thereof for
exchange shall be irrevocable. Unless otherwise provided in the applicable
Series Supplement, the exchange option may be exercised pursuant to this Section
by the Holder of a Certificate for less than the Certificate Principal Balance
or Notional Amount of such Certificate as long as the Certificate Principal
Balance or National Amount remaining Outstanding after such exchange is an
authorized denomination and all other exchange requirements set forth in the
related Series Supplement are satisfied upon such partial exchange such
Certificate shall be cancelled and a new Certificate or Certificates for the
remaining Certificate Principal Balance or Notional Amount thereof shall be
issued (which, in the case of any Registered Certificate, shall be in the name
of the Holder of such exchanged Certificate).
(c) Upon the completion of any such optional exchange, the
Trustee shall give prompt written notice thereof to each Rating Agency.
ARTICLE V
The Certificates
----------------
SECTION 5.01. The Certificates. (a) The Certificates of any
----------------
Series (or Class within such Series) may be issued in (x) fully registered form
as Registered Certificates or (y) bearer form with or without Coupons as Bearer
Certificates, and shall be substantially in the form of the exhibits with
respect thereto attached to the applicable Series Supplement.
The Certificates may be issued in one or more Series, each of
which Series may, subject to the provisions of the Code and the intended status
of each Series Trust to constitute a fixed investment trust for federal income
tax purposes, be issued in one or more Classes, with such further particular
designation added or incorporated in such title for the Certificates of any
particular Series or Class within such Series as the Depositor may determine.
Each Certificate and Coupon shall bear upon its face the designation so selected
for the Series and Class to
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which it belongs. All Certificates and all Coupons of the same Series and Class
shall be identical in all respects except for the denominations thereof. All
Certificates of all Classes within any one Series at any time Outstanding shall
be identical except for differences among the Certificates of the different
Classes within such Series specified in the applicable Series Supplement. Except
as otherwise provided in a Series Supplement, all Certificates of a particular
Series (and all Classes within such Series) issued under this Trust Agreement
shall be in all respects equally and ratably entitled to the benefits hereof
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Trust Agreement.
(b) Each Series (and all Classes within such Series) of
Certificates shall be created by a Series Supplement authorized by the Depositor
and establishing the terms and provisions of such Series. The several Series
may, subject to the provisions of the Code and the intended status of each Trust
to constitute a fixed investment trust for federal income tax purposes, differ
as between Series and any given Class may vary as between the other Classes
within any given Series.
SECTION 5.02. Execution, Authentication and Delivery.
--------------------------------------
(a) The Certificates and the Coupons, if any, shall be executed
by the Depositor by its President, its Treasurer, or one of its
Vice Presidents, under its corporate seal, which may be in facsimile form and
imprinted or otherwise reproduced thereon and shall be attested by its Secretary
or one of its Assistant Secretaries. The signature of any of these officers may
be manual or facsimile. Certificates and Coupons bearing the manual or facsimile
signature of individual who were at any time the proper officers of the
Depositor shall be binding, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Certificates or Coupons or did not hold such offices at the date of such
Certificates and Coupons. Notwithstanding anything in this Agreement to the
contrary, the Trustee, upon written direction by the Depositor, will, with
respect to any Series, execute any related Certificates.
(b) Each Certificate shall be dated as of the later of
the date specified in the related Series Supplement and the date
of its authentication.
(c) No Certificate or Coupon appertaining thereto shall be
entitled to any benefit under this Trust Agreement or be valid or obligatory for
any purpose, unless there appears on such
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Certificate a certificate of authentication substantially in one of the forms
provided for herein or in the form of Certificate attached to the related Series
Supplement executed by the Trustee by the manual signature of one of its
authorized signatories, and such certificate of authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate (and any Coupons appertaining thereto) has been duly authenticated
and delivered hereunder and is entitled to the benefits of this Trust Agreement.
Except as permitted by Section 5.04, 5.05 or 5.06, the Trustee shall not
authenticate and deliver any Bearer Certificate unless all appurtenant Coupons
then matured have been detached and cancelled.
SECTION 5.03. Temporary Certificates. Pending the preparation
----------------------
of Definitive Certificates of any Series (or Class within each such Series), the
Depositor may execute, and upon receipt of a Depositor Order, the Trustee shall
authenticate and deliver temporary Certificates which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the Definitive Certificates in lieu of which they
are issued, in registered form or, if authorized, in bearer form with one or
more Coupons or without Coupons, and with such appropriate insertions,
omissions, substitutions and other variations as may be authorized by such
Depositor Order. Any such temporary Certificate may be in global form,
representing all or a portion of the Outstanding Certificates of such Series or
Class. Every such temporary Certificate shall be executed by the Depositor and
shall be authenticated and delivered by the Trustee upon the same conditions and
in substantially the same manner, and with the same effect, as the Definitive
Certificate or Definitive Certificates in lieu of which is issued.
If temporary Certificates of any Series (or Class within such
Series) are issued, the Depositor will cause Definitive Certificates of such
Series or Class to be prepared without unreasonable delay. Except as otherwise
specified in the applicable Series Supplement with respect to a Series (or Class
within such Series) of Certificates issuable as Bearer Certificates or as one or
more Global Securities representing individual Bearer Certificates of such
Series or Class, (a) after the preparation of Definitive Certificates of such
Series or Class, the temporary Certificates of such Series or Class shall be
exchangeable for Definitive Certificates of such Series or Class upon surrender
of the temporary Certificates of such Series or Class at the office of the
Trustee in a Place of Distribution for such Series or Class, without charge to
the Holder, except as provided in Section 5.04 in connection with a transfer and
except
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that a Person receiving definitive Bearer Certificates shall bear the cost of
insurance, postage, transportation and the like unless otherwise specified in
the applicable Series Supplement, and (b) upon surrender for cancellation of any
one or more temporary Certificates of any Series or Class within such Series
(accompanied by any unmatured Coupons appertaining thereto), the Depositor shall
execute and the Trustees shall authenticate and deliver in exchange therefore
Definitive Certificates with a like Certificate Principal Balance or Notional
Amount, as applicable, of the same Series (or Class within such Series) of
authorized denominations and of like tenor; provided, however, that no
definitive Bearer Certificate shall be delivered in exchange for a temporary
Registered Certificate; and provided, further, that delivery of a Global
Security representing individual Bearer Certificates or a Bearer Certificate
shall occur only outside the United States. Until so exchanged, temporary
Certificates of any Series (or Class within such Series) shall in all respects
be entitled to the same benefits under this Trust Agreement as Definitive
Certificates of such Series or Class, except as otherwise specified in the
applicable Series Supplement with respect to the payment of interest on Global
Securities in temporary form.
Unless otherwise specified in the related Series Supplement,
the Depositor will execute and deliver individual Bearer Certificates in
exchange for beneficial interests in the definitive Global Security and each
Bearer Certificate to the Trustee's principal office in London or to an
authorized agent at such other place outside the United States specified in the
related Series Supplement.
Upon any exchange of a portion of a temporary Global Security
for a definitive Global Security or for the individual Definitive Certificates
represented thereby pursuant to this Section 5.03 or Section 5.04, the temporary
Global Security shall be endorsed by the Trustee to reflect the reduction of the
aggregate Certificate Principal Balance or Notional Amount, as applicable,
evidenced thereby, whereupon the aggregate Certificate Principal Balance or
Notional Amount, as applicable, of such temporary Global Security shall be
reduced for all purposes by the amount so exchanged and endorsed.
SECTION 5.04. Registration; Registration of Transfer and
------------------------------------------
Exchange. (a) The Trustee shall cause to be kept a register for each Series of
- --------
Registered Certificates (the registers maintained in such office and in any
other office or agency of the Trustee in a Place of Distribution being herein
sometimes collectively referred to as the "Certificate Register") in which
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a transfer agent and registrar (which may be the Trustee) (the "Certificate
Registrar") shall provide for the registration of Registered Certificates and
the registration of transfers and exchanges of Registered Certificates. The
Trustee is hereby initially appointed Certificate Registrar for the purpose of
registering Registered Certificates and transfers and exchanges of Registered
Certificates as herein provided; provided, however, that the Trustee may appoint
one or more co-Certificate Registrars. Upon any resignation of any Certificate
Registrar, the Depositor shall promptly appoint a successor or, in the absence
of such appointment, assume the duties of Certificate Registrar.
If a Person other than the Trustee is appointed by the
Depositor as Certificate Registrar, the Depositor will give the Trustee prompt
written notice of the appointment of a Certificate Registrar and of the
location, and any change in the location, of the Certificate Register, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Certificate Registrar by an Executive Officer thereof as to the names and
addresses of the Holders of the Registered Certificates and the principal
amounts and numbers of such Registered Certificates.
(b) Upon surrender for registration of transfer any Registered
Certificate of any Series (or Class within such Series) at the office or agency
of the Trustee, if the requirements of Section 8-401(1) of the Uniform
Commercial Code are met to the Depositor's satisfaction, the Depositor shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Registered Certificates of
any authorized denominations, of a like Series, Class and aggregate Certificate
Principal Balance or Notional Amount, as applicable. Except as otherwise
specified in the related Series Supplement, in no event may Registered
Certificates, including Registered Certificates received in exchange for Bearer
Certificates, be exchanged for Bearer Certificates.
(c) Notwithstanding any other provisions of this Section,
unless and until it is exchanged in whole or in part for the individual
Certificates represented thereby, a Global Security representing all or a
portion of the Certificates of a Series (or Class within such Series) may not be
transferred except as a whole by the Depository for such Series or Class 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 Depository for such Series or Class or a nominee of such
successor Depository.
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(d) At the option of the Holder, Registered Certificates of
any Series (or Class within such Series) (other than a Global Security, except
as set forth below) may be exchanged for other Registered Certificates of the
same Series or Class of any authorized denomination or denominations of like
tenor and aggregate Certificate Principal Balance or Notional Amount, as
applicable, upon surrender of the Registered Certificates to be exchanged at the
office or agency of the Trustee maintained for such purpose.
(e) At the option of the Holder, except as otherwise specified
in the related Series Supplement with respect to a Global Security representing
Bearer Certificates, Bearer Certificates of any Series (or Class within such
Series) may be exchanged for Registered Certificates (if the Certificates of
such Series or Class are issuable as Registered Certificates) or Bearer
Certificates of the same Series or Class, of any authorized denomination or
denominations, of like tenor and aggregate Certificate Principal Balance or
Notional Amount, as applicable, upon surrender of the Bearer Certificates to be
exchanged at the office or agency of the Trustee maintained for such purpose,
with all unmatured Coupons and all matured Coupons in default thereto
appertaining; provided, however, that delivery of a Bearer Certificate shall
occur only outside the United States. If the Holder of a Bearer Certificate is
unable to produce any such unmatured Coupon or Coupons or matured Coupon or
Coupons in default, such exchange may be effected if the Bearer Certificates are
accompanied by payment in funds acceptable to the Depositor and the Trustee in
an amount equal to the face amount of such missing Coupon or Coupons, or the
surrender of such missing Coupon or Coupons may be waived by the Depositor and
the Trustee if there be furnished to each of them such security or indemnity as
they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Bearer Certificate shall surrender for payment any
such missing Coupon in respect of which such a payment shall have been made,
such Holder shall be entitled to receive the amount of such payment; provided,
however, that, except as otherwise provided in Section 5.06, interest
represented by Coupons shall be payable only upon presentation and surrender of
those Coupons at an office or agency located outside the United States.
Whenever any Certificates are so surrendered for exchange, the
Depositor shall execute and the Trustee shall authenticate and deliver the
Certificates that the Holder making the exchange is entitled to receive.
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Notwithstanding the foregoing, the exchange of Bearer
Certificates for Registered Certificates will be subject to the provisions of
United States income tax laws and regulations applicable to Certificates in
effect at the time of such exchange.
(f) If at the time the Depository for the Certificates of a
Series (or Class within such Series) notifies the Depositor that it is unwilling
or unable to continue as Depository for the Certificates of such Series or Class
or if at any time the Depository for the Certificates of such Series or Class
shall no longer be eligible under Section 5.08(b), the Depositor shall appoint a
successor Depository with respect to the Certificates of such Series or Class.
If a successor Depository for the Certificates of such Series or Class is not
appointed by the Depositor within 90 days after the Depositor receives such
notice or becomes aware of such ineligibility, the Depositor's election as
specified in the related Series Supplement shall no longer be effective with
respect to the Certificates of such Series or Class and the Depositor will
execute, and the Trustee, upon receipt of a Depositor Order for the
authentication and delivery of individual Certificates of such Series or Class,
will authenticate and deliver individual Certificates of such Series or Class in
an aggregate Certificate Principal Balance or Notional Amount, as applicable,
equal to the aggregate Certificate Principal Balance or Notional Amount, as
applicable, of the Global Security or Securities representing Certificates of
such Series or Class in exchange for such Global Security or Securities.
(g) The Depositor may at any time and in its sole discretion
determine that individual Certificates of any Series (or Class within such
Series) issued in the form of one or more Global Securities shall no longer be
represented by such Global Security or Securities. In such event the Depositor
shall execute, and the Trustee, upon receipt of a Depositor Order for the
authentication and delivery of individual Certificates of such Series or Class,
shall authenticate and deliver, individual Certificates of such Series or Class
in an aggregate Certificate Principal Balance or Notional Amount, as applicable,
equal to the aggregate Certificate Principal Balance or Notional Amount, as
applicable, of the Global Security or Securities representing Certificates of
such Series or Class in exchange for such Global Security or Securities.
(h) If specified by the Depositor pursuant to the related
Series Supplement with respect to a Series (or Class within such Series) of
Certificates, the Depository for such
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Series may surrender a Global Security for such Series or Class in exchange in
whole or in part for individual Certificates of such Series or Class on such
terms as are acceptable to the Depositor and such Depository. Thereupon, the
Depositor shall execute, and the Trustee, upon receipt of a Depositor Order,
shall authenticate and deliver, without service charge,
(i) to each Person specified by such Depository a new
individual Certificate or Certificates of the same Series or Class, of
any authorized denomination as requested by such Person in an aggregate
Certificate Principal Balance or Notional Amount, as applicable, equal
to and in exchange for such Person's beneficial interest in the Global
Security; and
(ii) to such Depository a new Global Security in a
denomination equal to the difference, if any, between the aggregate
Certificate Principal Balance or Notional Amount, as applicable, of the
surrendered Global Security and the aggregate Certificate Principal
Balance or Notional Amount, as applicable, of individual Certificates
delivered to Holders thereof.
In any exchange provided for in any of the preceding three
paragraphs, the Depositor shall execute, and the Trustee, upon receipt of a
Depositor Order, will authenticate and deliver individual Certificates (a) in
registered form in authorized denominations, if the Certificates of such Series
or Class are issuable as Registered Certificates, (b) in bearer form in
authorized denominations, with or without Coupons attached, if the Certificates
of such Series or Class are issuable as Bearer Certificates or (c) as either
Registered or Bearer Certificates, if the Certificates of such Series or Class
are issuable in either form; provided, however, that individual Bearer
Certificates shall be delivered in exchange for a Global Security only in
accordance with the procedures specified in the related Series Supplement.
Upon the exchange of a Global Security for individual
Certificates, such Global Security shall be cancelled by the Trustee. Individual
Registered Certificates issued in exchange for a Global Security pursuant to
this Section 5.04 shall be registered in such names and in such authorized
denominations as the Depository for such Global Security, pursuant to
instructions from its Participants, any indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Registered
Certificates to the Person in whose names such Registered Certificates are so
registered. The Trustee shall
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deliver individual Bearer Certificates issued in exchange for a Global Security
pursuant to this Section 5.04 to the Persons and in such authorized
denominations as the Depository for such Global Security, pursuant to
instructions from its Participants, any indirect participants or otherwise,
shall instruct the Trustee; provided, however, that individual Bearer
Certificates shall be delivered in exchange for a Global Security only in
accordance with the procedures as may be specified in the related Series
Supplement.
Notwithstanding the foregoing, the exchange of Bearer
Certificates for Registered Certificates will be subject to the provisions of
United States income tax laws and regulations applicable to Certificates in
effect at the time of such exchange.
(i) All Certificates issued upon any registration of transfer
or exchange of Certificates shall constitute complete and indefeasible evidence
of ownership in the Trust related to such Certificates and be entitled to the
same benefits under this Trust Agreement as the Certificates surrendered upon
such registration of transfer or exchange.
(j) Every Registered Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Depositor, the
Trustee or the Certificate Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Depositor, the
Trustee or the Certificate Registrar, duly executed, by the Holder thereof or
his attorney duly authorized in writing, with such signature guaranteed by a
brokerage firm or financial institution that is a member of a Securities
Approved Medallion Program such as Securities Transfer Agents Medallion Program
(STAMP), Stock Exchange Medallion Program (SEMP) or New York Stock Exchange Inc.
Medallion Signature Program (MSP).
(k) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Depositor may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates, other than exchanges pursuant to Section 5.03 not
involving any transfer.
SECTION 5.05. Mutilated, Destroyed, Lost and Stolen
-------------------------------------
Certificates. If (i) any mutilated Certificate or any mutilated
- ------------
Coupon with the Coupon Certificate to which it appertains (and
all unmatured Coupons attached thereto) is surrendered to the
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Trustee at its Corporate Trust Office (in the case of Registered Certificates)
or at its principal London office (in the case of Bearer Certificates) or (ii)
the Depositor and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate or any Coupon, and there is
delivered to the Depositor and the Trustee such security or indemnity as they
may require to hold each of them and any Paying Agent harmless, and neither the
Depositor nor the Trustee receives notice that such Certificate or Coupon has
been acquired by a bona fide purchaser, then the Depositor shall execute and the
Trustee, upon receipt of a Depositor Order, shall authenticate and deliver, in
exchange for any such mutilated Certificate, or in lieu of any such destroyed,
lost or stolen Certificate or in exchange for the Coupon Certificate to which
such mutilated, destroyed lost or stolen Coupon appertained, a new Certificate
of the same Series or Class of like tenor, form, terms and principal amount,
bearing a number not contemporaneously Outstanding, and, in the case of a Coupon
Certificate, with such Coupons attached thereto so that neither gain nor loss in
interest shall result from such exchange or substitution.
Upon the issuance of any new Certificate under this Section,
the Depositor may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in respect thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Certificate of any Series or Class, with its
Coupons, if any, issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust related to such Series, whether
or not the destroyed, lost or stolen Certificate or Coupon shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this Trust
Agreement equally and proportionately with any and all other Certificates of
that Series or Class and their Coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates
or Coupons.
SECTION 5.06. Persons Deemed Owners. (a) The Depositor, the
---------------------
Trustee and any agent of the Depositor or the Trustee may treat the Person in
whose name any Registered Certificate is registered as the owner of such
Registered Certificate for the purpose of receiving distributions of principal
of (and premium, if any) and (subject to Section 4.02)
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interest, if any, on such Registered Certificate and for all other purposes
whatsoever, whether or not such Registered Certificate be overdue, and neither
the Depositor or the Trustee, nor any agent of the Depositor or the Trustee
shall be affected by notice to the contrary.
(b) The Depositor, the Trustee and any agent of the Depositor
or the Trustee may treat the Holder of any Bearer Certificate or of any Coupon
as the absolute owner of such Bearer Certificate or Coupon for the purposes of
receiving distributions thereof or on account thereof and for all other purposes
whatsoever, whether or not such Bearer Certificate or Coupon be overdue, and
neither the Depositor, the Trustee, nor any agent of the Depositor or the
Trustee shall be affected by notice to the contrary. All distributions made to
any Holder, or upon his order, shall be valid, and, to the extent of the sum or
sums paid, effectual to satisfy and discharge the liability for moneys
distributable upon such Certificate or Coupon.
(c) None of the Depositor, the Trustee or any of their agents
will have any responsibility or liability for any aspect of the records relating
to or distributions made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
SECTION 5.07. Cancellation. Unless otherwise specified in the
------------
related Series Supplement for Certificates of any Series, all Certificates
surrendered for payment, redemption, transfer or exchange and all Coupons
surrendered for payment or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificates or Coupons shall be authenticated in lieu of or in exchange
for any Certificates or Coupons cancelled as provided in this Section, except as
expressly permitted by this Trust Agreement.
SECTION 5.08. Global Securities. (a) If the Series Supplement
-----------------
pursuant to Section 5.01 provides that a Series (or Class within such Series) of
Certificates shall be represented by one or more Global Securities, then the
Depositor shall execute and the Trustee shall authenticate and deliver one or
more Global Securities, that (i) shall represent an aggregate initial
Certificate Principal Balance or Notional Amount, as applicable, equal to the
aggregate initial Certificate Principal Balance or Notional Amount, as
applicable, of the Certificates of such Series or Class to be represented by
such one or more Global Securities, (ii) shall be registered, if in registered
form, in
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the name of the Depository for such Global Security or Securities or the nominee
of such Depository, (iii) shall be delivered by the Trustee to such Depository
or pursuant to such Depository's instruction and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for the individual Certificates represented hereby, this Global
Security may not be transferred except as a whole by the Depository to a nominee
of the Depository or by a nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository.
No Holder of a Certificate of such Series or Class will
receive a Definitive Certificate representing such Holder's interest in such
Certificate or Certificates, except as provided in Section 5.10. Unless and
until definitive, fully registered Certificates (the "Definitive Certificates")
have been issued to Holders of such Series or Class pursuant to Section 5.11:
(i) the provisions of this Section 5.09 shall
be in full force and effect;
(ii) the Certificate Registrar and the Trustee
shall be entitled to deal with the Depository for all purposes
of this Trust Agreement (including the distribution of
principal of, and premium, if any, and interest on the
Certificates and the giving of instructions or directions
hereunder) as the sole Holder of the Certificates of such
Series or Class, and shall have no obligation to the owners of
beneficial interests in such Series or Class (collectively,
the "Certificate Owners");
(iii) to the extent that the provisions of this
Section 5.08 conflict with any other provisions of this Trust
Agreement, the provisions of this Section 5.08 shall control;
(iv) the rights of Certificate Owners of such
Series or Class shall be exercised only through the Depository
and shall be limited to those established by law and
agreements between such Certificate Owners and the Depository
or its Participants;
(v) whenever this Trust Agreement requires or
permits actions to be taken based upon instructions or
directions of Holders of Certificates of such Series or Class
evidencing a specified percentage of the aggregate Voting
Rights of such Series or Class, the
54
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Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect
from Certificate Owners of such Series or Class or
Participants in such Depository's system owning or
representing, respectively, such required percentage of the
beneficial interest in the Certificates of such Series or
Class and has delivered such instructions to the Trustee.
(b) Each Depository designated in the related Series
Supplement for a Global Security in registered form must, at the time of its
designation and at all times while it serves as such Depository, be a clearing
agency registered under the Exchange Act and any other applicable statute or
regulation.
SECTION 5.09. Notices to Depository. Whenever a notice or
---------------------
other communication to the Holders of a Series or Class within such Series
represented by one or more Global Securities is required under this Trust
Agreement, unless and until Definitive Certificates for such Series or Class
shall have been issued to such Certificate Owners pursuant to Section 5.10, the
Trustee shall give all such notices and communications specified herein to be
given to Holders of the Certificates of such Series to the Depository, and shall
have no obligation to the Certificate Owners.
SECTION 5.10. Definitive Certificates. If in respect of a
-----------------------
Series (or Class within such Series) represented by one or more Global
Securities (i) the Depositor advises the Trustee in writing that the Depository
is no longer willing or able to properly discharge its responsibilities with
respect to the Certificates of such Series or Class and the Depositor is unable
to locate a qualified successor, (ii) the Depositor at its option advises the
Trustee in writing that it elects to terminate the book-entry system of such
Series or Class through the Depository or (iii) Certificate Owners representing
beneficial interests aggregating at least a majority (or such other Required
Percentage--Definitive Certificates that may be specified in a Series
Supplement) of the Voting Rights of the Certificates of such Series or Class
advise the Depository in writing that the continuation of a book-entry system
for such Series or Class through the Depository is no longer in the best
interests of the Certificates Owners of such Series or Class, then the
Depository shall notify all Certificate Owners or Participants in the
Depository's system with respect to such Series or Class and the Trustee of the
occurrence of any such event and of the availability of Definitive Certificates
for such Series or Class
55
<PAGE>
to Certificate Owners of such Series or Class requesting the
same.
Upon surrender to the Trustee of the Global Securities of such
Series or Class by the Depository, accompanied by registration instructions, the
Depositor shall execute and the Trustee shall authenticate the Definitive
Certificates of such Series or Class in accordance with the instructions of the
Depository. None of the Depositor, the Certificate Registrar or the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates of Series or Class, the Trustee
shall recognize the holders of the Definitive Certificates of such Series or
Class as Holders.
SECTION 5.11. Currency of Distributions in Respect of
---------------------------------------
Certificates. (a) Except as otherwise specified in the related Series Supplement
- ------------
for Bearer Certificates of any Series (or Class within such Series),
distributions of the principal of (and premium, if any) and interest on Bearer
Certificates of such Series or Class denominated in any Currency will be made in
such Currency.
(b) Except as otherwise specified in the related Series
Supplement for Registered Certificates of any Series (or Class within such
Series), distributions of the principal of (and premium, if any) and interest on
Registered Certificates of such Series or Class will be made in Dollars.
(c) For purposes of any provision of the Trust Agreement where
the Holders of Outstanding Certificates may perform an act that requires that a
specified percentage of the aggregate Voting Rights of the Certificates of all
Series perform such act and for purposes of any decision or determination by the
Trustee of amounts due and not distributed for the principal of (and premium, if
any) and interest on the Certificates of all Series in respect of which moneys
are to be disbursed ratably, the principal of (and premium, if any) or notional
amount of, as applicable, and interest on the Outstanding Certificates
denominated in a Foreign Currency will be the amount in Dollars based upon
exchange rates, determined as specified in the related Series Supplement for
Certificates of such Series, as of the date for determining whether the Holders
entitled to perform such act have performed it or as of the date of such
decision or determination by the Trustee, as the case may be.
56
<PAGE>
(d) With respect to Certificates of any Series, any decision
or determination to be made regarding exchange rates shall be made by an
Exchange Rate Agent appointed by the Depositor; provided, however, that such
Exchange Rate Agent shall accept such appointment in writing and the terms of
such appointment shall be acceptable to the Trustee and shall, in the opinion of
the Depositor at the time of such appointment, require such Exchange Rate Agent
to make such determination by a method provided in the applicable Series
Supplement for the making of such decision or determination. All decisions and
determinations of such Exchange Rate Agent regarding exchange rates shall be in
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and irrevocably binding upon the Depositor, the Trustee and all
Holders of the Certificates of such Series.
(e) If distributions in respect of a Certificate are required
to be made in a Specified Currency other than Dollars and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the control of the Trustee and the Depositor or is no longer used by the
government of the country issuing such Specified Currency or is no longer
commonly used 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 Dollars until such Specified Currency is again
so used in the manner specified in the related Series Supplement.
SECTION 5.12. Conditions of Authentication and Delivery of New
------------------------------------------------
Series. Certificates of a new Series may be issued at any time and from time to
- ------
time after the execution and delivery of these Standard Terms and the related
Series Supplement. The Depositor shall execute and deliver Certificates of such
Series to the Trustee, with appropriate Coupons, if any, appertaining thereto,
and the Trustee shall authenticate and deliver such Certificates upon a
Depositor Order and upon delivery by the Depositor to the Trustee of the
following:
(1) The delivery of the Underlying Securities in
accordance with Section 2.01(b);
(2) Opinions of Counsel to the Depositor, addressed to
the Trustee, in a form acceptable to the Trustee;
(3) An Officer's Certificate of the Depositor, dated as
of the Closing Date, to the effect that all of the
requirements of this Section 5.12 have been
satisfied, and that the Depositor is not in breach
57
<PAGE>
of this Trust Agreement and that the issuance of the
Certificates will not result in any breach of any of
the terms, conditions, or provisions of, or
constitute a default under, the Depositor's
Certificate of Incorporation or bylaws, or any
indenture, mortgage, deed of transfer or other
agreement or instrument to which the Depositor is a
party or by which it or its property is bound or any
order of any court or administrative agency entered
in any Proceeding to which the Depositor is a party
or by which it or its property may be bound or to
which it or its property may be subject;
(4) A Series Supplement consistent with the applicable
provisions of these Standard Terms;
(5) If applicable, a fully executed copy of the Swap
Agreement, together with all documents and opinions
required to be delivered to the Trust upon execution
thereof pursuant to the terms thereof;
(6) Written instructions by the Depositor to the Trustee
directing the Trustee to enter into and perform any
obligations under the Swap Agreement, if applicable,
and/or the Market Agent Agreement, if applicable.
If all the Certificates of a Series are not to be originally
issued at the same time, then the documents required to be delivered pursuant to
this Section 5.12 must be delivered only once, prior to the authentication and
delivery of the first Certificate of such Series; provided, however, that any
subsequent Depositor Order to the Trustee to authenticate Certificate of such
Series upon original issuance shall constitute a representation and warranty by
the Depositor that, as of the date of such request, the statements made in this
Section 5.12 shall be true and correct as if made on such date.
SECTION 5.13. Appointment of Paying Agent. The Trustee may
---------------------------
appoint one or more paying agents (each, a "Paying Agent") with respect to the
Certificates of any Series. Any such Paying Agent shall be authorized to make
distributions to Certificateholders of such Series from the Certificate Account
for such Series pursuant to the provisions of the applicable Series Supplement
and shall report the amounts of such distributions to the Trustee. Any Paying
Agent shall have the revocable
58
<PAGE>
power to withdraw funds from such Certificate Account for the purpose of making
the distributions referred to above. The Trustee may revoke such power and
remove the Paying Agent if the Trustee determines in its sole discretion that
the Paying Agent shall have failed to perform its obligations under this Trust
Agreement in any material respect. The Paying Agent shall initially be the
Trustee and any co-paying agent chosen by the Trustee and acceptable to the
Depositor, including, if and so long as any Series or Class within such Series
is listed on the Luxembourg Stock Exchange and such exchange so requires, a
co-paying agent in Luxembourg or another European city. Any Paying Agent shall
be permitted to resign as Paying Agent upon 30 days' notice to the Trustee. In
the event that the Trustee shall no longer be the Paying Agent, the Trustee
shall appoint a successor or additional Paying Agent. The Trustee shall cause
each successor to act as Paying Agent to execute and deliver to Trustee an
instrument in which such successor or additional Paying Agent shall agree with
the Trustee that it will hold all sums, if any, held by it for distribution to
the Certificate- holders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be distributed to such Certificateholders
and will agree to such other matters as are required by Section 317(b) of the
Trust Indenture Act. The Paying Agent shall return all unclaimed funds to the
Trustee and upon removal shall also return all funds in its possession to the
Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 7.06 shall apply to the
Trustee also in its role as Paying Agent, for so long as the Trustee shall act
as Paying Agent. Any reference in this Trust Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
Notwithstanding anything contained herein to the contrary, the appointment of a
Paying Agent pursuant to this Section 5.13 shall not release the Trustee from
the duties, obligations, responsibilities or liabilities arising under this
Trust Agreement other than with respect to funds paid to such Paying Agent.
SECTION 5.14. Authenticating Agent. (a) The Trustee may
--------------------
appoint one or more authenticating agents (each, an "Authenticating Agent") with
respect to the Certificates of any Series which shall be authorized to act on
behalf of the Trustee in authenticating such Certificates in connection with the
issuance, delivery and registration of transfer or exchange of such
Certificates. Whenever reference is made in this Trust Agreement to the
authentication of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an Authenticating Agent and a certificate of
authentication
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<PAGE>
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent must be acceptable to the Depositor. Notwithstanding
anything contained herein to the contrary, the appointment of an Authenticating
Agent pursuant to this Section 5.14 shall not release the Trustee from the
duties, obligations, responsibilities or liabilities arising under this Trust
Agreement.
(b) Any institution succeeding to the corporate agency
business of any Authenticating Agent shall continue to be an Authenticating
Agent without the execution or filing of any power or any further act on the
part of the Trustee or such Authenticating Agent. An Authenticating Agent may at
any time resign by giving notice of resignation to the Trustee and to the
Depositor. The Trustee may at any time terminate the agency of an Authenticating
Agent by giving notice of termination to such Authenticating Agent and to the
Depositor. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an Authenticating Agent shall cease to be
acceptable to the Trustee or the Depositor, the Trustee promptly may appoint a
successor Authenticating Agent. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless acceptable to the Depositor. The Trustee agrees to pay
to each Authenticating Agent from time to time reasonable compensation for its
services under this Section. The provisions of Section 7.01, 7.03 and 7.04 shall
be applicable to any Authenticating Agent.
(c) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in the
Standard Terms and the related Series Supplement.
Dated:
---------------------------
---------------------------
as Authenticating Agent
for the Trustee,
By --------------------- "
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<PAGE>
SECTION 5.15. Voting Rights with Respect to Underlying
----------------------------------------
Securities. (a) Within five Business Days after receipt of notice of any meeting
- ----------
of, or other occasion for the exercise of voting rights or the giving of
consents ("voting rights") by, owners of any of the Underlying Securities, the
Trustee shall give notice to the Certificateholders, setting forth (i) such
information as is contained in such notice to owners of Underlying Securities,
(ii) a statement that the Certificateholders will be entitled, subject to any
applicable provision of law and any applicable provisions of such Underlying
Securities (and to the extent of the voting rights allocated to the
Certificateholders pursuant to subsection 5.15(b)), to instruct the Trustee as
to the exercise of voting rights, if any, pertaining to such Underlying
Securities and (iii) a statement as to the manner in which instructions may be
given to the Trustee to give a discretionary proxy to a person designated in the
notice received by the Trustee. Such notice shall be given by the Trustee to the
Certificateholders of record on such Record Date.
Upon the written request of the applicable Certificateholder,
received on or before the date established by the Trustee for such purpose, the
Trustee shall endeavor, insofar as practicable and permitted under any
applicable provision of law and any applicable provision of or governing the
Underlying Securities, to vote in accordance with any nondiscretionary
instruction set forth in such written request (in each case to the extent of the
voting rights allocated pursuant to subsection 5.15(b) to such
Certificateholder). The Trustee shall not vote except as specifically authorized
and directed in written instructions from the applicable Certificateholder
entitled to give such instructions.
(b) Unless otherwise specified in the applicable Series
Supplement, the voting rights allocable to the owners of the Underlying
Securities pursuant to the terms thereof shall be allocated among the
Certificateholders pro rata, in the proportion that the denomination of each
Certificate bears to the aggregate denomination of all Certificates.
(c) By accepting delivery of a Certificate, whether upon
original issuance or subsequent transfer, exchange or replacement thereof, and
without regard to whether ownership is beneficial or otherwise, the
Certificateholder agrees so long as it is an owner of such Certificate that it
shall not grant any consent (i) to any conversion of the timing of payment of,
or the method or rate of accruing of, interest on the Underlying Securities
underlying the Certificates held by such
61
<PAGE>
Certificateholder or (ii) to any redemption or prepayment of the Underlying
Securities underlying the Certificates held by such Certificateholder. The
Trustee shall not grant any consent solicited from the owners of the Underlying
Securities underlying the Certificates with respect to the matters set forth in
this Section nor shall it accept or take any action in respect of any consent,
proxy or instructions received from any Certificateholder in contravention of
the provisions of this Section.
SECTION 5.16. Actions by Certificateholders.
-----------------------------
(a) Wherever in this Trust Agreement a provision is made that
an action may be taken or a notice, demand or instruction given by
Certificateholders or Beneficial Owners, such action, notice or instruction may
be taken or given by any Certificateholder or Beneficial Owner.
(b) Each Certificateholder or Beneficial Owner shall have the
right to assert any rights and privileges of a Certificateholder or Beneficial
Owner, and shall have the right to proceed directly and individually against any
Person to enforce any remedies hereunder and shall not be required to act in
concert with any other Certificateholder or Beneficial Owner or any other
Person.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder or Beneficial Owner of a
Certificate shall bind such Certificateholder or Beneficial Owner and every
subsequent Certificateholder or Beneficial Owner of such Certificate or any
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, suffered or omitted to
be done by the Certificateholder or Beneficial Owner or the Trustee in reliance
thereon, whether or not notation of such action is made upon such Certificate.
(d) Certificateholders of Certificates are beneficial owners
of the right to receive principal payments and interest payments to which such
Certificates relate and, as such, will have the right following an event of
default with respect to any Underlying Security to proceed directly against the
Issuer(s). Such Certificateholders are not required to join other
Certificateholders of Certificates, the Depositor or the Trustee in order to
proceed against the Issuer(s).
SECTION 5.17. Events of Default. If any Event of
-----------------
Default shall occur and be continuing with respect to any Class
62
<PAGE>
of Certificates, then, and in each and every case, the Trustee shall exercise
any rights in respect of the related Underlying Securities as provided in the
applicable Series Supplement.
SECTION 5.18. Judicial Proceedings Instituted by Trustee;
-------------------------------------------
Trustee May Bring Suit. If there shall be a failure to make payment of the
- ----------------------
principal of or premium, if any, or interest on any Underlying Security, then
the Trustee, in its own name, and as trustee of an express trust, as holder of
such Underlying Security, shall be, to the extent permitted by and in accordance
with the terms of the Underlying Security, subject to the limitations on
acceleration and the exercise of remedies set forth therein, entitled and
empowered to institute any suits, actions or proceedings at law, in equity or
otherwise, including the power to make a demand on the trustee in respect of
such Underlying Security, if provided for, to take action to enforce the
Underlying Security for the collection of the sums so due and unpaid on such
Underlying Security and may prosecute any such claim or proceeding to judgment
or final decree with respect to the whole amount of any such sums so due and
unpaid.
SECTION 5.19. Control by Certificateholders. The Holders of
-----------------------------
Certificates of any Class holding Certificates representing not less than the
Required Percentage--Direction of Trustee of the aggregate Voting Rights of the
Outstanding Certificates of such Class shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee under this
Trust Agreement, including any right of the Trustee as holder of the Underlying
Securities; provided, however, that:
(1) such direction shall not be in conflict with any rule of
law or with this Trust Agreement and would not involve the Trustee in
personal liability or expense;
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders of Certificates
of such Class not taking part in such direction;
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.20. Waiver of Past Defaults. The Holders of
-----------------------
the Required Percentage--Waiver of Certificates of any Series may
direct the Trustee to vote such percentage of the Underlying
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<PAGE>
Securities held by the Trustee as corresponds to the percentage of the aggregate
principal amount of the Certificates of such Series held by such Holders to
waive any past Event of Default thereunder with respect to such Series of
Certificates and its consequences or may instruct the Trustee, on behalf of all
Certificateholders of such Series, to waive any past default under this Trust
Agreement and its consequences, except a default:
(1) in the payment of the principal of or premium, if
any, or interest on the Underlying Securities or the
Certificates;
(2) in respect of a covenant or provision hereof which under
Article X hereof cannot be modified or amended without the consent of
the Holder of each Outstanding Certificate affected; or
(3) specified in the applicable Series Supplement, if any,
unless the applicable Series Supplement provides otherwise.
Upon any such direction, the Trustee shall vote such
percentage of the Underlying Securities of the corresponding Series held by the
Trustee as corresponds to the percentage of the aggregate principal amount of
the Outstanding Certificates of such Series held by Holders who directed the
Trustee to waive such default or Event of Default thereunder. Upon any waiver
that is effective under the terms of such Class of Underlying Securities to
waive such default or Event of Default, such default or Event of Default shall
cease to exist with respect to this Trust Agreement, and, in the case of a
default, any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Trust Agreement and any direction given by the
Trustee on behalf of such Certificateholders or in respect of any Underlying
Securities shall be annulled with respect thereto; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 5.21. Right of Certificateholders to Receive Payments
-----------------------------------------------
Not to Be Impaired. Anything in this Trust Agreement to the contrary
- ------------------
notwithstanding, the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.01 hereof on the Certificates when due,
or to institute suit for enforcement of any such payment on or after the
applicable Distribution Date, Special Distribution Date or other date specified
herein for the making of such payment, shall not be
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<PAGE>
impaired or affected without the consent of such
Certificateholder.
SECTION 5.22. Remedies Cumulative. Every remedy given
-------------------
hereunder to the Trustee or to any of the Certificateholders shall not be
exclusive of any other remedy or remedies, and every such remedy shall be
cumulative and in addition to every other remedy given hereunder or now or
hereafter given by statute, law, equity or otherwise.
ARTICLE VI
The Depositor
-------------
SECTION 6.01. Liability of the Depositor. (a) The Depositor
--------------------------
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by these Standard Terms and the related Series Supplement.
SECTION 6.02. Limitation on Liability of the Depositor. (a)
----------------------------------------
The Depositor shall not be under any obligation to expend or risk its own funds
or otherwise incur financial liability in the performance of its duties
hereunder or under a Series Supplement or in the exercise of any of its rights
or power if reasonable grounds exist for believing that the repayment or such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(b) Neither the Depositor nor any of its directors, officers,
employees or agents shall be under any liability to any Trust or the
Certificateholders of any Series for any action taken, or for refraining from
the taking of any action, in good faith pursuant to this Trust Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Depositor against any breach of representations, warranties or covenants made
herein, or against any liability which would otherwise be imposed by reason of
willful misfeas- ance, bad faith or gross negligence in the performance of
duties or by reason of reckless disregard of its obligations and duties
hereunder.
Unless otherwise provided in a related Series Supplement, the
Trust will indemnify and hold harmless the Depositor and any director, officer,
employee or agent of the Depositor 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
65
<PAGE>
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties by the Depositor and any of its directors, officers,
employees or agents hereunder or by reason of reckless disregard of their
obligations and duties hereunder.
(c) The Depositor shall not be under any obligation to appear
in, prosecute or defend any legal action unless such action is related to its
respective duties under this Trust Agreement and, in its opinion, does not
involve it in any expense or liability; provided, however, that the Depositor
may in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Trust Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. The
Depositor shall be under no obligation whatsoever to appear in, prosecute or
defend any action, suit or other proceeding in respect of any Underlying
Securities.
(d) The Depositor shall not be liable to any Certificateholder
for any action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, any Certificateholder of a Certificate or any
other person believed by it in good faith to be competent to give such advice or
information, including, without limitation, the Calculation Agent, the Market
Agent or the other party to this Trust Agreement. The Depositor may rely and
shall be protected in acting upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or presented
by the proper party or parties.
(e) The Depositor shall not incur any liability to any
Certificateholder if, by reason of any provision of any present or future law,
or regulation thereunder, or any governmental authority, or by any reason of any
act of God or war or other circumstance beyond the control of the relevant
party, the Depositor shall be prevented or forbidden from doing or performing
any act or thing which the terms of this Trust Agreement provide shall be done
or performed; and the Depositor shall not incur any liability to any
Certificateholder by reason of any non-performance or delay, caused as
aforesaid, in the performance of any act or thing which the terms of this Trust
Agreement provide shall or may be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided for in this Trust
Agreement.
SECTION 6.03. Depositor May Purchase Certificates.
-----------------------------------
The Depositor may at any time purchase Certificates in the open
market or otherwise. Certificates so purchased by the Depositor
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<PAGE>
may, at the discretion of the Depositor, be held or resold. Certificates
beneficially owned by the Depositor will be disregarded for purposes of
determining whether the required percentage of the aggregate Voting Rights has
given any request, demand, authorization, direction, notice, consent or waiver
hereunder.
SECTION 6.04. Merger or Consolidation of the Depositor.
----------------------------------------
Nothing in this Trust Agreement shall prevent any consolidation or merger of the
Depositor with or into any other corporation, or any consolidation or merger of
any other corporation with or into the Depositor or any sale or transfer of all
or substantially all of the property and assets of the Depositor to any other
Person lawfully entitled to acquire the same; provided, however, that, so long
as Certificates are outstanding hereunder, the Depositor covenants and agrees
that any such consolidation, merger, sale or transfers shall be upon the
condition that the due and punctual performance and observance of all the terms,
covenants and conditions of this Trust Agreement to be kept or performed by the
Depositor shall be assumed by the Person (if other than the Depositor) formed by
or resulting from any such consolidation or merger, or which shall have received
the transfer of all or substantially all of the property and assets of the
Depositor, just as fully and effectually as if successor Person had been the
original party of the first part hereto; and in the event of any such sale or
transfer the predecessor Depositor may be dissolved, wound up and liquidated at
any time thereafter.
SECTION 6.05. No Liability of the Depositor with Respect to
---------------------------------------------
the Underlying Securities; Certificateholders to Proceed Directly Against the
- -----------------------------------------------------------------------------
Issuer(s). (a) The sole obligor with respect to any Underlying Security is the
- ---------
Issuer thereof. The Depositor shall not have any obligation on or with respect
to the Underlying Securities; and its obligations with respect to Certificates
shall be solely as set forth in this Trust Agreement.
(b) The Depositor is not authorized to proceed against the
Issuer of any Underlying Security in the event of a default or to assert the
rights and privileges of Certificateholders of Certificates and has no duty in
respect thereof.
ARTICLE VII
Concerning the Trustee
----------------------
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<PAGE>
SECTION 7.01. Duties of Trustee. (a) The Trustee undertakes to
-----------------
perform such duties and only such duties as are specifically set forth in these
Standard Terms and the related Series Supplement. The Trustee shall exercise
such of the rights and powers vested in it by this Trust Agreement, and shall
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of such person's own
affairs. The Trustee shall exercise those rights in a manner consistent with the
status of any Trust created hereunder as a fixed investment trust for federal
income tax purposes. The Trustee shall not have any power to vary the investment
of any Certificateholders of any Series or to accept any assets (other than
proceeds of the Underlying Securities) other than the Underlying Securities
transferred to it on the Closing Date of any Series. Any permissive right of the
Trustee enumerated in this Trust Agreement shall not be construed as a duty and
shall be interpreted consistently with the status of the Trust as a fixed
investment trust.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Trust Agreement, shall examine them
to determine whether they conform to the requirements of this Trust Agreement.
If any such instrument is found not to conform to the requirements of this Trust
Agreement, the Trustee shall take action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to the Trustee's
satisfaction, the Trustee will provide notice thereof to the Depositor and
Certificateholders.
(c) No provision of this Trust Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Trust Agreement,
the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Trust
Agreement, no implied covenants or obligations shall be read into this
Trust Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any
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certificates or opinions furnished to the Trustee that
conform to the requirements of this Trust Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of Holders of the Required
Percentage--Direction of Trustee of the aggregate Voting Rights of a
given Series (or Class or group of Classes within such Series), as
specified in the applicable Series Supplement relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Trust Agreement;
(iv) the Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights
or powers if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it;
(v) except for actions expressly authorized by this
Trust Agreement, the Trustee shall take no actions reasonably likely to
impair the interests of the Trust in any Underlying Security now
existing or hereafter acquired or to impair the value of any Underlying
Security now existing or hereafter acquired;
(vi) except as expressly provided in this Trust
Agreement, the Trustee shall have no power to vary the corpus of the
Trust including by (A) accepting any substitute obligation or asset for
a Underlying Security initially assigned to the Trustee under Section
2.01, (B) adding any other investment, obligation or security to the
Trust or (C) withdrawing from the Trust any Underlying Securities;
(vii) in the event that the Paying Agent or the
Certificate Registrar shall fail to perform any obligation, duty or
agreement in the manner or on the day required to be performed by the
Paying Agent or Certificate Registrar, as
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the case may be, under this Trust Agreement, the Trustee shall be
obligated promptly upon its knowledge thereof to perform such
obligation, duty or agreement in the manner so required;
(viii) the Trustee shall not be liable to any Certificateholder for
any action or non-action by it in reliance upon the advice of or
information from legal counsel, accountants, any Certificateholder of a
Certificate or any other person believed by it in good faith to be
competent to give such advice or information, including, without
limitation, the Calculation Agent, the Market Agent or the other party
to this Trust Agreement. The Trustee may rely and shall be protected in
acting upon any written notice, request, direction or other document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ix) the Trustee shall not incur any liability to any
Certificateholder if, by reason of any provision of any present or
future law, or regulation thereunder, or any governmental authority, or
by any reason of any act of God or war or other circumstance beyond the
control of the relevant party, the Trustee shall be prevented or
forbidden from doing or performing any act or thing which the terms of
this Trust Agreement provide shall be done or performed; and the
Trustee shall not incur any liability to any Certificateholder by
reason of any non-performance or delay, caused as aforesaid, in the
performance of any act or thing which the terms of this Trust Agreement
provide shall or may be done or performed, or by reason of any exercise
of, or failure to exercise, any discretion provided for in this Trust
Agreement;
(x) the Trustee shall be under no obligation whatsoever to appear
in, prosecute or defend any action, suit or other proceeding in respect
of any Underlying Securities;
(xi) whenever in the administration of this Trust Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officers' Certificate; and
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(xii) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in reliance thereon, unless the
Trustee's taking, suffering or omitting such action shall have been
willful misconduct, in bad faith or negligent.
(d) As promptly as practicable after, and in any event within
10 days after, the occurrence of any default (as such term is defined below)
hereunder with respect to any Class of Certificates, the Trustee shall transmit
by mail to the Depositor and the Holders of Certificates of such Class in
accordance with Section 313(c) of the Trust Indenture Act, notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal of or premium, if any, or interest on any Underlying
Security, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of the Certificates of such Class. For the purpose of this Section, the term
"default" means, with respect to any Class of Certificates, any event that is,
or after notice or lapse of time or both would become, an Event of Default with
respect to such Class of Certificates.
(e) Within five (5) Business Days after the receipt by the
Trustee of a written application by any three or more Certificateholders stating
that the applicants desire to communicate with other Certificateholders with
respect to their rights under this Trust Agreement or under the Certificates,
and accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, and by reasonable proof that each such applicant
has owned its Certificates for a period of at least six (6) months preceding the
date of such application, the Trustee shall, at its election, either:
(i) afford to such applicants access to all
information so furnished to or received by the Trustee; or
(ii) inform such applicants as to the approximate
number of Certificateholders according to the most recent information so
furnished to or received by the Trustee, and as to the approximate cost of
mailing to such Certificateholders the form of proxy or other communication, if
any, specified in such application.
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If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to all such Certificateholders copies of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of such mailing.
SECTION 7.02. Between Trustee and Sub-Administrative Agents.
---------------------------------------------
(a) Unless otherwise provided in a Series Supplement, the Trustee may enter into
Sub-Administration Agreements with one or more Sub-Administrative Agents in
order to delegate certain of its administrative obligations with respect to a
related Series under this Trust Agreement to such Sub-Administrative Agents;
provided, however, that (i) such delegation shall not release the Trustee from
the duties, obligations, responsibilities or liabilities arising under this
Trust Agreement; (ii) the Rating Agency Condition shall have been satisfied with
respect to the entering into of any such agreement and (iii) such agreements are
consistent with the terms of these Standard Terms and, with respect to
Certificates of any Series, the related Series Supplement. With respect to any
Series (or Class within such Series) of Certificates, each Sub-Administration
Agreement shall impose on the Sub-Administrative Agent requirements conforming
to the provisions set forth in Section 3.01 and provide for administration of
the related Trust and all or certain specified Underlying Securities for such
Series consistent with the terms of this Trust Agreement. Additional
requirements relating to the scope and contents of any Sub-Administration
Agreement may be provided in the applicable Series Supplement. The Trustee shall
deliver to the Depositor copies of all Sub-Administration Agreements which it
enters into, and any amendments or modifications thereof, promptly upon the
Trustee's execution and delivery of any such instruments.
(b) The Trustee shall be entitled to terminate any
Sub-Administration Agreement which it enters into and the rights and obligations
of any Sub-Administrative Agent under any Sub- Administration Agreement in
accordance with the terms and conditions of any such Sub-Administration
Agreement. In the event of a termination of any Sub-Administration Agreement,
the Trustee shall simultaneously reassume direct responsibility for all
obligations delegated in such Sub-Administration Agreement without any act or
deed on the part of the applicable Sub- Administrative Agent, the Trustee shall
administer directly the related Underlying Securities or shall enter into a Sub-
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Administration Agreement with a successor Sub-Administrative Agent which so
qualifies under this Section 7.02.
(c) Unless otherwise provided in the applicable Series
Supplements, in the event a Sub-Administrative Agent is administering one or
more Underlying Securities pursuant to a Sub-Administration Agreement, the
Sub-Administrative Agent shall be required immediately to direct the Trustee to
deposit into an Eligible Account established by such Sub-Administrative Agent (a
"Sub-Administration Account") any amounts collected with respect thereto, and
all such amounts shall be deposited into the related Certificate Account not
later than the Business Day after receipt thereof.
SECTION 7.03. Certain Matters Affecting the Trustee.
-------------------------------------
(a) Except as otherwise provided in this Article VII:
(i) the Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Trust
Agreement or to institute, conduct or defend any litigation hereunder
or in relation hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Trust Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Trust Agreement;
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(v) the Trustee shall not be bound to make any
investigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, approval, bond or other paper or document
believed by it to be genuine, unless requested in writing to do so by
Holders of the Required Percentage -- Direction of Trustee of the
aggregate Voting Rights of the affected Series (or Class or Classes
within any such Series), as specified by the applicable Series
Supplement; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Trust Agreement, the Trustee may
require reasonable indemnity against such expense or liability as a
condition to taking any such action;
(vi) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys or a custodian; and
(vii) the Trustee shall not be personally liable for any
loss resulting from the investment of funds held in any Certificate
Account or Reserve Account at the direction of the Depositor pursuant
to Section 3.05.
(b) All rights of action under this Trust Agreement or under
any of the Certificates, enforceable by the Trustee, may be enforced by it
without the possession of any of the Certificates of any Series (or Class within
such Series), or the production thereof at the trial or other Proceeding
relating thereto, and any such suit, action or proceeding instituted by the
Trustee shall be brought in its name for the benefit of all the Holders of such
Certificates, subject to the provisions of this Trust Agreement.
SECTION 7.04. Trustee Not Liable for Recitals in Certificates
-----------------------------------------------
or Underlying Securities. The Trustee assumes no responsibility for the
- ------------------------
correctness of the recitals contained herein and in the Certificates or in any
document issued in connection with the sale of the Certificates (other than the
signature and authentication on the Certificates). Except as set forth in
Section 7.10, the Trustee makes no representations or warranties as to the
validity or sufficiency of this Trust Agreement or of the Certificates of any
Series (other than the
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signature and authentication on the Certificates) or of any Underlying Security
or related document. The Trustee shall not be accountable for the use or
application by the Depositor, of any of the Certificates or of the proceeds of
such Certificates.
SECTION 7.05. Trustee May Own Certificates. The Trustee in its
----------------------------
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee;
provided, however, that in determining whether the required percentage of
aggregate Voting Rights shall have consented to any action hereunder requiring
the consent of the Certificateholders, the Trustee's interest shall be excluded.
SECTION 7.06. Trustee's Fees and Expenses. (a) The applicable
---------------------------
Series Supplement shall specify the amount and circumstances of the Trustee's
compensation and the source thereof.
(b) If the Prepaid Ordinary Expenses set forth in the Series
Supplement is greater than zero, the Trustee acknowledges that the Depositor has
paid to the Trustee an amount equal to the Prepaid Ordinary Expenses, and the
Trustee agrees that the payment of such amount shall constitute full and final
satisfaction of and payment for all Ordinary Expenses.
(c) If the Prepaid Ordinary Expenses set forth in the Series
Supplement is zero, the Series Supplement may indicate that Ordinary Expenses
will be paid for by the Trust, in which case the Trustee shall be paid on a
periodic basis by the Trust or the Retained Interest at the rate or amount and
on the terms provided for in the Series Supplement. The Trustee agrees that its
right to receive such payments from the Trust shall constitute full and final
satisfaction of and payment for all Ordinary Expenses and that the Trustee shall
have no claim on payment of Ordinary Expenses from any other source, including
the Depositor.
(d) If the Prepaid Ordinary Expenses set forth in the Series
Supplement is zero, the Series Supplement may provide that the Depositor shall
pay to the Trustee from time to time a fee for its services and expenses as
Trustee as set forth in the Series Supplement payable at the times set forth
therein. The Trustee agrees that its right to receive such payments from the
Depositor shall constitute full and final satisfaction of and payment for all
Ordinary Expenses and that the Trustee shall have no claim for payment of
Ordinary Expenses from the Trust. The Trustee further agrees that,
notwithstanding any failure by the
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Depositor to make such periodic payments of the Ordinary Expenses, the Trustee
shall continue to perform its obligations under this Trust Agreement. The
Depositor's obligations to pay Ordinary Expenses under this Trust Agreement
shall be extinguished and of no further effect upon the payment of Ordinary
Expenses due and owing on the termination of the Trust pursuant to Section 9.01
hereof.
(e) Subject to subsection 7.06(f), all Extraordinary Trust
Expenses, to the extent not paid by a third party are, and shall be, obligations
of the Trust and when due and payable shall be satisfied solely by the Trust.
(f) The Trustee shall not take any action, including appearing
in, instituting or conducting any action or suit hereunder or in relation
hereto, which is not indemnifiable under Section 7.11 hereof which, in the
Trustee's opinion, would or might cause it to incur costs, expenses or
liabilities that are Extraordinary Trust Expenses unless (i) the Trustee is
satisfied that it will have adequate security or indemnity in respect of such
costs, expenses and liabilities, (ii) the Trustee has been instructed to do so
by Certificateholders representing not less than the Required
Percentage--Remedies of the aggregate principal amount of Certificates then
outstanding, and (iii) the Certificateholders, pursuant to the instructions
given under clause (ii) above, have agreed that such costs, expenses or
liabilities shall either be (x) paid by the Trustee from the Trust, in the case
of a vote of 100% of the aggregate principal amount of Certificates then
outstanding, or (y) paid by the Trustee (which payment shall be made out of its
own funds and not from monies on deposit in the Trust) in which case the Trustee
shall be entitled to receive, upon demand, reimbursement from those
Certificateholders who have agreed to bear the entire amount of such costs,
expenses or liabilities, on a pro rata basis among such Certificateholders.
SECTION 7.07. Eligibility Requirements for Trustee. (a) The
------------------------------------
Trustee hereunder shall at all times be a corporation or an association which is
not an Affiliate of the Depositor, the Underlying Securities Issuer or the
Credit Support Provider (but may have normal banking relationships with such
parties and their Affiliates) organized and doing business under the laws of any
State or the United States, authorized under such laws to exercise corporate
trust powers which shall be eligible to act as a trustee under Section 310(a) of
the Trust Indenture Act, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such corporation or association publishes reports
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of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. Such corporation or association must
be rated in one of the four highest rating categories by the Rating Agency. In
the event that at any time such Trustee shall cease to be eligible in accordance
with the provisions of this Section, such Trustee shall resign immediately in
the manner and with the effect specified in Section 7.08.
(b) In determining whether the Trustee has a conflicting
interest with respect to any Class of Certificates under Section 310(b) of the
Trust Indenture Act and this Section, each other Class of Certificate will be
treated as having been issued under an indenture other than this Trust
Agreement.
SECTION 7.08. Resignation or Removal of the Trustee;
--------------------------------------
Appointment of Successor Trustee. (a) The Trustee may at any time resign as
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Trustee hereunder by written notice of its election so to do, delivered to the
Depositor, and such resignation shall take effect upon the appointment of a
successor Trustee and its acceptance of such appointment as hereinafter
provided; provided, however, that in the event of such resignation, the Trustee
shall (a) assist the Depositor in finding a successor Trustee acceptable to the
Depositor and (b) negotiate in good faith concerning any prepaid but unaccrued
fees.
(b) The Depositor or Holders of the Required
Percentage--Removal of Trustee of Certificates may at any time remove the
Trustee as Trustee hereunder by written notice delivered to the Trustee in the
manner provided in Section 10.04 hereof, and such removal shall take effect upon
the appointment of the successor trustee and its acceptance of such appointment
as provided in the succeeding paragraph; provided, however, that in the event of
such removal, the Depositor shall negotiate in good faith with the Trustee in
order to agree regarding payment of the termination costs of the Trustee
resulting from such removal.
(c) Upon the designation of a successor Trustee, following
either resignation or removal of the Trustee, the Trustee shall deliver to the
successor Trustee all records relating to the Certificates in the form and
manner then maintained by the Trustee, which shall include a hard copy thereof
upon written request of the successor Trustee.
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(d) If at any time the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property of affairs for the purpose
of rehabilitation, conservation or liquidation, the Depositor shall petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee. In the event the Trustee resigns or is
removed, the Trustee shall reimburse the Depositor for any fees or charges
previously paid to the Trustee in respect of duties not yet performed under this
Trust Agreement which remain to be performed by a successor Trustee.
(e) In case at any time the Trustee acting hereunder notifies
the Depositor that it elects to resign or the Depositor or Holders of the
Required Percentage--Removal of Trustee of Certificates notifies or notify the
Trustee that it or they elects or elect to remove the Trustee as Trustee, the
Depositor shall, within ninety (90) days after the delivery of the notice of
resignation or removal, appoint a successor Trustee, which shall satisfy the
requirements for a trustee under Section 7.07. If no successor Trustee has been
appointed within 90 days after the Trustee has given written notice of its
election to resign or the Depositor or Holders of the Required
Percentage--Removal of Trustee of Certificates have given written notice to the
Trustee of its or their election to remove the Trustee, as the case may be, the
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee. Every successor Trustee shall execute and deliver to its
predecessor and to the Depositor an instrument in writing accepting its
appointment hereunder, and thereupon such successor Trustee, without any further
act or deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall be the Trustee under
this Trust Agreement, and such predecessor, upon payment of all sums due it and
on the written request of the Depositor, shall execute and deliver an instrument
transferring to such successor all rights, obligations and powers of such
predecessor hereunder, and shall duly assign, transfer and deliver all right,
title and interest in the Underlying Securities and parts thereof to such
successor Trustee. Any successor Trustee shall promptly give notice of its
appointment to the Certificateholders of Certificates for which it is successor
Trustee in the manner provided in Section 10.04 hereof.
(f) Any corporation into or with which the Trustee may
be merged, consolidated or converted shall be the successor of
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such Trustee without the execution or filing of any document or
any further act.
SECTION 7.09. Appointment of Office or Agency. As specified in
-------------------------------
a Series Supplement, the Trustee shall appoint an office or agency in the City
of New York where the Certificates may be surrendered for registration of
transfer or exchange, and presented for the final distribution with respect
thereto, and where notices and demands to or upon the Trustee in respect of the
Certificates of the related Series and this Trust Agreement may be served.
SECTION 7.10. Representations and Warranties of Trustee. The
-----------------------------------------
Trustee represents and warrants that:
(i) the Trustee is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation or association;
(ii) neither the execution nor the delivery by the
Trustee of this Trust Agreement, nor the consummation by it of the
transactions contemplated hereby nor compliance by it with any of the
terms or provisions hereof will contravene any Federal or New York law,
governmental rule or regulation governing the banking or trust powers
of the Trustee or any judgment or order binding on it, or violate its
charter documents or by-laws or constitute a default under (or an event
which, without notice or lapse of time or both, would constitute a
default) under, or result in the breach or acceleration of any material
contract, indenture, mortgage, agreement or instrument to which it is a
party or by which any of its properties may be bound.
(iii) the Trustee has full power, authority and right to
execute, deliver and perform its duties and obligations as set forth
herein and in each Series Supplement to which it is a party and has
taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(iv) this Trust Agreement has been duly executed and
delivered by the Trustee and constitutes the legal, valid and binding
obligation of the Trustee, enforceable in accordance with its terms,
except as enforcement may be limited by the applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and general principles of
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equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(v) the Trustee is not in violation, and the execution
and delivery of the Trust Agreement by the Trustee and its performance
and compliance with the terms thereof will not constitute a violation,
of any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction
over the Trustee or its properties, which violation would reasonably be
expected to have a material adverse effect on the condition (financial
or otherwise) or operations of the Trustee or its properties or on the
performance of its duties hereunder;
(vi) there are no actions or proceedings against, or
investigations of, the Trustee pending, or, to the knowledge of the
Trustee, threatened, before any court, administrative agency or other
tribunal (A) that could reasonably be expected to prohibit its entering
into the Trust Agreement, (B) seeking to prevent the issuance of the
Certificates contemplated by the Trust Agreement or (C) that could
reasonably affect the performance by the Trustee of its obligations
under, or the validity or enforceability against the Trustee of, the
Trust Agreement; and
(vii) no consent, approval, authorization or order of any
court, governmental agency or body is required for the execution,
delivery and performance by the Trustee of, or compliance by the
Trustee with, the Trust Agreement, or for the consummation of the
transactions contemplated by the Trust Agreement, except for such
consents, approvals, authorizations and orders, if any, that have been
obtained prior to the Closing Date.
The representations and warranties of the Trustee set forth in this Section 7.10
shall survive the receipt of Underlying Securities by the Trustee and shall
survive the delivery of the Trust Agreement by the Trustee to the Depositor.
SECTION 7.11. Indemnification of Trustee by the Depositor;
--------------------------------------------
Contribution. (a) The Depositor agrees, to the extent the Trustee is not
- ------------
reimbursed pursuant to Section 7.06 hereof, to indemnify the Trustee against,
and hold it harmless from, any loss, expense or liability incurred in connection
with any legal action relating to this Trust Agreement or the Certificates or
the performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense (i) that constitutes a specific liability of the Trustee
under this Trust
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Agreement or (ii) incurred by reason of wilful misfeasance, bad faith or
negligence in the performance of the Trustee's duties hereunder or by reason of
reckless disregard of the Trustee's obligations and duties hereunder or as a
result of a breach of the Trustee's obligations and duties hereunder.
(b) If the indemnification provided for in the preceding
paragraph is invalid or unenforceable in accordance with its terms, then the
Depositor shall contribute to the amount paid or payable by the Trustee as a
result of such liability in such proportion as is appropriate to reflect the
relative benefits received by the Depositor on one hand and the Trustee as
Trustee on the other hand. For this purpose (i) the benefits received by the
Depositor shall be the aggregate amount received by it upon the sale of such
Certificates, less the costs and expenses of such sale, including the cost of
acquisition of the Underlying Securities or parts thereof evidenced thereby, and
(ii) the benefits received by the Trustee as Trustee shall be the aggregate
amount of fees received by it as Trustee, less costs and expenses incurred by it
as Trustee in relation to such Certificates. If, however, the allocation
provided by the immediately preceding two sentences is not permitted by
applicable law, then the Depositor shall contribute to such amount paid or
payable by the Trustee in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Depositor on the one
hand and the Trustee on the other in connection with the actions or omissions
which resulted in such liability, as well as any other relevant equitable
considerations.
(c) In case any claim shall be made or action brought against
the Trustee for any reason for which indemnity may be sought against the
Depositor as provided above, the Trustee may promptly notify the Depositor in
writing setting forth the particulars of such claim or action and the Depositor
may assume the defense thereof. In the event that the Depositor assumes the
defense, the Trustee shall have the right to retain separate counsel in any such
action but shall bear the fees and expenses of such counsel unless (i) the
Depositor shall have specifically authorized the retaining of such counsel or
(ii) the parties to such suit include the Trustee and the Depositor, and the
Trustee has been advised in writing by such counsel that one or more legal
defenses may be available to it which may not be available to the Depositor, in
which case the Depositor shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the reasonable fees and expenses of
such counsel.
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(d) The term "liability," as used in this Section 7.11, shall
include any losses, claims, damages, expenses (including without limitation the
Trustee's reasonable costs and expenses) in defending itself against any losses,
claims or investigations of any nature whatsoever.
(e) The obligations of the Depositor under this Section 7.11
shall be in addition to any liability which the Depositor may otherwise have and
shall extend, upon the same terms and conditions, to each officer and director
of the Trustee, and to each person, if any, who controls the Trustee within the
meaning of the Exchange Act.
(f) Notwithstanding anything to the contrary contained in this
Section 7.11, the Depositor shall not be liable for settlement of any such claim
by the Trustee entered into without the prior written consent of the Depositor,
which consent shall not be unreasonably withheld.
(g) The indemnity provided in this Section shall survive the
termination or discharge of this Trust Agreement.
SECTION 7.12. Indemnification of Depositor by Trustee. The
---------------------------------------
Trustee, in its individual capacity and not from the assets of the Trust, shall
indemnify the Depositor and any successor trustee against any losses, claims,
damages, expenses (including without limitation the Depositor's costs and
expenses in defending itself against any losses, claims or investigations of any
nature whatsoever) or other liabilities, joint or several, which may arise out
of acts performed or omitted by the Trustee or its agents due to its or their
negligence, bad faith or willful misconduct.
SECTION 7.13. No Liability of the Trustee with Respect to the
-----------------------------------------------
Underlying Securities; Certificateholders to Proceed Directly Against the
- -------------------------------------------------------------------------
Issuer(s). (a) The sole obligor with respect to any Underlying Security is the
- ---------
Issuer thereof. The Trustee shall not have any obligation on or with respect to
the Underlying Securities; and its obligations with respect to Certificates
shall be solely as set forth in this Trust Agreement.
(b) The Trustee is not authorized to proceed against the
Issuer of any Underlying Security in the event of a default or to assert the
rights and privileges of Certificateholders of Certificates and has no duty in
respect thereof except as expressly provided herein.
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SECTION 7.14. The Depositor To Furnish Trustee with Names and
-----------------------------------------------
Addresses of Certificateholders. The Depositor will furnish to the Trustee
- -------------------------------
within 15 days after each Record Date with respect to any Distribution Date, and
at such other times as the Trustee may request in writing, within 30 days after
receipt by the Depositor of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the possession or control
of the Depositor as to the names and addresses of the Certificateholders, in
each case as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the sole
Certificate Registrar, no such list need be furnished.
SECTION 7.15. Preservation of Information. The Trustee shall
---------------------------
preserve, in as current a form as is reasonably practicable, the names and
addresses of Certificateholders contained in the most recent list furnished to
the Trustee as provided in Section 7.14, and the names and addresses of
Certificateholders received by the Trustee in its capacity as Certificate
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.14, upon receipt of a new list so furnished.
SECTION 7.16. Reports by Trustee. If required, within 60 days
------------------
after May 15 of each year, commencing with the year 1998, the Trustee shall
transmit to the Certificateholders, as provided in Section 313(c) of the Trust
Indenture Act, a brief report dated as of such May 15, if required by Section
313(a) of the Trust Indenture Act.
SECTION 7.17. Trustee's Application for Instructions from the
-----------------------------------------------
Depositor. Any application by the Trustee for written instructions from the
- ---------
Depositor may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Trust Agreement and
the date on and/or after which such action shall be taken or such omission shall
be effective, if, but only if, the obligations of the Trustee with respect to
such proposed action or omission are not set forth reasonably clearly in these
Standard Terms and the related Series Supplement. The Trustee shall not be
liable for any action taken by, or omission of, the Trustee in accordance with a
proposal included in such application on or after the date specified in such
application (which date shall not be less than ten (10) Business Days after the
date an officer of the Depositor actually receives such application, unless any
such officer shall have consented in writing to any earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Trustee shall have received written instructions
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<PAGE>
in response to such application specifying the action to be taken or omitted;
provided, however, that this provision shall not protect the Trustee from
liability for any action or omission constituting willful misconduct, bad faith
or negligence.
ARTICLE VIII
Market Agent
------------
SECTION 8.01. Market Agent. (a) If specified for a specific
------------
Series, on the Closing Date the Trustee shall enter into a Market Agent
Agreement with Lehman Brothers Inc., as the initial Market Agent, in the form
attached to the related Series Supplement. The Market Agent shall serve as such
under the terms and provisions hereof and of the Market Agent Agreement. The
Market Agent, including any successor appointed pursuant hereto, shall be a
member of the National Association of Securities Dealers, Inc., have
capitalization of at least $25,000,000, and be authorized by law to perform all
the duties imposed upon it by this Trust Agreement and the Market Agent
Agreement. The Market Agent may be removed at any time by the Trustee, acting at
the direction of the Depositor; provided, however, that such removal shall not
take effect until the appointment of a successor Market Agent. The Market Agent
may resign upon 30 days' written notice delivered to the Trustee. The Trustee
shall use its best efforts to appoint a successor Market Agent that is a
qualified institution, effective as of the effectiveness of any such resignation
or removal.
ARTICLE IX
Termination
-----------
SECTION 9.01. Termination upon Liquidation of All Underlying
----------------------------------------------
Securities. (a) The respective obligations and responsibilities under this Trust
- ----------
Agreement of the Depositor, and the Trustee (other than the obligations of the
Trustee to make distributions to Holders of the Certificates of any given Series
as hereafter set forth and to provide information reports and information tax
reporting) shall terminate upon the distribution to such Holders of all amounts
held in all the Accounts for such Series and required to be paid to such Holders
pursuant to this Trust Agreement on the Distribution Date coinciding with the
final payment on or other liquidation (which may include redemption or other
purchase thereof by the applicable Issuer)
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(or any Advance with respect thereto) of the last Underlying Security remaining
in the Trust for such Series or the disposition of all property acquired upon
liquidation of any such Underlying Security; provided, however, that in no event
shall the Trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof.
(b) Written notice of any termination shall be
provided as set forth in Section 10.04.
(c) Upon presentation and surrender of the Certificates by the
Certificateholders to the Trustee at the locations specified in Section 5.05 on
the Final Scheduled Distribution Date or the Distribution Date coinciding with
or next following the earlier to occur of the occurrences specified in 9.01(a),
with respect to the applicable Series of Certificates, the Trustee shall, upon
its cancellation of each surrendered Certificate, distribute to each Holder
presenting and surrendering its Certificates (i) the amount otherwise
distributable on such Distribution Date in accordance with Section 4.01 in
respect of the Certificates so presented and surrendered, or (ii) as specified
in the applicable Series Supplement, if in connection with the Trustee's sale of
all the remaining Underlying Securities. Any funds not distributed on such
Distribution Date shall be set aside and held in trust for the benefit of
Certificateholders not presenting and surrendering their Certificates in the
aforesaid manner, and shall be disposed of in accordance with this Section 9.01
and Section 4.01 hereof. Immediately following the deposit of funds in trust
hereunder, the Trust for such Series shall terminate.
ARTICLE X
Miscellaneous Provisions
------------------------
SECTION 10.01. Amendment. (a) This Trust Agreement may be
---------
amended from time to time by the Depositor and the Trustee without the consent
of any of the Certificateholders for any of the following purposes: (i) to cure
any ambiguity or to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein or to provide for any
other terms or modify any other provisions with respect to matters or questions
arising under this Trust Agreement which shall not adversely affect the
interests of the Holders in any material respect; or (ii) to evidence and
provide for the
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acceptance of appointment hereunder of a change in Trustee as Trustee for a
Series of Certificates subsequent to the Closing Date for such Series, and to
add to or change any of the provisions of this Trust Agreement as shall be
necessary to provide for or facilitate the administration of the separate Trusts
hereunder by more than one trustee, pursuant to the requirements of Section 5.01
hereof; or (iii) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Certificate of one or more
Series or to add or change any of the provisions of this Trust Agreement as
shall be necessary to provide for or facilitate the administration of the trusts
hereunder; or (iv) to provide for the issuance of a new Series of Certificates
pursuant to a Series Supplement issued hereunder pursuant to Sections 5.01 and
5.12 hereof; provided, however, that in the case of any amendment the Rating
Agency Condition shall be satisfied with respect to such amendment and that no
such amendment shall cause any Trust created hereunder (as evidenced by an
opinion of Counsel) to fail to qualify as a fixed investment trust for federal
income tax purposes.
(b) Without limiting the generality of the foregoing, with
respect to any Series, unless otherwise specified in a related Series
Supplement, this 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 representing the Required Percentage--Amendment of the aggregate
Voting Rights of those Certificates to which such modification or amendment
relates for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Trust Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that,
unless otherwise specified in a related Series Supplement, no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of, payments
received on Underlying Securities which are required to be distributed on any
Certificate without the consent of the Holders of such Certificates, (ii)
adversely affect in any material respect the interests of the Holders of any
Series (or Class within such Series) of Certificates in a manner other than as
described in (i), without the consent of the Holders of Certificates of such
Series or Class evidencing not less than the Required Percentage-- Amendment of
the aggregate Voting Rights of such Series or Class or (iii) reduce the
percentage of aggregate Voting Rights required by (ii), as described in (ii),
without the consent of the Holders of all Certificates of such Series or Class
then Outstanding.
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<PAGE>
Notwithstanding any other provision of this Trust Agreement,
for purposes of the giving or withholding of consents pursuant to this Section
10.01, Certificates registered in the name of the Depositor or the Trustee or
any Affiliate thereof shall be entitled to Voting Rights with respect to matters
affecting such Certificates; and provided, further, that in the event the Rating
Agency Condition is not satisfied with respect to such modification or
amendment, the Required Percentage--Amendment shall be increased to require an
aggregate percentage of the aggregate Voting Rights in the amount specified in
the applicable Series Supplement. Notwithstanding any other provision of this
Trust Agreement, this Section 10.02(b) shall not be amended without the
unanimous consent of the Holders of all such Certificates.
(c) Promptly after the execution of any such amendment or
modification, the Trustee shall furnish a copy of such amendment or modification
to each Certificateholder of the affected Series or Class and to the Rating
Agency. It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
SECTION 10.02. Limitation on Rights of Certificateholders. (a)
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to terminate
this Trust Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the applicable Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) No Certificateholder of a given Series shall have any
right to vote (except as expressly provided for herein) or in any manner
otherwise control the operation and management of any Trust, or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Trust Agreement pursuant to
any provision hereof.
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(c) No Certificateholder of a given Series shall have any
right by virtue of any provision of this Trust Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Trust Agreement, unless (i) such Holder previously shall have given to the
Trustee a written notice of breach and of the continuance thereof, (ii) the
Holders of Certificates of such Series evidencing not less than the Required
Percentage--Remedies of the aggregate Voting Rights of such Series shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, (iii) the Trustee, for 15
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding, and
(iv) 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 of such Series.
It is understood and agreed that the Trustee shall not be obligated to make any
investigation of matters arising under this Trust Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the request,
order or direction of any Certificateholders unless such Certificateholders have
offered to the Trustee the reasonable security or indemnity referred to above.
It is further understood and agreed, and expressly covenanted by each
Certificateholder of each Series with every other Certificateholder of such
Series and the Trustee, that no one or more Holders of Certificates of such
Series shall have any right in any manner whatever by virtue of any provision of
this Trust Agreement to affect, disturb or prejudice the rights of the Holders
of any other of the Certificates of such Series, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Trust Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders of such Series. For
the protection and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 10.03. GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF NEW
YORK AND WITHOUT GIVING EFFECT TO SUCH STATE'S PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
88
<PAGE>
WOULD BE REQUIRED THEREBY, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Notices. (a) All directions, demands and
-------
notices hereunder shall be in writing and shall be delivered as set forth in the
applicable Series Supplement.
(b) Any notice required to be provided to a Holder of a
Registered Certificate shall be given by first class mail, postage prepaid, at
the last address of such Holder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Trust Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice.
(c) Any notice required to be given to a holder of a Bearer
Certificate or Coupon shall be published in an Authorized Newspaper or
Newspapers in such Place or Places of Distribution as may be specified for a
given Series in the applicable Series Supplement, and such notice shall be
deemed sufficient if published on two separate Business Days within two Business
Days of the time prescribed in this Trust Agreement.
(d) Any and all notices to be given to the Depositor shall be
deemed to have been duly given if sent by facsimile transmission to the
Depositor at 3 World Financial Center, New York, New York 10285, Attention: Mark
Zusy, through facsimile transmission number (212) 528-6664, telephone
confirmation number (212) 526-4428. The Depositor may change this information by
written notice to the Trustee.
(e) Any and all notices to be given to the Trustee shall be
deemed to have been duly given if sent by facsimile transmission to the Trustee
at 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust
Trustee Administration, facsimile transmission number (212) 815-5999, telephone
confirmation number (212) 815-5098. The Trustee may change this information by
notice to the Depositor.
(f) Any and all notices to be given to the Swap Counterparty,
if any, will be specified in the Series Supplement.
SECTION 10.05. Notice to Rating Agencies. (a) The Trustee
-------------------------
shall use its best efforts promptly to provide notice to each Rating Agency with
respect to each of the following of which it has actual knowledge:
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(i) any change or amendment to this Trust Agreement;
(ii) the resignation or termination of the Trustee;
(iii) the final payment to Holders of the Certificates
of any Class;
(iv) any change in the location of the Certificate
Account; and
(v) any event that would result in the inability of
the Trustee to make Advances.
(b) In addition, the Trustee shall promptly furnish to each
Rating Agency copies of each report to Certificateholders described in Section
4.03.
(c) Any such notice pursuant to this Section shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service to
each Rating Agency at the address specified below or in the applicable Series
Supplement.
(d) (i) Any and all notices to be given to Moody's shall be
deemed to have been duly given if sent by facsimile transmission to
Moody's at Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10007, Attention: CBO/CLO Monitoring Department, facsimile
transmission number (212) 553-0355, telephone confirmation number (212)
553- 1494. Moody's may change this information by notice to the
Depositor and the Trustee.
(ii) Any and all notices to be given to S&P shall be deemed to
have been duly given if sent by facsimile transmission to S&P at
Standard & Poor's Rating Group, 25 Broadway, New York, New York, 10004,
Attention: Structured Finance Surveillance Group, facsimile
transmission number (212) 208-0053, telephone confirmation number (212)
208- 1191. S&P may change this information by notice to the Depositor
and the Trustee.
SECTION 10.06. Severability of Provisions. If any one or more
--------------------------
of the covenants, agreements, provisions or terms of this Trust Agreement shall
be for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Trust Agreement and shall in no way
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affect the validity or enforceability of the other provisions of this Trust
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.07. Grant of Security Interest. (a) It is the
--------------------------
express intent of the parties hereto that each conveyance of any Underlying
Securities by the Depositor to the Trustee be, and be construed as, a sale of
the Underlying Securities by the Depositor and not a pledge of any Underlying
Securities by the Depositor to secure a debt or other obligation of the
Depositor.
(b) In the event that, notwithstanding the aforementioned
intent of the parties, any Underlying Securities are held to be property of the
Depositor, then, (x) it is the express intent of the parties that such
conveyance be deemed a pledge of such Underlying Securities by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor and (y)(1)
this Trust Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York, or such other State as may be specified
in the related Series Supplement; (2) the conveyance provided for in Section
2.01 hereof shall be deemed to be a grant by the Depositor to the Trustee of a
security interest in all the Depositor's right, title and interest in and to
such Underlying Securities and all amounts payable to the holders of such
Underlying Securities in accordance with the terms hereof and all proceeds of
the conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property including all amounts from time to
time held or invested in the applicable Certificate Account, whether in the form
of cash, instruments, securities or other property; (3) the obligations secured
by such security agreement shall be deemed to be all the Depositor's obligations
under this Trust Agreement, including the obligation to provide to the
Certificateholders the benefits of this Trust Agreement relating to such
Underlying Securities and the applicable Trust; and (4) notifications to persons
holding such property, and acknowledgements, receipts or confirmations from
persons holding such property, shall be deemed notifications to, or
acknowledgements, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a
security interest in the Underlying Securities and all other property described
in clause (y)(2) of the preceding paragraph,
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for the purpose of securing to the Trustee the performance by the Depositor of
the obligations described in clause (y)(3) of the preceding paragraph.
Notwithstanding the foregoing, the parties hereto intend the Grant pursuant to
Section 2.01 to be a true, absolute and unconditional sale of the Underlying
Securities and assets constituting the applicable Trust by the Depositor to the
Trustee.
(c) The Depositor and the Trustee shall to the extent
consistent with this Trust Agreement, take such actions as may be necessary to
ensure that, if this Trust Agreement were deemed to create a security interest
in the Underlying Securities, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such for so long as any of the Underlying Securities remain
outstanding. Without limiting the generality of the foregoing, the Trustee shall
file, or shall cause to be filed, all filings necessary to maintain the
effectiveness of any original filings necessary under the Uniform Commercial
Code as in effect in any jurisdiction to perfect the Trustee's security interest
in or lien on the Underlying Securities, including (x) continuation statements
and (y) such other statements as may be occasioned by (1) any change of name of
the Depositor or the Trustee, (2) any change of location of the place of
business or the chief executive office of the Depositor or (3) any transfer of
any interest of the Depositor in any Underlying Security.
SECTION 10.08. Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Trust Agreement, each of the Trustee (including any
Sub-Administrative Agent, Authenticating Agent, Calculation Agent, or Paying
Agent) and the Depositor agrees that it shall not, until the date which is one
year and one day after the termination of the Trust acquiesce, petition or
otherwise invoke or cause the Trust to invoke the process of the United States
of America, any State or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government for the purpose of commencing or
sustaining a case by or against the Trust under a Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust or all
or any part of the property or assets of the Trust or ordering the winding up or
liquidation of the affairs of the Trust.
SECTION 10.09. No Recourse. Neither the Trustee (including any
-----------
Sub-Administrative Agent, Authenticating Agent, Calculation Agent, or Paying
Agent) nor the Depositor shall have
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any recourse to the Underlying Securities, except for as
specifically provided in the related Series Supplement.
SECTION 10.10. Article and Section References. All article and
------------------------------
section references used in these Standard Terms, unless otherwise provided, are
to articles and sections in these Standard Terms.
SECTION 10.11. Counterparts. These Standard Terms may be
------------
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute one and the same instrument.
SECTION 10.12. Trust Indenture Act Controls. This Trust
----------------------------
Agreement is subject to the provisions of the Trust Indenture Act and shall, to
the extent applicable, be governed by such provisions. The Trustee agrees to
take all actions within its control to prevent these Standard Terms, as
supplemented by any Series Supplements, from failing to qualify under the Trust
Indenture Act.
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IN WITNESS WHEREOF, the Depositor and the Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, in each case as of the day and year first above written.
LEHMAN ABS CORPORATION,
as Depositor
By: ___________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________________
Name:
Title:
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<PAGE>
Reconciliation and tie between the Trust Agreement dated as of
July __, 1997, and the Trust Indenture Act of 1939 as amended. This
reconciliation does not constitute part of Trust Agreement.
Trust Indenture Act Trust
of 1939 Section Agreement Section
- ------------------- -----------------
310(a)(1) 7.07
(a)(2) 7.07
(a)(5) 7.07
310(b) 7.07
312(a) 7.14
313(a) 7.16
314(a) 3.10
(c)(1) 1.03
(c)(2) 1.03
(e) 1.03
315(a)(1) 7.01(a)
315(a)(2) 7.03(a)
315(b) 7.01(d)
315(d) 7.01(c)
316(a)(1)(A) 5.19
(a)(1)(B) 5.20
(b) 5.21
(c) 1.03(b)
317(a)(1) 5.18
(b) 5.13
318(a) 10.12
<PAGE>
EXHIBIT B
Form of Class A-[ ] Certificate
-------------------------------
Number [ ] $[_________]
CUSIP NO. [__________]
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN
THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THIS CERTIFICATE OR THE TRUST ASSETS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.
LEHMAN ABS CORPORATION
[CORPORATE] [US GOVERNMENT] [FOREIGN] BOND-BACKED CERTIFICATES
SERIES [199[ ]] [200[ ]] - [____]
$[____] [PRINCIPAL BALANCE] [NOTIONAL AMOUNT]
[[ ]% PASS-THROUGH RATE]
evidencing a fractional undivided beneficial ownership interest in the Trust, as
defined below, the property of which consists principally of $[____] aggregate
principal amount of [____]% [Debentures] due [due date] of [name of issuer] (the
"Underlying Security Issuer") and all payments received thereon (the "Trust
Property"), deposited in trust by Lehman ABS Corporation (the "Depositor").
THIS CERTIFIES THAT CEDE & CO. is the registered owner of $[ ]
DOLLARS nonassessable, fully-paid, fractional undivided interest in the
[Corporate] [US GOVERNMENT] [Foreign] Bond-Backed Certificates, Series [199[ ]]
[200[ ]]-[____] Trust, formed by the Depositor.
<PAGE>
The Trust was created pursuant to a Standard Terms for Trust
Agreements, dated as of [_________________] (the "Standard Terms"), between the
Depositor and [name of bank] a [_________] banking corporation, not in its
individual capacity but solely as Trustee (the "Trustee"), as supplemented by
the Series Supplement, Series [199[ ]] [200[ ]]-[____] dated as of [____] (the
"Series Supplement" and, together with the Standard Terms, the "Trust
Agreement"), between the Depositor [[_______], ______ corporation, as
Administrative Agent (the "Administrative Agent")] and the Trustee. This
Certificate does not purport to summarize the Trust Agreement and reference is
hereby made to the Trust Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and obligations of the Trustee with respect hereto. A
copy of the Trust Agreement may be obtained from the Trustee by written request
sent to the Corporate Trust Office. Capitalized terms used but not defined
herein have the meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as the "[Corporate] [US GOVERNMENT] [Foreign] Bond-Backed
Certificates, Series [199[ ]] [200[ ]]- [____], Class [_]" (herein called the
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound. The Trust Property consists of: (i) Underlying
Securities described in the Trust Agreement; (ii) all payments on or collections
in respect of the Underlying Securities accrued on or after [____] together with
any proceeds thereof; and (iii) all funds from time to time deposited with the
Trustee relating to the Certificates together with any and all income, proceeds
and payments with respect thereto [describe any other assets][; provided,
however that any income from the investment of Trust funds in certain permitted
investments ("Eligible Investments") do not constitute Trust Property].
[Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the obligation
created by the Trust Agreement shall have terminated in accordance therewith,
[no] distributions [of interest] [of principal] will be made on this Certificate
on [each] [any] Distribution Date.]
[Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until
2
<PAGE>
the obligation created by the Trust Agreement shall have terminated in
accordance therewith, distributions will be made on each Distribution Date, to
the Person in whose name this Certificate is registered on the applicable Record
Date, in an amount equal to such Certificateholder's fractional undivided
interest in the amount required to be distributed to the Holders of the
Certificates on such Distribution Date. The Record Date applicable to any
Distribution Date is the close of business on the [day immediately preceding]
[specify other] such Distribution Date (whether or not a Business Day). If a
payment with respect to the Underlying Securities is made to the Trustee after
the date on which such payment was due, then the Trustee will distribute any
such amounts received on the next occurring Business Day (a "Special
Distribution Date").]
[Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the obligation
created by the Trust Agreement shall have terminated in accordance therewith,
the Trust will distribute on the Final Scheduled Distribution Date (i) all the
Underlying Securities held by the Trust as of such date and/or, if applicable,
(ii) the proceeds of the redemption of such Underlying Securities by the
Underlying Securities Issuer on such date, to the Person in whose name this
Certificate is registered on the applicable Record Date in a amount equal to
such Certificateholder's fractional undivided interest in the amount required to
be distributed to the Holders of the Certificates on such Final Scheduled
Distribution Date.]
The Record Date applicable to the [Final Scheduled] [any]
Distribution Date is the close of business on the day immediately preceding such
[Final Scheduled] Distribution Date (whether or not a Business Day). If a
payment with respect to the Underlying Securities is made to the Trustee after
the date on which such payment was due, then the Trustee will distribute any
such amounts received on the next occurring Business Day (a "Special
Distribution Date").
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Trust, or join in any institution against the Trust of, any
bankruptcy proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates or
the Trust Agreement.
3
<PAGE>
Distributions made on this Certificate will be made as
provided in the Trust Agreement by the Trustee by wire transfer in immediately
available funds, or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee shall be [Cede & Co.]), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location as may be specified in such notice.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not entitle the Holder hereof to any benefit under the Trust Agreement or
be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed as of the date set forth below.
CORPORATE BOND-BACKED CERTIFICATES,
SERIES [199[ ]] [200[ ]]-[ ] TRUST
[Lehman ABS Corporation,
By: ________________________
Name:
Title: ]
[By: [Name of bank]
not in its individual
capacity but solely as
Trustee,
By:
_______________________
Authorized Officer]
Dated: [____]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is on one of the Corporate Bond-Backed Certificates,
Series [199[ ]] [200[ ]]-[____], described in the Trust Agreement referred to
herein.
[Name of bank],
not in its individual
capacity but solely as
Trustee,
by
_________________
Authorized Officer
5
<PAGE>
(REVERSE OF CERTIFICATE)
The Certificates are limited in right of distribution to
certain payments and collections respecting the Underlying Securities, all as
more specifically set forth herein and in the Trust Agreement. The registered
Holder hereof, by its acceptance hereof, agrees that it will look solely to the
Trust Property (to the extent of its rights therein) for distributions
hereunder.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor and
the Trustee with the consent of the holders of Certificates evidencing greater
than [66 2/3]% of the aggregate Voting Rights of the Class [__] Certificates,
subject to certain provisions set forth in the Trust Agreement that require the
consent of the holders of [100]% of the Class [__] and Class [__] Certificates
then outstanding. Any such consent by the Holder of this Certificate (or any
predecessor Certificate) shall be conclusive and binding on such Holder and upon
all future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent in made upon this Certificate. The Trust Agreement also permits
the amendment thereof, in certain limited circumstances, without the consent of
the Holders of any of the Certificates.
The Certificates are issuable in fully registered form only in
minimum [original principal] [notional] amounts of $[____] and integral
multiples of $[____] in excess thereof.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Trustee in the Borough of Manhattan, the City of New York, duly endorsed
by or accompanied by an assignment in the form below and by such other documents
as required by the Trust Agreement, and thereupon one or more new Certificates
of the same class in authorized denominations evidencing the same [principal]
amount will be issued to the designated transferee or transferees. The initial
Certificate Registrar appointed under the Trust Agreement is [name of bank].
6
<PAGE>
No service charge will be made for any registration of
transfer or exchange, but the Trustee may require exchange of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.
The Depositor and the Trustee and any agent of the Depositor
or the Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Depositor, the Trustee,
nor any such agent shall be affected by any notice to the contrary.
It is the intention of the parties to the Trust Agreement that
the Trust created thereunder shall constitute a fixed investment trust for
federal income tax purposes under Treasury Regulation Section 301.7701-4, and
the Certificateholder agrees to treat the Trust, any distributions therefrom and
its beneficial interest in the Certificates consistently with such
characterization.
The Trust and the obligations of the Depositor and the Trustee
created by the Trust Agreement with respect to the Certificates shall terminate
upon the earliest to occur of (i) the distribution in full of all [Underlying
Certificates and, if applicable, all proceeds of a redemption by the Underlying
Securities Issuer] [amounts due to Certificateholders and retirement] of the
Underlying Securities, [(ii) the distribution in full of all Underlying
Securities to the exchanging Certificateholders on any Optional Exchange Date
and any amounts due to Certificateholders on any Optional Exchange Date,] and
(iii) the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.
An employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), a plan described in Section
4975(e)(1) of the Code, an entity whose underlying assets include plan assets by
reason of any such plan's investment in the entity, including an individual
retirement account or Keogh plan (any such, a "Plan") may purchase and hold
Certificates if the Plan can represent and warrant that its purchase and holding
of the Certificates would not be prohibited under ERISA or the Code.
7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip
code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder,
hereby irrevocably constituting and appointing
_____________________________________________________________________ Attorney
to transfer said Certificate on the books of the Certificate Register, with full
power of substitution in the premises.
Dated:
_____________________ *
Signature Guaranteed:
_____________________ *
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member of the New York Stock Exchange or a commercial bank or
trust company.
8
<PAGE>
EXHIBIT C
Form of Market Agent Agreement
------------------------------
(begins on next page)
<PAGE>
Exhibit C
to Series Supplement
FORM OF
MARKET AGENT AGREEMENT
MARKET AGENT AGREEMENT dated as of [________], 199[_] (the
"Agreement"), by and between [____________], and the [Corporate] [US Government]
[Foreign Government] Bond-Backed Certificates Trust, Series [_________] (the
"Trust"), a New York trust created under the Standard Terms for Trust
Agreements, dated as of [___________], 199[_] (the "Standard Terms"), between
Lehman ABS Corporation, as depositor (the "Depositor"), and [name of bank], as
trustee (the "Trustee"), as supplemented by the Series Supplement, dated as of
[__________], 199[_], between the Depositor[, [_________], as administrative
agent (the "Administrative Agent")] and the Trustee (the Standard Terms,
together with the Series Supplement, the "Trust Agreement"). Capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Trust Agreement. This Agreement shall constitute the "Market Agent Agreement" as
defined in the Trust Agreement.
W I T N E S S E T H:
WHEREAS, the Trust desires to retain [_______] to render
certain services to the Trust in the manner and on the terms hereinafter set
forth:
WHEREAS, [__________] is a recognized broker dealer meeting
the qualifications for a Market Agent set forth in the Trust Agreement and
desires to provide such services to the Trust on the terms and conditions
hereinafter set forth; and
WHEREAS, the Trustee has been directed to enter into and
execute this Market Agent Agreement with [__________] as the initial Market
Agent pursuant to Section 8.01 of the Trust Agreement;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, [___________] and the Trust hereby agree as
follows:
Section 1. Duties of the Market Agent. The Trust
--------------------------
hereby employs [________] to act as the Market Agent for the Trust and to
furnish to the Trust all of the services of the Market Agent set forth herein
and in the Trust Agreement,
<PAGE>
including but not limited to acting on behalf of the Trust in connection with
the sale and purchase of Underlying Securities as provided in the Trust
Agreement. [____________] hereby accepts such employment and agrees during the
term of the Certificates to render such services and to assume the obligations
of the Market Agent under the Trust Agreement under the terms and conditions
herein set forth.
Section 2. Compensation of [ ]. The Depositor shall
----------------------------
pay [__________] a fee as shall be separately agreed between the Depositor and
[_________]. It shall be the sole responsibility of the Depositor to pay such
fee and the Trust shall have no obligation to compensate [___________] for the
services it renders pursuant to the terms of this Market Agent Agreement.
Section 3. Limitation of Liability of the Market Agent. The
-------------------------------------------
Market Agent shall not be liable in contract, tort or otherwise to the Trust for
any losses, costs or damages arising out of its performance of its obligations
and duties hereunder except for willful misconduct, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder.
Section 4. Term of this Agreement. This Agreement, which shall
----------------------
be a binding agreement as of the date hereof, shall terminate upon the earlier
to occur of (a) the termination of the Trust Agreement, (b) the removal of the
Market Agent by the Trustee in accordance with the Trust Agreement or (c) 30
days after written notice of [_____________]'s resignation as Market Agent is
delivered to the Trustee.
Section 5. Amendments. No amendment or waiver of any provision
----------
of this Agreement nor consent to any departure herefrom by any party hereto
shall in any event be effective unless the same shall be in writing and signed
by the party against which enforcement of such amendment or waiver or consent is
sought, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
Section 6. Notice Addresses. Except as otherwise expressly
----------------
provided herein, all notices and other communications provided for hereunder
shall be deemed to have been duly given if sent by facsimile transmission (a) if
to the Market Agent, as set forth below and (b) if to the Trustee, as set forth
in the Trust Agreement;
2
<PAGE>
If to [________]:
____________________________________
____________________________________
____________________________________
Attention: ________________________
Facsimile: ________________________
Telephone: ________________________
Section 7. Assignment. Except as provided in this Section 7,
----------
this Agreement may not be assigned by the Market Agent without the prior consent
of the Trustee in accordance with the Trust Agreement.
The Market Agent shall have the right to transfer and assign
all of its rights, duties, obligations and liabilities under this Agreement to
an affiliate of the Market Agent; provided, however, that such transfer and
assignment shall be on the condition that the due and punctual performance and
observance of all the terms and conditions of this Agreement to be performed by
the Market Agent shall, by an agreement supplemental hereto, be assumed by such
affiliate just as fully and effectually as if such affiliate had been the
original party of the first part to this Agreement.
Section 8. Governing Law. This Agreement shall be construed
-------------
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in such state (without reference to choice of law
doctrine).
Section 9. Entire Agreement. This Agreement embodies the
----------------
entire agreement and understanding between [___________] and the Trust and
supersedes any and all prior agreements and understandings between
[_____________] and the Trust relating to the subject matter hereof.
Section 10. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Market Agent Agreement as of the day and year first above
written.
[name of market agent]
By: ______________________________
Name:_________________________
Title: _______________________
[name of bank], not in
its individual capacity but
as Trustee
By:_______________________________
Name:__________________________
Title: ________________________
4
Exhibit 5.1
WEIL, GOTSHAL & MANGES LLP
A Limited Liability Partnership Including Professional Corporations
767 Fifth Avenue
New York, N.Y. 10153-0119
(212) 310-8000
Fax: (212) 310-8007
July 25, 1997
Lehman ABS Corporation
Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Lehman ABS Corporation, a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of the Company's Registration Statement
on Form S-3, (together with the exhibits and any and all amendments thereto, the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the registration by the Company of Trust
Certificates (the "Certificates"). As described in the Registration Statement,
the Certificates will be issued in series (and may be issued in classes within
any given series), with each series being issued by a trust (each, a "Trust") to
be formed by the Company pursuant to a Trust Agreement (each, a "Trust
Agreement") between the Company and a trustee to be determined (each, a
"Trustee").
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Trust Agreement, and such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives, as we have deemed relevant and necessary
as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. As to all questions of fact material to this opinion
<PAGE>
that have not been independently established, we have relied upon certificates
or comparable documents of officers and representatives of the Company. The
opinion set forth below is also based on the assumptions that (i) the
Registration Statement, as finally amended (including any necessary
post-effective amendments), has become effective under the Securities Act, (ii)
the amount, price, interest rate and other principal terms of the Certificates
have been duly approved by the Board of Directors (or its authorized designees)
of the Company, (iii) the related Trust Agreement has been duly executed and
delivered by the parties thereto substantially in the form filed as an exhibit
to the Registration Statement, and (iv) the Certificates have been duly executed
by the Trustee and authenticated by the Trustee in accordance with the Trust
Agreement and sold and delivered by the Company against payment therefor.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that the Certificates will be legally
issued, fully paid and nonassessable.
The opinion herein is limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters covered
by this opinion of the laws of any other jurisdiction.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement. We further consent to the reference to our firm's
name under the caption "Legal Opinions" in the prospectuses and the forms of
prospectus supplements which are a part of the Registration Statement.
This opinion is rendered solely for your benefit in connection
with the transactions described above. This opinion may not be used or relied
upon by any other person and, except as provided in the immediately preceding
paragraph, may not be disclosed, quoted, filed with a governmental agency or
otherwise referred to without our prior written consent.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
2
Exhibit 8.1
WEIL, GOTSHAL & MANGES LLP
A Limited Liability Partnership Including Professional Corporations
767 Fifth Avenue
New York, N.Y. 10153-0119
(212) 310-8000
Fax: (212) 310-8007
July 25, 1997
Lehman ABS Corporation
3 World Financial Center
New York, New York 10295
Gentlemen:
We have acted as special counsel to Lehman ABS Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of the
Company's Registration Statement on Form S-3, as amended to the date hereof (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Act"). As described in the Registration Statement, the Company may form a trust
or several trusts (each, a "Trust") which may issue various series of
Certificates (and may issue various classes of Certificates within any given
series) pursuant to a Trust Agreement (each, a "Trust Agreement") between the
Company and a trustee to be determined. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Registration
Statement.
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
prospectus dated July 25, 1997 contained therein (the "Base Prospectus" and,
together with the model Prospectus Supplements contained therein and the
Registration Statement, the "Prospectus"), the form of Trust Agreement attached
as an exhibit thereto, and such corporate records, agreements, documents and
other instruments (collectively, the "Documents"), and have made such inquiries
of such officers and representatives of the Company, as we have deemed relevant
and necessary as a basis for the opinion hereinafter set forth.
<PAGE>
Lehman ABS Corporation
July 25, 1997
Page 2
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. We have further assumed (i) that the Documents and Certificates as
executed and delivered by the requisite signatories thereto will conform in
substance and form in all material respects to the respective forms thereof
examined by us, (ii) timely compliance by all parties to the various Documents
to the terms thereof (without waiver of any of the terms thereof) and (iii) that
the Documents constitute all the agreements, understandings, and arrangements
between the parties thereto with respect to the transactions contemplated
therein and the Securities.
Based on the foregoing and subject to the next succeeding
paragraph, it is our opinion that the applicable statements contained in the
Base Prospectus under the caption "Tax Considerations," and in the Prospectus
Supplements under the caption "Certain Federal Income Tax Consequences," insofar
as such statements constitute matters of law or legal conclusions and except to
the extent qualified therein, are correct in all material respects.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. Further,
you should be aware that opinions of counsel are not binding on the Internal
Revenue Service or the courts. We express no opinion either as to any matters
not specifically covered by the foregoing opinion or as to the effect on the
matters covered by this opinion of the laws of any other jurisdictions.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, facts, including the taking
of any action by any party to any of the transactions described in the Documents
pursuant to any opinion of counsel as required by any of the documents relating
to such transactions, or documents on which this opinion is based, or an
inaccuracy in any of the representations or warranties upon which we have relied
in rendering this opinion.
We consent to the references to our firm under the captions
"Certain Federal Income Tax Consequences" and "Legal Matters" in the Prospectus.
This opinion may not be used for any other purpose and may not otherwise be
relied upon by, or disclosed, quoted or referred to, any other person.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
Exhibit 25.1(a)
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
LEHMAN ABS CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 13-3447441
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3 World Financial Center
New York, New York 10285
(Address of principal executive offices) (Zip code)
----------------------
Trust Certificates
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 17th day of July, 1997.
THE BANK OF NEW YORK
By: /S/STEPHEN J. GIURLANDO
----------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 19,449)
Cumulative foreign currency transla-
tion adjustments .................. ( 13,034)
------------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
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Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
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