<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 15, 1995)
$227,086,000
CALLABLE ZERO COUPON TRUST CERTIFICATES,
SERIES 1997-TVA-2
(UNDERLYING SECURITIES WILL BE SEPARATE STRIPS REPRESENTING THE PRINCIPAL AMOUNT
PAYABLE UPON MATURITY AND CERTAIN INDIVIDUAL INTEREST PAYMENTS OF TENNESSEE
VALLEY AUTHORITY 6 3/4% GLOBAL POWER BONDS 1995 SERIES E DUE NOVEMBER 1, 2025)
Each Callable Zero Coupon Trust Certificate, Series 1997-TVA-2 offered
hereby (collectively, the 'Certificates') represents a beneficial interest in a
trust (the 'Trust') formed pursuant to the Trust Agreement dated as of October
31, 1997 between Lehman ABS Corporation (the 'Depositor') and The Bank of New
York, as trustee (the 'Trustee'). The Certificates will be issued in six
Classes, Class A-1 through Class A-6 (each a 'Class'), each Class having the
characteristics described herein.
The principal assets of the Trust will be separate strips representing the
principal amount payable upon maturity and certain individual future interest
payments with a total initial aggregate face amount of $227,086,000 with respect
to Tennessee Valley Authority (the 'TVA' or the 'Underlying Securities Issuer')
bonds due November 1, 2025 (the 'Initial Strips' or the 'Initial Underlying
Securities'), having the characteristics described herein under 'Description of
the Underlying Securities.' Each Class of Certificates will represent an
interest solely in Initial Strips having a scheduled payment date on the
Scheduled Distribution Date (as defined below) for such Class of Certificates.
Distributions are scheduled to be made on each Class of Certificates only
on the scheduled distribution date of such Class (the 'Scheduled Distribution
Dates'), at which time such Class of Certificates will be entitled to a
distribution of the amount received on the Strip of Underlying Securities having
a scheduled payment date on the Scheduled Distribution Date for such Class, or,
as described herein, upon an Optional Redemption in whole of the Certificates.
The Certificates are callable in whole on any November 1 or May 1 on or
after November 1, 2000 through May 1, 2021 to November 1, 2024 (based on the
respective Certificate Class) (a 'Redemption Date') at the 'Redemption Prices'
shown on pages S-4 and S-16, upon exercise of the Call Rights, as defined
herein. All distributions on the Certificates of a particular Class will be made
on a pro rata basis to the holders of the Certificates (each a
'Certificateholder') of such Class or Classes. See 'Special
Considerations--Maturity and Yield Considerations' and 'Description of the
Certificates--Early Redemption' herein. It is a condition to the issuance of the
Certificates that the Certificates have ratings assigned by Moody's Investors
Service, Inc. ('Moody's') and by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ('S&P') of 'Aaa' and 'AAA,' respectively.
See 'Risk Factors' herein on pages S-8 and S-9 and in the Prospectus on
pages 4 and 5. (Cover continued on next page)
------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY OF ITS AFFILIATES. THE
CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
INITIAL INITIAL AGGREGATE SCHEDULED
AGGREGATE SELLING GROSS DISTRIBUTION
CLASS NUMBER FACE AMOUNT PRICE PROCEEDS DATE(1) CUSIP NUMBER
- ------------- ------------ ------- ----------- ---------------- ------------
<C> <C> <C> <C> <S> <C>
Class A-1 $186,707,000 11.121% $20,763,686 November 1, 2025 131010 AB 6
Class A-2 $ 11,583,000 11.566% $ 1,339,690 May 1, 2025 131010 AD 2
Class A-3 $ 11,583,000 12.028% $ 1,393,204 November 1, 2024 131010 AE 0
Class A-4 $ 5,213,000 13.530% $ 705,319 May 1, 2023 131010 AH 3
Class A-5 $ 7,000,000 14.634% $ 1,024,380 May 1, 2022 131010 AK 6
Class A-6 $ 5,000,000 15.219% $ 760,950 November 1, 2021 131010 AL 4
------------ -----------
$227,086,000 $25,987,229
</TABLE>
(1) The Certificates may be redeemed before the Scheduled Distribution Date in
the event of an Optional Redemption on any November 1 or May 1 occurring on
or after November 1, 2000 through May 1, 2021 to November 1, 2024 (based on
the respective Certificate Class) at a price equal to the Redemption Prices
set forth on pages S-4 and S-16 hereto.
------------------
The Certificates offered hereby will be purchased by Lehman Brothers Inc.
(the 'Underwriter') from the Depositor and will be offered by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. 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 'Underwriting.' The
Certificates are offered subject to receipt and acceptance by the Underwriter,
prior sale and the Underwriter's right to reject any order in whole or in part
and to withdraw, cancel or modify the offer without notice. It is expected that
delivery of the Certificates will be made in book-entry form through the
facilities of The Depository Trust Company on or about October 31, 1997 (the
'Closing Date').
------------------
LEHMAN BROTHERS
October 28, 1997
<PAGE>
(Cover page continued)
The TVA is not participating in, and will not receive any proceeds in
connection with, the offering of the Certificates, and is not an affiliate of
the Depositor. The Underlying Securities were acquired by an affiliate of the
Depositor in the secondary market and will be deposited into the Trust for the
benefit of the Certificateholders.
The Certificates have been authorized for listing, upon official notice of
issuance, with the New York Stock Exchange ('NYSE').
Pursuant to the Trust Agreement, the Trust may, from time to time, be
reopened and increased in size upon the deposit by the Depositor of additional
strips representing additional amounts of identical principal and individual
interest payments on additional identical TVA bonds in the same proportion as
the Initial Strips (the 'Additional Strips' or the 'Additional Underlying
Securities,' and together with the Initial Strips, the 'Strips' or the
'Underlying Securities') into the Trust together with the issuance of additional
Certificates. The Additional Strips and the Additional Certificates will be, in
all respects, fully fungible with the Initial Strips and the respective Classes
of Certificates issued hereby, respectively.
There is currently no secondary market for the Certificates, and there can
be no assurance that a secondary market for the Certificates will develop or, if
it does develop, that it will continue. See 'Risk Factors' in the Prospectus.
The Certificates initially will be represented by certificates registered
in the name of CEDE & Co., as nominee of The Depository Trust Company ('DTC').
The interests of beneficial owners of such Certificates will be represented by
book entries on the records of participating members of DTC ('Participants').
Definitive certificates will be available for such Certificates only under the
limited circumstances described herein. See 'Description of the
Certificates--Definitive Certificates.'
------------------
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO ITS
PROSPECTUS DATED NOVEMBER 15, 1995, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH UNDER 'RISK FACTORS' IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY
The following summary of certain pertinent information does not purport to
be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the headings 'Description of the Certificates' and 'Description of the
Underlying Securities'. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement on the pages indicated in the 'Index of
Defined Terms' or, to the extent not defined herein, have the meanings assigned
to such terms in the Prospectus.
<TABLE>
<S> <C>
THE CERTIFICATES
Certificates Offered.... The Callable Zero Coupon Trust Certificates, Series 1997-TVA-2 (the 'Certificates').
The Certificates, each of which represents a fractional beneficial interest in the
Trust, will be issued pursuant to the Trust Agreement and will consist of six Classes
(each a 'Class') offered hereby. The Underlying Securities will be the sole assets of
the Trust from which Certificateholders will receive any distributions. Under the Trust
Agreement, Additional Underlying Securities (as defined below) may be deposited in the
Trust. If Additional Underlying Securities are so deposited, pursuant to the Trust
Agreement, additional certificates of any or all of the same Classes which will be, in
all respects, fully fungible with the Certificates issued hereby (the 'Additional
Certificates') shall be issued upon the deposit of such corresponding Additional
Underlying Securities into the Trust.
The Trust............... The Callable Zero Coupon Trust, Series 1997-TVA-2 (the 'Trust'). The Trust will be
formed pursuant to the Standard Terms for Trust Agreements dated as of February 28,
1996 (the 'Standard Terms for Trust Agreements'), between the Depositor and the
Trustee, as supplemented by the Series 1997-TVA-2 Supplement dated as of the Closing
Date (the 'Series Supplement' and, together with the Standard Terms for Trust
Agreements, the 'Trust Agreement').
Depositor............... Lehman ABS Corporation (the 'Depositor'), an indirect wholly-owned subsidiary of Lehman
Brothers Inc., will deposit the Underlying Securities into the Trust. See 'The
Depositor' in the Prospectus.
Trustee................. The Bank of New York.
Closing Date............ On or about October 31, 1997.
Scheduled Distribution
Dates................. Class A-1: November 1, 2025
Class A-2: May 1, 2025
Class A-3: November 1, 2024
Class A-4: May 1, 2023
Class A-5: May 1, 2022
Class A-6: November 1, 2021
Trust Assets............ The assets of the Trust will be strips representing the principal amount payable and
certain individual future interest payments with a total initial aggregate face amount
of $227,086,000 with respect to 6 3/4% Global Power Bonds 1995 Series E due November 1,
2025 (the 'Initial Strips' or the 'Initial Underlying Securities') issued by the
Tennessee Valley Authority (the 'TVA' or the 'Underlying Securities Issuer'), having
the characteristics described herein. Pursuant to the Trust Agreement, additional
strips representing additional amounts of principal and/or individual interest payments
on additional identical TVA bonds (the 'Additional Strips' or the 'Additional
Underlying Securities,' and together with the Initial Strips, the 'Strips' or the
'Underlying Securities') may, from time to time, be deposited into the Trust by the
Depositor. Such Additional Strips must be identical to and fully fungible with, and in
the same proportion as, the corresponding principal and interest strips that make up
the Initial Strips. The Strips will be subject to 'Call Rights' as described below.
Optional Redemption
Dates................. On any November 1 or May 1 occurring on or after November 1, 2000 through May 1, 2021
to November 1, 2024 (based on the respective Certificate Class) (a 'Redemption Date'),
the Certificates may be redeemed in whole at a price equal to the Redemption Prices set
forth herein.
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Redemption Prices....... The Redemption Prices listed as a percentage of the Face Amount of the Certificates,
for each respective Class of Certificates, as set forth below, correspond to the
related Redemption Dates for such Class.
</TABLE>
REDEMPTION CLASS CLASS CLASS CLASS CLASS CLASS
DATE A-1 A-2 A-3 A-4 A-5 A-6
- ---------- ------ ------ ------ ------ ------ ------
11/1/00 14.071% 14.634% 15.219% 17.120% 18.517% 19.257%
5/1/01 14.634 15.219 15.828 17.805 19.257 20.028
11/1/01 15.219 15.828 16.461 18.517 20.028 20.829
5/1/02 15.828 16.461 17.120 19.257 20.829 21.662
11/1/02 16.461 17.120 17.805 20.028 21.662 22.529
5/1/03 17.120 17.805 18.517 20.829 22.529 23.430
11/1/03 17.805 18.517 19.257 21.662 23.430 24.367
5/1/04 18.517 19.257 20.028 22.529 24.367 25.342
11/1/04 19.257 20.028 20.829 23.430 25.342 26.355
5/1/05 20.028 20.829 21.662 24.367 26.355 27.409
11/1/05 20.829 21.662 22.529 25.342 27.409 28.506
5/1/06 21.662 22.529 23.430 26.355 28.506 29.646
11/1/06 22.529 23.430 24.367 27.409 29.646 30.832
5/1/07 23.430 24.367 25.342 28.506 30.832 32.065
11/1/07 24.367 25.342 26.355 29.646 32.065 33.348
5/1/08 25.342 26.355 27.409 30.832 33.348 34.682
11/1/08 26.355 27.409 28.506 32.065 34.682 36.069
5/1/09 27.409 28.506 29.646 33.348 36.069 37.512
11/1/09 28.506 29.646 30.832 34.682 37.512 39.012
5/1/10 29.646 30.832 32.065 36.069 39.012 40.573
11/1/10 30.832 32.065 33.348 37.512 40.573 42.196
5/1/11 32.065 33.348 34.682 39.012 42.196 43.883
11/1/11 33.348 34.682 36.069 40.573 43.883 45.639
5/1/12 34.682 36.069 37.512 42.196 45.639 47.464
11/1/12 36.069 37.512 39.012 43.883 47.464 49.363
5/1/13 37.512 39.012 40.573 45.639 49.363 51.337
11/1/13 39.012 40.573 42.196 47.464 51.337 53.391
5/1/14 40.573 42.196 43.883 49.363 53.391 55.526
11/1/14 42.196 43.883 45.639 51.337 55.526 57.748
5/1/15 43.883 45.639 47.464 53.391 57.748 60.057
11/1/15 45.639 47.464 49.363 55.526 60.057 62.460
5/1/16 47.464 49.363 51.337 57.748 62.460 64.958
11/1/16 49.363 51.337 53.391 60.057 64.958 67.556
5/1/17 51.337 53.391 55.526 62.460 67.556 70.259
11/1/17 53.391 55.526 57.748 64.958 70.259 73.069
5/1/18 55.526 57.748 60.057 67.556 73.069 75.992
11/1/18 57.748 60.057 62.460 70.259 75.992 79.031
5/1/19 60.057 62.460 64.958 73.069 79.031 82.193
11/1/19 62.460 64.958 67.556 75.992 82.193 85.480
5/1/20 64.958 67.556 70.259 79.031 85.480 88.900
11/1/20 67.556 70.259 73.069 82.193 88.900 92.456
5/1/21 70.259 73.069 75.992 85.480 92.456 96.154
11/1/21 73.069 75.992 79.031 88.900 96.154 N/A
5/1/22 75.992 79.031 82.193 92.456 N/A N/A
11/1/22 79.031 82.193 85.480 96.154 N/A N/A
5/1/23 82.193 85.480 88.900 N/A N/A N/A
11/1/23 85.480 88.900 92.456 N/A N/A N/A
5/1/24 88.900 92.456 96.154 N/A N/A N/A
11/1/24 92.456 96.154 N/A N/A N/A N/A
S-4
<PAGE>
<TABLE>
<S> <C>
The Call Rights.................. The Call Rights associated with the Certificates, as defined herein, represent
the rights to purchase at the Redemption Price the Underlying Securities which
correspond to each respective Class of Certificates. Such purchase will result
in the redemption of the Certificates (an 'Optional Redemption'). The initial
holder of the Call Rights (the 'Rights Holder') will be an affiliate of the
Depositor. The Call Rights are not offered hereby.
Optional Redemption
Provisions..................... The Rights Holder may provide notice to the Trustee (a 'Redemption Request')
no less than seven Business Days prior to a Redemption Date that it intends to
exercise its Call Rights with respect to the Certificates which will result in
an Optional Redemption of the Certificates on such Redemption Date.
Denominations; Specified
Currency....................... The Certificates will be denominated and payable in U.S. dollars and will be
available for purchase in minimum denominations of $1,000 and integral
multiples thereof.
Form of Security................. Book-entry Certificates with The Depository Trust Company ('DTC'), except in
certain limited circumstances. See 'Description of the
Certificates--Definitive Certificates.' Distributions thereon will be settled
in immediately available (same-day) funds.
CUSIP Numbers.................... Class A-1: 131010 AB 6
Class A-2: 131010 AD 2
Class A-3: 131010 AE 0
Class A-4: 131010 AH 3
Class A-5: 131010 AK 6
Class A-6: 131010 AL 4
Certain Federal Income Tax
Consequences................... In the opinion of tax counsel to the Trust, the Trust will not be classified
for federal income tax purposes as an association (or publicly traded
partnership) taxable as a corporation. The Trustee intends to treat the Trust
as a grantor trust for federal income tax purposes. A purchaser of a
Certificate will be required to include original issue discount ('OID') in
income periodically over the term of the Certificate, although no cash
attributable to such income will be received before the Maturity Date or, as
described herein, an Optional Redemption Date. See 'Certain Federal Income Tax
Consequences.'
Ratings.......................... It is a condition to the issuance of the Certificates that the Certificates
have ratings assigned by Moody's Investors Service, Inc. ('Moody's') and by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ('S&P') of
'Aaa' and 'AAA,' respectively. The rating on the Certificates does not
constitute a statement regarding the occurrence of an Optional Redemption of
the Certificates and the corresponding effect on yield to investors. See
'Ratings.'
ERISA Considerations............. An employee benefit plan subject to the Employee Retirement Income Security
Act of 1974, as amended ('ERISA') or a plan subject to Section 4975 of the
Internal Revenue Code of 1986 as amended (the 'Code'), an individual
retirement account (an 'IRA') or a Keogh plan (a 'Keogh'), (each, a 'Plan'),
may purchase Certificates if either (i) the Underwriter is able to confirm the
existence of at least 100 independent purchasers for such Class of
Certificates or (ii) such Plan determines that the acquisition and holding of
a Certificate does not give rise to a transaction prohibited by ERISA or
Section 4975 of the Code or that an exemption from such prohibited transaction
provisions applies. See 'ERISA Considerations.'
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
THE UNDERLYING SECURITIES
Underlying Securities............ Strips representing the principal amount payable upon maturity and certain
individual future interest payments with a total initial aggregate face amount
of $227,086,000 with respect to bonds comprising a portion of a publicly
issued offering by the TVA of $600,000,000 aggregate principal amount of
6 3/4% Global Power Bonds 1995 Series E Due November 1, 2025 (the 'Bonds').
(On August 5, 1997, the TVA issued a second installment of $750,000,000 of
Bonds which are identical in all respects to and fungible with the Bonds
originally offered on October 31, 1995.) The Bond offering affords holders the
option to strip the Bonds into their separate interest and principal
components. The Underlying Securities represent the stripped principal portion
(the 'PO') and six separate strips representing individual future interest
payments (the 'IO's') of such Bonds. Pursuant to the Trust Agreement, the
Trust may, from time to time, be increased in size by the depositing of
additional strips representing additional amounts of principal and individual
future interest payments on identical TVA bonds which will be identical to the
Initial Strips (the 'Additional Strips' or the 'Additional Underlying
Securities,' and together with the Initial Strips, the 'Strips' or the
'Underlying Securities') into the Trust by the Depositor. The Additional
Strips, will be, in all respects, fully fungible with, and in the same
proportion as, the corresponding principal strips and interest strips that
make up the Initial Strips. As of the date of this Prospectus Supplement, the
Underlying Securities have remaining terms to maturity ranging from slightly
more than 24 years to slightly more than 28 years.
Underlying Securities Issuer..... According to the Offering Circular and Information Statement issued by the TVA
in connection with the Bonds (together the 'Underlying Securities Circular'),
the TVA is a wholly owned corporate agency and instrumentality of the United
States of America established by the Tennessee Valley Authority Act of 1933,
as amended (the 'Act').
As more fully described in the Underlying Securities Circular, the interest
and principal on the Bonds are payable solely from net income earned by the
Underlying Securities Issuer from the sale of power and are not obligations
of, or guaranteed by, the United States of America.
<CAPTION>
Description of the
Initial Strips................. INITIAL STRIP DESCRIPTION
--------------------------------------------------------------
RELATED PRINCIPAL MATURITY
CLASS TYPE AMOUNT CUSIP DATE
------- ---- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C>
A-1 PO $175,124,000 88059FAV3 November 1, 2025
IO 11,583,000 88059EHQ0 November 1, 2025
------------
186,707,000
A-2 IO 11,583,000 88059EHP2 May 1, 2025
A-3 IO 11,583,000 88059EHN7 November 1, 2024
A-4 IO 5,213,000 88059EHK3 May 1, 2023
A-5 IO 7,000,000 88059EHH0 May 1, 2022
A-6 IO 5,000,000 88059EHG2 November 1, 2021
------------
$227,086,000
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Ratings of the Underlying
Securities Issuer as of the
Closing Date................... Power Bonds (as defined herein) issued by the TVA and the stripped principal
portion of such obligations are generally rated 'Aaa' by Moody's and 'AAA' by
S&P. The stripped interest portions of such obligations are typically not
rated by Moody's or S&P.
Amortization..................... None
Form and Denomination of Bonds... The Bonds are transferable by holders only on the book-entry system of the
U.S. Federal Reserve Banks. The Bonds are not exchangeable for definitive
securities. The Bonds are issued and must be maintained and transferred in
minimum denominations of $1,000 and integral multiples thereof.
Redemption/Put/
Other Features................. None
Taxation......................... United States federal income tax generally is not withheld from payments on
Bonds or interest or principal strips therefrom beneficially owned by non-U.S.
persons, provided that an appropriate United States Internal Revenue Service
Form W-8 (or successor form) is provided. The Bonds are not subject to
redemption by reason of the imposition of withholding or other tax by any
jurisdiction, and the TVA has no obligation to pay additional interest or
other amounts in respect of any such tax that may be imposed on payments on
the Bonds or strips as a result of a change in law or otherwise, including any
withholding tax that may be imposed as a result of a failure to provide an
applicable United States Internal Revenue Service form.
Redemption....................... The Bonds are not subject to redemption prior to maturity.
</TABLE>
This Prospectus Supplement does not provide information with respect to the
Underlying Securities Issuer. No investigation of the Underlying Securities
Issuer (including, without limitation, no investigation as to its financial
condition or creditworthiness) or of the Underlying Securities (including,
without limitation, no investigation as to its rating) has been made. Potential
Certificateholders should obtain and evaluate the same information concerning
the Underlying Securities Issuer as it would obtain and evaluate if it were
investing directly in the Underlying Securities, the Bonds or in other
securities issued by the Underlying Securities Issuer. None of the Depositor,
the Trustee, the Underwriter, or any of their respective affiliates, assume any
responsibility for the accuracy or completeness of any publicly available
information of the Underlying Securities Issuer filed with the Commission or
otherwise made publicly available or considered by a purchaser of the
Certificates in making its investment decision in connection therewith.
S-7
<PAGE>
RISK FACTORS
Prospective purchasers should consider, among other things, the following
factors (as well as the factors set forth under 'RISK FACTORS' in the
Prospectus) in connection with an investment in the Certificates.
Limited Liquidity. There is currently no secondary market for the
Certificates. Lehman Brothers is under no obligation to make a market in the
Certificates. It is unlikely that a secondary market will develop and, if a
secondary market does develop, it is unlikely that it will provide
Certificateholders with liquidity of investment or will continue for the life of
the Certificates. In addition, under the Trust Agreement, the Depositor or an
affiliate has the right to exchange a limited amount of Certificates for
Underlying Securities, subject to substantial restrictions as to timing, amount
and other matters, as set forth in the Trust Agreement. See 'Description of the
Certificates--Exchange of Certificates.' Such exchanges could lead to a less
liquid market for the Certificates.
Maturity and Yield Considerations. The yield realized by an investor in
any Class of Certificates will be based upon such investor's purchase price, the
timing of its purchase, and whether the investor receives the principal amount
of such Certificates at their Scheduled Distribution Date or the applicable
Redemption Price on any Redemption Date (see the Schedule on page S-16). If a
Rights Holder exercises the right to cause an Optional Redemption, the
Certificates will have a shorter average maturity than if such right were not
exercised. Additionally, such right is likely to be exercised, if at all, at a
time when the market value of the Underlying Securities has increased due to a
declining interest rate environment. In such an environment, the interest rates
available on potential reinvestment can be expected to be lower than the return
that would have been earned over the remaining life of the Certificates if they
had not been called. See 'Risk Factors' and 'Maturity and Yield Considerations'
in the Prospectus.
Zero Coupon Nature of the Certificates. Because each Class of Certificates
does not receive allocations of either interest or principal until its Scheduled
Distribution Date or a Redemption Date, the changes in market value of the
Certificates as a result of fluctuations in interest rates may exceed those of a
coupon-paying security of a similar maturity. In addition, given the potential
for an Optional Redemption of the Certificates, which, as described above, is
likely to occur in a declining interest rate environment (see 'Maturity and
Yield Considerations' above), the Certificates are unlikely to appreciate
significantly in price during periods of declining interest rate environments.
The Certificates will be deemed to be issued with original issue discount. See
'Certain Federal Income Tax Consequences' herein.
Limited Assets. The Trust has no assets other than the Underlying
Securities. No other assets will be available for payment of the Certificates.
No Management of Underlying Securities. Except pursuant to an Optional
Redemption or an event of default on the Underlying Securities as described
herein, the Trust will not dispose of any Underlying Security, regardless of
adverse events, financial or otherwise, which may affect the Underlying
Securities Issuer or the value of any Underlying Security.
Credit Risk. The Certificates represent interests in obligations of a
single obligor. In particular, the Certificates will be subject to all the risks
associated with a direct investment in unsecured debt obligations of the TVA
including such factors as changes in governmental rules and fiscal policies
which could be adverse to the financial condition of the TVA, acts of God and
other factors.
Although by their terms the Bonds are not redeemable prior to their
scheduled maturity in November 2025, in the event that the maturity of the Bonds
is accelerated as a result of, for instance, a default on the Bonds, the
interest strips maturing subsequent to the date of such acceleration may not be
entitled to any payments. However, in such case, pursuant to a specific
obligation of the holders of the Class A-1 Certificates to them, the Class A-2
through Class A-6 Certificates would be entitled to an allocation of the sales
proceeds (according to the Allocation Ratio) from the sale of all of the
Underlying Securities.
No Investigation of Underlying Securities. None of the Depositor, the
Underwriter or the Trustee will (i) make any investigation of the business
condition, financial or otherwise, of the Underlying Securities Issuer, or (ii)
verify any reports or public information published by the Underlying Securities
Issuer. Investors are encouraged to consider publicly available financial and
other information regarding the Underlying Securities
S-8
<PAGE>
Issuer. The issuance of the certificates should not be construed as an
endorsement by the Depositor, the Underwriter or the Trustee of the financial
condition or business prospects of the Underlying Securities Issuer.
Legal Investment. The appropriate characterization of the Certificates
under various legal investment restrictions, and thus the ability of investors
subject to those restrictions to purchase the Certificates, may be subject to
significant interpretative uncertainties. No representation is made as to the
proper characterization of the Certificates for legal investment purposes, or
for risk-weighting, securities valuation, regulatory accounting or other
financial institution regulatory regimes of the National Association of
Insurance Commissioners, any state commissions, any federal or state banking
authority or any other regulatory body. No representation is made as to the
ability of particular investors to purchase Certificates under applicable legal
investment restrictions. Investors should consult with their own legal advisors
in determining whether, and to what extent, the Certificates will constitute
legal investment for them, and the consequences of such an investment.
THE TRUST
The Trust will be formed pursuant to the Standard Terms for Trust
Agreements, as supplemented by the Series 1997-TVA-2 Supplement (the 'Series
Supplement' and together with the Standard Terms for Trust Agreements, the
'Trust Agreement') between the Depositor and the Trustee. Concurrently with the
execution and delivery of the Series Supplement, the Depositor will deposit the
Underlying Securities in the Trust. In addition, pursuant to the Trust
Agreement, the Depositor may, from time to time, deposit Additional Strips (as
defined below) into the Trust. The Trustee, on behalf of the Trust, will accept
all such Underlying Securities and will deliver the Certificates to or upon the
order of the Depositor.
The Initial Underlying Securities (as defined below) have been, or in the
case of any Additional Underlying Securities (as defined below) will be,
purchased by the Depositor in the secondary market (either directly or through
an affiliate of the Depositor). The Underlying Securities will not be acquired
from the Underlying Securities Issuer as part of any distribution by or pursuant
to any agreement with the Underlying Securities Issuer. The Underlying
Securities Issuer is not participating in this offering and will not receive any
of the proceeds of the sale of the Certificates.
DESCRIPTION OF THE UNDERLYING SECURITIES
GENERAL
The Underlying Securities represent the sole assets of the Trust that are
available to make distributions in respect of the Certificates. The Initial
Underlying Securities are a strip representing the principal amount payable (the
'Principal Component'--See '--Stripping' herein) and six separate strips
representing individual future interest payments (each an 'Interest
Component'--See '-- Stripping' herein) with respect to certain of the 6 3/4%
Global Power Bonds 1995 Series E due November 1, 2025 (the 'Bonds') issued by
Tennessee Valley Authority (the 'TVA' or the 'Underlying Securities Issuer')
(the 'Initial Strips' or the 'Initial Underlying Securities'). The Initial
Strips are summarized below.
RELATED
CLASS TYPE PRINCIPAL AMT CUSIP MATURITY DATE
- ---------- ---- ------------- ----------- -----------------
A-1 PO $ 175,124,000 88059FAV3 November 1, 2025
IO 11,583,000 88059EHQ0 November 1, 2025
-------------
$ 186,707,000
A-2 IO $ 11,583,000 88059EHP2 May 1, 2025
A-3 IO $ 11,583,000 88059EHN7 November 1, 2024
A-4 IO $ 5,213,000 88059EHK3 May 1, 2023
A-5 IO $ 7,000,000 88059EHH0 May 1, 2022
A-6 IO $ 5,000,000 88059EHG2 November 1, 2021
-------------
$ 227,086,000
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In addition, pursuant to the Trust Agreement, the Depositor may, from time
to time, deposit additional strips representing additional amounts of principal
and individual future interest payments on additional Bonds which will be
identical to, and in the same proportion as, the Initial Strips (the 'Additional
Strips' or the 'Additional Underlying Securities,' and together with the Initial
Strips, the 'Strips' or the 'Underlying Securities') into the Trust. The
Additional Underlying Securities, will be, in all respects, fully fungible with
the corresponding principal strip and/or individual interest strips that make up
the Initial Strips. All the Underlying Securities will be deposited into the
Trust subject to the right of the Rights Holders to request an Optional
Redemption of the Certificates on any Optional Redemption Date.
This Prospectus Supplement sets forth certain relevant terms with respect
to the Underlying Securities and the Bonds, but does not provide detailed
information with respect to the Underlying Securities, the Bonds or the TVA as
the Underlying Securities Issuer. This Prospectus Supplement relates only to the
Certificates offered hereby and does not relate to the Underlying Securities or
the Bonds. All disclosure contained herein with respect to the Underlying
Securities Issuer, the Bonds and the Underlying Securities is derived from
publicly available documents.
Although the Depositor has no reason to believe the information concerning
the Underlying Securities, the Bonds or the Underlying Securities Issuer is not
reliable, neither the Depositor nor the Underwriter (nor any of their
affiliates) takes any responsibility with respect to the information provided
therein. There can be no assurance that events affecting the Underlying
Securities, the Bonds or the Underlying Securities Issuer have not occurred
which would affect the accuracy or completeness of the publicly available
information described below.
THE UNDERLYING SECURITIES ISSUER
The Tennessee Valley Authority periodically prepares information statements
which describe the business and operations of the TVA as of the dates of such
information statements and the financial conditions of the TVA as of the dates
of the financial statements included therein (the 'Statements') for the
information of potential purchasers of its Power Bonds (the 'New Power Bonds'),
including its First Installment Series Bonds (the 'Installment Bonds'--sometimes
called 'FISBS'), its discount notes and such other evidences of indebtedness
('Other Indebtedness') it may issue pursuant to the Act (as defined below). New
Power Bonds are to be issued pursuant to authority vested in the TVA by the
Tennessee Valley Authority Act of 1933, as amended (the 'Act'), and the Basic
Tennessee Valley Authority Power Bond Resolution adopted by the Board of
Directors of the TVA (the 'Board') on October 6, 1960, as amended on September
28, 1976, October 17, 1989 and March 25, 1992 (the 'Basic Resolutions').
According to the Underlying Securities Circular, the Statements will be
updated from time to time to reflect annual financial results of the TVA and as
otherwise determined appropriate by the TVA. Statements may 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 (423) 632-3366.
THE NEW POWER BONDS, DISCOUNT NOTES AND OTHER INDEBTEDNESS OF THE TVA WILL
NOT BE OBLIGATIONS OF, NOR WILL PAYMENT OF PRINCIPAL THEREOF OR ANY INTEREST
THEREON BE GUARANTEED BY, THE UNITED STATES OF AMERICA. PRINCIPAL AND INTEREST,
IF ANY, WILL BE PAYABLE SOLELY FROM THE TVA'S NET POWER PROCEEDS AS DEFINED IN
THE STATEMENTS. THE NEW POWER BONDS, DISCOUNT NOTES AND OTHER INDEBTEDNESS ARE
NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933. ACCORDINGLY, NO
REGISTRATION STATEMENT HAS BEEN, AND NONE WILL BE, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE TVA IS NOT SUBJECT TO THE PERIODIC REPORTING
REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934.
DESCRIPTION OF BONDS
According to the Underlying Securities Circular, the Bonds were issued
pursuant to the authority vested in the TVA by the Act and pursuant to the Basic
Resolutions and the Supplemental Resolution authorizing the Outstanding Series E
Bonds adopted on October 24, 1995, as amended by an amendatory resolution
adopted on July 21, 1997 to provide for the issuance of $600,000,000 of Bonds on
November 3, 1995 and an additional $750,000,000 on August 5, 1997 of the Series
E Bonds (the 'Supplemental Resolution' and, together with the
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<PAGE>
Basic Resolution, the 'Resolutions'). The TVA has entered into a Fiscal Agency
Agreement dated as of October 17, 1989 (the 'Fiscal Agency Agreement') with the
U.S. Federal Reserve Banks, as fiscal agents (together, the 'Underlying
Securities Fiscal Agent'). The U.S. Secretary of the Treasury has approved the
time of issuance of and the maximum rate of interest to be borne by, the Bonds
in compliance with Section 15d(c) of the Act. The Bonds represent obligations of
the TVA payable solely from the TVA's 'Net Power Proceeds' (as defined below)
and are not obligations of, or guaranteed by, the United States of America.
The Act authorizes the TVA to issue and sell bonds, notes and other
evidences of indebtedness (hereinafter collectively referred to as 'Evidences of
Indebtedness') to assist in financing its power program and to refund such
Evidences of Indebtedness. Evidences of Indebtedness issued pursuant to Section
2.2 of the Basic Resolution designated as Tennessee Valley Authority Power Bonds
are herein referred to as 'Power Bonds.' The aggregate amount of Evidences of
Indebtedness at any one time outstanding is limited to $30 billion. As of June
30, 1997, the TVA had approximately U.S. $26.4 billion and DM 1.5 billion
(issued in September 1996) of Evidences of Indebtedness outstanding. At the time
the TVA issued such DM Evidences of Indebtedness, the TVA entered into a
currency swap agreement to hedge against fluctuations in such currency. In
addition, $250 million of Power Bonds are being redeemed under in-substance
defeasance arrangements and are not considered by the TVA to be debt that is
subject to the $30 billion limit.
The summaries contained herein of certain provisions of the Act, the
Resolutions and the Fiscal Agency Agreement do not purport to be complete and
are qualified in their entirety by reference to all the provisions of the Act,
the Resolutions and the Fiscal Agency Agreement, copies of which may 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 (423) 632-3366 in the United States. In addition, such summaries
are based solely upon the Underlying Securities Circular, and the Depositor and
the Underwriter have made no investigation as to the accuracy thereof.
The Bonds are 'Power Bonds' payable as to both principal and interest
solely from the TVA's Net Power Proceeds, which are defined as the remainder of
the TVA's Gross Power Revenues (as defined in the Basic Resolutions) after
deducting the costs of operating, maintaining and administering its power
properties (including multiple-purpose properties in the proportion that
multiple-purpose costs are allocated to power) and payments to states and
counties in lieu of taxes, but before deducting depreciation accruals or other
charges representing the amortization of capital expenditures, plus the net
proceeds of the sale or other disposition of any Power Facility (as defined in
the Basic Resolutions) or interest therein ('Net Power Proceeds'). The Act also
requires the TVA to make certain payments to the U.S. Treasury each year from
Net Power Proceeds in excess of those required for debt service as a return on
and reduction of the Appropriation Investment (as defined in the Basic
Resolutions).
According to the Underlying Securities Circular, the Bonds rank equally as
to the application of Net Power Proceeds with all other Power Bonds. As to the
application of Net Power Proceeds, Power Bonds presently rank senior to other
Evidences of Indebtedness as to principal and on a parity with or senior to
other Evidences of Indebtedness as to interest. At some future date prior to the
maturity of the Bonds, Evidences of Indebtedness other than Power Bonds may also
rank on parity with Bonds as to principal.
There are no limits on other indebtedness or securities which may be issued
by the TVA and no financial or similar restrictions on the TVA, except as
provided under the Act, the Basic Resolutions and the Supplemental Resolution.
The TVA issues its Discount Notes pursuant to Section 15d of the Act and in
accordance with Section 2.5 of the Basic Resolution. The TVA may also issue
Other Indebtedness in addition to Power Bonds and Discount Notes. Other
Indebtedness, such as the TVA's Quarterly Income Debt Securities, are issued
pursuant to Section 15d of the Act and under appropriate authorizing
resolutions.
The Bonds do not contain any provisions permitting holders thereof to
accelerate the maturity thereof on the occurrence of any default or other event.
POSSIBLE FUTURE ISSUANCES
The Supplemental Resolution provides that, at the option of the TVA,
additional 1995 Series E Bonds may be issued in one or more future installments
pursuant to an amendment to the Supplemental Resolution not requiring the
consent of Holders (as such term is defined under 'Book-Entry System') of the
1995 Series E
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<PAGE>
Bonds. Additional 1995 Series E Bonds so issued shall be identical in all
respects to and fully fungible with the Bonds offered thereby (with any related
changes in the issue date, issue price, and interest commencement date).
PAYMENT OF PRINCIPAL AND INTEREST
The TVA initially issued $600,000,000 aggregate principal amount of its
6 3/4% Global Power Bonds Series E Due November 1, 2025 on November 3, 1995. On
August 5, 1997, the TVA added $750,000,000 to the issuance. The Bonds are
identical in all respects and are fully fungible. The Bonds are issued in
minimum denominations of $1,000 and integral multiples thereof in book-entry
form only through the U.S. Federal Reserve Bank as described below under
'Book-Entry System.' Interest will be payable semi-annually in arrears on May 1
and November 1 (each an 'Interest Payment Date') commencing November 1, 1997.
Such interest payments will include any interest accrued from and including May
1, 1997 or the preceding Interest Payment Date, as the case may be, to but
excluding the relevant Interest Payment Date. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months. The Bonds are payable at 100%
of the principal amount thereof, together with the interest accrued and unpaid
thereon, on the Maturity Date. Payments of principal and interest on the Bonds
will be made on the applicable payment dates to Holders of the Bonds which are
Holders as of the close of business on the Business Day preceding such payment
dates, by credit of the payment amount to the Holders' accounts at the U.S.
Federal Reserve Banks. The Holder and any financial intermediary in any
applicable chain to the beneficial owner will have the responsibility of
remitting payments for the accounts of their customers.
In any case in which an Interest Payment Date or the Maturity Date is not a
Business Day, payment of principal or interest, as the case may be, by the TVA
to the Holders shall be made on the next succeeding Business Day with the same
force and effect as if made on such Interest Payment Date or the Maturity Date.
The term 'Business Day' for the purposes of this section shall mean any day
other than a Saturday or Sunday or a day on which banking institutions in New
York City are authorized or required by law or executive order to be closed.
Certain certification requirements are applicable to payments of interest
on the Bonds and strips of principal or interest on such Bonds (the 'Strips').
The Holder or other persons otherwise required to withhold taxes may require the
beneficial owner of a Bond or Strip, as a condition of payment of amounts due
with respect to such Bond or Strip, to present on a timely basis an appropriate
United States Internal Revenue Service Form W-8 (or successor form) or other
appropriate form to enable such person to determine its duties and liabilities
with respect to any taxes or other charges that may be required to be deducted
or withheld under U.S. law or any reporting or other requirements thereunder.
See 'United States Tax Matters' in the Underlying Securities Circular. In the
event that any withholding or other tax or information reporting requirements
should be imposed by any jurisdiction, the TVA has no obligation to pay
additional interest or other amounts as a consequence thereof or to redeem the
Bonds prior to their stated maturity.
REDEMPTION
The Bonds are not subject to redemption prior to maturity.
BOOK-ENTRY SYSTEM
The Bonds are transferable only on the book-entry system of the U.S.
Federal Reserve Banks in minimum principal amounts of $1,000 and additional
integral multiples thereof. The U.S. Federal Reserve Banks maintains book-entry
accounts with respect to the Bonds and will make payments, on behalf of the TVA,
of interest on and principal of the Bonds on the applicable payment dates by
crediting Holders' accounts at the U.S. Federal Reserve Banks. The Bonds are not
exchangeable for definitive securities. The Bonds may be held of record only by
entities eligible to maintain book-entry accounts with the U.S. Federal Reserve
Banks. Such entities whose names appear on the book-entry records of a U.S.
Federal Reserve Bank as the entities for whose accounts the Bonds have been
deposited are herein referred to as 'Holders.'
S-12
<PAGE>
STRIPPING
According to the Underlying Securities Circular, a Bond may be separated
('stripped') into its Interest and Principal Components and maintained as such
on the book-entry records of the U.S. Federal Reserve Banks. The components of
each stripped Bond are each future interest payment (each an 'Interest
Component') and the principal payment (the 'Principal Component'). Once a Bond
has been stripped into its Interest and Principal Components, the Interest and
Principal Components may be maintained and transferred on the book-entry system
of the U.S. Federal Reserve Banks (the 'FRBNY') in integral multiples of $1,000.
Payments on the Interest and Principal Components will be made on the applicable
payment dates on the related Bonds by crediting the accounts of the holders of
the Bonds at the FRBNY.
GOVERNING LAW
The Fiscal Agency Agreement and the Bonds are governed by and construed in
accordance with the laws of the State of New York, to the extent such law is not
inconsistent with U.S. federal law.
The foregoing description is taken from the Underlying Securities Circular.
THE TRUST WILL HAVE NO OTHER SIGNIFICANT ASSETS FROM WHICH TO MAKE
DISTRIBUTIONS OF AMOUNTS DUE IN RESPECT OF THE CERTIFICATES. CONSEQUENTLY, THE
ABILITY OF CERTIFICATEHOLDERS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THE
CERTIFICATES WILL DEPEND, EXCEPT FOR DISTRIBUTIONS MADE ACCORDING TO THE
ALLOCATION RATIO IN THE EVENT OF A PAYMENT DEFAULT ON OR ACCELERATION OF THE
MATURITY OF THE UNDERLYING SECURITIES, ENTIRELY ON THE TRUST'S RECEIPT OF
PAYMENTS ON THE PARTICULAR UNDERLYING SECURITIES UNDERLYING A PARTICULAR CLASS
OF CERTIFICATES. PROSPECTIVE PURCHASERS OF THE CERTIFICATES SHOULD CONSIDER
CAREFULLY THE UNDERLYING SECURITIES ISSUER'S FINANCIAL CONDITION AND ITS ABILITY
TO MAKE PAYMENTS IN RESPECT OF SUCH UNDERLYING SECURITIES. THIS PROSPECTUS
SUPPLEMENT RELATES ONLY TO THE CERTIFICATES BEING OFFERED HEREBY AND DOES NOT
RELATE TO THE UNDERLYING SECURITIES OF THE UNDERLYING SECURITIES ISSUER. ALL
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT REGARDING THE UNDERLYING
SECURITIES ISSUER IS DERIVED FROM PUBLICLY AVAILABLE DOCUMENTS. NONE OF THE
DEPOSITOR, THE UNDERWRITER OR THE TRUSTEE PARTICIPATED IN THE PREPARATION OF
SUCH DOCUMENTS OR TAKES ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF
THE INFORMATION PROVIDED THEREIN.
S-13
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each Class of Certificates will be denominated in U.S. dollars and on the
Closing Date will have the face amounts listed on the front cover hereof under
the heading Initial Aggregate Principal Amount. Pursuant to the Trust Agreement,
additional certificates of the same Class or Classes, which will be, in all
respects, fully fungible with the corresponding Class or Classes of Certificates
offered hereby (the 'Additional Certificates'), shall be issued upon the deposit
of Additional Underlying Securities, which correspond to such particular Class
or Classes of Certificates, into the Trust. Any such Additional Certificates
will have face amounts for each Class or Classes, equal to the face amounts of
the Additional Underlying Securities, corresponding to such Class or Classes of
Additional Certificates, deposited into the Trust at such time by the Depositor.
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants in minimum denominations of $1,000 and integral multiples
thereof.
The 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 Depositor, the 'Clearing Agency'),
except as provided below. The Depositor has been informed by DTC that DTC's
nominee will be CEDE & Co. ('CEDE'). No holder of any such Certificate will be
entitled to receive a certificate representing such person's interest, except as
set forth below under '--Definitive Certificates.' Unless and until Definitive
Certificates are issued under the limited circumstances described herein, all
references to actions by Certificateholders with respect to any such
Certificates shall refer to actions taken by DTC upon instructions from its
Participants. See '--Definitive Certificates' below and 'Description of
Certificates--Global Securities' in the Prospectus.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC will take action permitted to be taken by a
Certificateholder under the Trust Agreement only at the direction of one or more
Participants to whose DTC account such Certificates are credited. Additionally,
DTC will take such actions with respect to specified Voting Rights only at the
direction and on behalf of Participants whose holdings of such Certificates
evidence such specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose holdings of
Certificates evidence such Voting Rights, authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Certificateholders or their
nominees, respectively, rather than to DTC or its nominee, only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Clearing Agency with respect to
the Certificates and the Depositor is unable to locate a qualified successor or
(ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the Definitive Certificates representing the Certificates and receipt of
instructions for re- registration, the Trustee will reissue such Certificates as
Definitive Certificates issued in the respective principal amounts owned by the
individual owners of such Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as Certificateholders
under the Trust Agreement.
LISTING ON THE NEW YORK STOCK EXCHANGE
The Certificates have been authorized for listing, upon official notice of
issuance, with the NYSE. There can be no assurance that the Certificates, once
listed, will continue to be eligible for trading on the NYSE.
S-14
<PAGE>
COLLECTIONS AND DISTRIBUTIONS
Except as otherwise provided herein (see 'Default on Underlying
Securities'), collections on a Strip that are received by the Trustee pursuant
to the procedures described herein and in the Prospectus and deposited from time
to time into the Certificate Account will be applied by the Trustee on the
Scheduled Distribution Date of the related Class of Certificates or on any
earlier date in connection with a redemption of the related Class of the
Certificates pursuant to an Optional Redemption (together with the Scheduled
Distribution Dates, the 'Distribution Dates') to the following distributions in
the following order of priority, solely to the extent of Available Funds (as
defined below) on such Distribution Date:
(a) to the Trustee, reimbursement for Extraordinary Expenses, if
any, incurred by the Trustee in accordance with the Trust Agreement;
(b) the remainder to the holders of the Class of Certificates
having a Scheduled Distribution Date on the scheduled payment date of
such Strip that is maturing or being redeemed.
'Available Funds' for any Distribution Date means all amounts actually
received on or with respect to the respective Underlying Securities.
If the Trustee has not received payment on the Underlying Securities on or
prior to a Distribution Date, such distribution will be made upon receipt of
payment on the Underlying Securities. No additional amounts will accrue on the
Certificates or be owed to Certificateholders as a result of any such delay. In
the event of a default on the Underlying Securities, approved Extraordinary
Expenses (see 'Description of the Trust Agreement--The Trustee' herein) of the
Trustee may be reimbursed to the Trustee out of Available Funds before any
distribution to Certificateholders are made.
There can be no assurance that collections received from the Underlying
Securities will be sufficient to make all required distributions to the
Certificateholders. Ordinary Expenses of the Trustee will be paid by the
Depositor or an affiliate thereof, and will not be paid from the assets in the
Trust.
OPTIONAL REDEMPTION
The Certificates may be redeemed in whole by the Trust at the request of
the Rights Holder (as defined below) at a price not less than the Redemption
Price corresponding to each Class of Certificates on any Redemption Date on or
after November 1, 2000 through May 1, 2021 to November 1, 2024 (based on the
respective Certificate Class), or the next succeeding Business Day if any such
Redemption Date is not a Business Day.
'Business Day' shall mean any day other than a Saturday or Sunday or a day
on which banking institutions in New York City are authorized or required by law
or executive order to be closed.
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<PAGE>
The Redemption Prices listed as a percentage of the Face Amount of the
Certificates, for each respective Class of Certificates, as set forth below,
correspond to each related Redemption Date.
REDEMPTION CLASS CLASS CLASS CLASS CLASS CLASS
DATE A-1 A-2 A-3 A-4 A-5 A-6
- ---------- ------ ------ ------ ------ ------ ------
11/1/00 14.071% 14.634% 15.219% 17.120% 18.517% 19.257%
5/1/01 14.634 15.219 15.828 17.805 19.257 20.028
11/1/01 15.219 15.828 16.461 18.517 20.028 20.829
5/1/02 15.828 16.461 17.120 19.257 20.829 21.662
11/1/02 16.461 17.120 17.805 20.028 21.662 22.529
5/1/03 17.120 17.805 18.517 20.829 22.529 23.430
11/1/03 17.805 18.517 19.257 21.662 23.430 24.367
5/1/04 18.517 19.257 20.028 22.529 24.367 25.342
11/1/04 19.257 20.028 20.829 23.430 25.342 26.355
5/1/05 20.028 20.829 21.662 24.367 26.355 27.409
11/1/05 20.829 21.662 22.529 25.342 27.409 28.506
5/1/06 21.662 22.529 23.430 26.355 28.506 29.646
11/1/06 22.529 23.430 24.367 27.409 29.646 30.832
5/1/07 23.430 24.367 25.342 28.506 30.832 32.065
11/1/07 24.367 25.342 26.355 29.646 32.065 33.348
5/1/08 25.342 26.355 27.409 30.832 33.348 34.682
11/1/08 26.355 27.409 28.506 32.065 34.682 36.069
5/1/09 27.409 28.506 29.646 33.348 36.069 37.512
11/1/09 28.506 29.646 30.832 34.682 37.512 39.012
5/1/10 29.646 30.832 32.065 36.069 39.012 40.573
11/1/10 30.832 32.065 33.348 37.512 40.573 42.196
5/1/11 32.065 33.348 34.682 39.012 42.196 43.883
11/1/11 33.348 34.682 36.069 40.573 43.883 45.639
5/1/12 34.682 36.069 37.512 42.196 45.639 47.464
11/1/12 36.069 37.512 39.012 43.883 47.464 49.363
5/1/13 37.512 39.012 40.573 45.639 49.363 51.337
11/1/13 39.012 40.573 42.196 47.464 51.337 53.391
5/1/14 40.573 42.196 43.883 49.363 53.391 55.526
11/1/14 42.196 43.883 45.639 51.337 55.526 57.748
5/1/15 43.883 45.639 47.464 53.391 57.748 60.057
11/1/15 45.639 47.464 49.363 55.526 60.057 62.460
5/1/16 47.464 49.363 51.337 57.748 62.460 64.958
11/1/16 49.363 51.337 53.391 60.057 64.958 67.556
5/1/17 51.337 53.391 55.526 62.460 67.556 70.259
11/1/17 53.391 55.526 57.748 64.958 70.259 73.069
5/1/18 55.526 57.748 60.057 67.556 73.069 75.992
11/1/18 57.748 60.057 62.460 70.259 75.992 79.031
5/1/19 60.057 62.460 64.958 73.069 79.031 82.193
11/1/19 62.460 64.958 67.556 75.992 82.193 85.480
5/1/20 64.958 67.556 70.259 79.031 85.480 88.900
11/1/20 67.556 70.259 73.069 82.193 88.900 92.456
5/1/21 70.259 73.069 75.992 85.480 92.456 96.154
11/1/21 73.069 75.992 79.031 88.900 96.154 N/A
5/1/22 75.992 79.031 82.193 92.456 N/A N/A
11/1/22 79.031 82.193 85.480 96.154 N/A N/A
5/1/23 82.193 85.480 88.900 N/A N/A N/A
11/1/23 85.480 88.900 92.456 N/A N/A N/A
5/1/24 88.900 92.456 96.154 N/A N/A N/A
11/1/24 92.456 96.154 N/A N/A N/A N/A
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The holder of the Call Rights (the 'Rights Holder') may provide notice to
the Trustee (a 'Redemption Request') no less than seven Business Days prior to
such Redemption Date that it intends to exercise its Call Rights which will
result in an Optional Redemption of the Certificates on such Redemption Date.
CALL RIGHTS
The Call Rights for the Certificates, in the aggregate, as defined herein,
represent the rights to purchase all of the Underlying Securities at the
applicable Redemption Prices. Such purchase will result in a redemption of the
Certificates (an 'Optional Redemption'). The initial Rights Holder will be the
Depositor or an affiliate thereof. The Call Rights are not being offered hereby.
Under the terms of the Call Rights and the Trust Agreement,
Certificateholders will not be entitled to a distribution in kind of their pro
rata share of the Underlying Securities without the consent of the Rights Holder
(but will be entitled to receive the stated Redemption Price upon an Optional
Redemption). In addition, amendment of the Trust Agreement may require, and
amendment of the Call Rights generally will require, consent of the Rights
Holder. See 'Description of the Trust Agreement--Voting Rights.'
OPTIONAL EXCHANGE OF CERTIFICATES BY DEPOSITOR
The Depositor or any affiliate of the Depositor may, if it holds face
amounts of each Class of Certificates in the same proportion as the total
Certificates of each Class issued as of the Closing Date, notify the Trustee,
not less than seven Business Days (or any shorter period acceptable to the
Trustee) but not more than 45 days prior to such date, that it intends to tender
such Certificates to the Trustee on such date (an 'Optional Exchange Date');
provided that such optional exchange will not be permissible if it would cause
the Trustee or Depositor to fail to satisfy the applicable requirements for
exemption under Rule 3a-7 or other applicable exemption under the Investment
Company Act of 1940. See 'Optional Exchange' in the Prospectus. Upon such
tender, the Trustee will deliver Underlying Securities to such Certificateholder
having a principal amount equal to the face amount of the Certificates being
tendered. The right of the Depositor or any affiliate to effect any such
exchange is subject to substantial restrictions as to timing, amount and other
matters, as set forth in the Trust Agreement.
DEFAULT ON UNDERLYING SECURITIES
In the event of the occurrence of a payment default on the Underlying
Securities or an acceleration of the maturity of the Underlying Securities, the
Trustee will sell or cause the sale of the Underlying Securities in accordance
with the sale procedures set forth in the Trust Agreement. The Holders of each
Class of Certificates, are separately agreeing, upon the occurence of a payment
default or an acceleration of the maturity of the Underlying Securities, to
share with the Holders of each other Class of Certificates the proceeds, if any,
relating to their respective Class of Underlying Securities, in accordance with
the Allocation Ratio.
As used herein, the 'Allocation Ratio' means, for each Class of
Certificates, the ratio of the present values (discounted at the semi-annual
rate of 8.00% per annum) of the amount each separate Class of Certificates is
scheduled to receive on its respective Scheduled Distribution Date to the sum of
the present values (discounted at the semi-annual rate of 8.00% per annum) of
the amounts due or to become due on all of the Certificates (assuming that the
Underlying Securities were paid when due and were not redeemed prior to their
stated maturity).
The proceeds paid to any Class of Certificates will be distributed on a pro
rata basis to the holders of such Class of Certificates.
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THE DEPOSITOR
Lehman ABS Corporation (the 'Depositor') was incorporated in the State of
Delaware on January 29, 1988. The Depositor is a wholly owned, special purpose
subsidiary of Lehman Commercial Paper Inc. ('LCPI'), which is itself a wholly
owned subsidiary of Lehman Brothers Inc. ('Lehman Brothers'), which is a wholly
owned subsidiary of Lehman Brothers Holdings Inc. ('Holdings'). None of Lehman
Brothers, LCPI, Holdings or the Depositor, nor any affiliate of the foregoing,
has guaranteed or is otherwise obligated with respect to the Certificates.
The principal executive offices of the Depositor are located at Three World
Financial Center, New York, New York 10285 (Telephone: (212) 526-7000). See 'The
Depositor' in the Prospectus.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement. A Current Report on
Form 8-K relating to the Certificates containing a copy of the Trust Agreement
as executed will be filed by the Depositor with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement (including the Series 1997-TVA-2 Supplement) will consist of (i) the
Underlying Securities and (ii) all payments on or collections in respect of the
Underlying Securities due after the Closing Date. Reference is made to the
Prospectus for important information in addition to that set forth herein
regarding the Trust, the terms and conditions of the Trust Agreement and the
Certificates. The following summaries of certain provisions of the Trust
Agreement do not purport to be complete and are subject to the detailed
provisions contained in the form of Trust Agreement, to which reference is
hereby made for a full description of such provisions, including the definition
of certain terms used herein.
THE TRUSTEE
The Bank of New York, a New York banking corporation, will act as trustee
(the 'Trustee') for the Certificates and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at 101 Barclay Street, New York,
New York 10286 and its telephone number is (212) 815-5098.
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.
The Trust Agreement provides that the Trustee may not take any action
which, in the Trustee's opinion, would or might cause it to incur Extraordinary
Expenses, unless (i) the Trustee is satisfied that it will have adequate
security or indemnity in respect of such costs, expenses and liabilities and
(ii) the Trustee has been instructed to do so by Certificateholders representing
not less than 100% of the aggregate voting rights of the Certificates then
outstanding; provided, however, that for purposes of clause (ii) of this
sentence, in the event of a payment default on the Underlying Securities, a vote
of not less than 66 2/3% of the aggregate voting rights of the Certificates then
outstanding shall suffice to instruct the Trustee to incur such Extraordinary
Expenses.
'Extraordinary Expenses' are defined in the Trust Agreement as any and all
costs, expenses or liabilities arising out of the establishment, existence or
administration of the Trust, other than (i) Ordinary Expenses and (ii) costs and
expenses payable by a particular Certificateholder, the Trustee or the Depositor
pursuant to the Trust Agreement.
'Ordinary Expenses' are defined in the Trust Agreement and are generally
described as the Trustee's customary fee for its services as Trustee, including
(i) the costs and expenses of preparing, sending and receiving all reports,
statements, notices, returns, filings, solicitation of consent or instructions,
or other communications
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required by the Trust Agreement, (ii) the costs and expenses of holding and
making ordinary collection or payments on the assets of the Trust and of
determining and making payments of interest or principal, (iii) the costs and
expenses of the Trust's or Trustee's counsel, accountants and other experts for
ordinary or routine consultation or advice in connection with the establishment,
administration and termination of the Trust, and (iv) any other costs and
expenses that are or reasonably should have been expected to be incurred in the
ordinary course of administration of the Trust.
PROCEEDINGS
No Certificateholder will have the right to institute any proceeding with
respect to the Trust Agreement, unless (i) such Certificateholder has previously
given to the Trustee written notice of a continuing breach, (ii)
Certificateholders evidencing not less than the Required Percentage--Remedies of
the aggregate Voting Rights have requested in writing that the Trustee institute
such proceeding in its own name as Trustee, (iii) such Certificateholder or
Certificateholders have offered the Trustee reasonable indemnity, (iv) the
Trustee has for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to the Trustee during such
15-day period by Certificateholders evidencing not less than the Required
Percentage--Remedies of the aggregate Voting Rights. 'Required
Percentage--Remedies' shall mean 66 2/3% of the aggregate face amount of the
outstanding Certificates.
VOTING RIGHTS
At all times, 100% of all Voting Rights will be allocated among all
Certificateholders, in proportion to the then outstanding principal balances of
their respective Certificates. The 'Required Percentage--Amendment' of Voting
Rights of those Certificates that are materially adversely affected by any
modification or amendment of the Trust Agreement necessary to consent to such
modification or amendment shall be 66 2/3% of the aggregate face amount of the
then outstanding Certificates. In addition to the other restrictions on
modification and amendment, the Trustee will not enter into any amendment or
modification of the Trust Agreement which would adversely affect in any material
respect the interests of the Rights Holder without the consent of the Rights
Holder; provided, however, that no such amendment or modification will be
permitted which would alter the timing or amounts of any payment of the
Redemption Price corresponding to a Class or Classes of Certificates, without
the consent of the Rights Holder, or which would alter the status of the Trust
as a grantor trust for federal income tax purposes. See 'Description of the
Trust Agreement--Modification and Waiver' in the Prospectus. Further, no
amendment to the Call Rights will be permitted which would adversely affect in
any material respect the interests of the Certificateholders without the consent
of Certificateholders representing 66 2/3% of the aggregate Voting Rights of
those Certificates that are materially adversely affected by such modification
or amendment and without confirmation by each Rating Agency that such amendment
will not result in a downgrading or withdrawal of its rating of the
Certificates; provided, however, that no such amendment or modification will be
permitted which would alter the timing or amount of any payment of the
Redemption Price, without the consent of Certificateholders representing 100% of
the aggregate Voting Rights of the Certificates of the affected Class or which
would alter the status of the Trust as a grantor trust for federal income tax
purposes. In addition, the Call Rights generally may not be amended without the
consent of the Rights Holder.
VOTING OF UNDERLYING SECURITIES
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
Fiscal Agent or the Underlying Securities Issuer for its consent to any
amendment, modification or waiver of the Underlying Securities, the Fiscal Agent
Agreement 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 each respective Class of
Certificates, 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
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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 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, (ii) which would alter the
timing or amount of any payment on the Underlying Securities, including, without
limitation, any demand to accelerate the Underlying Securities, except in the
event of an Underlying Security Event of Default or an event which with the
passage of time would become an Underlying Security Event of Default and with
the unanimous consent of all outstanding 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 Bonds or the
Resolutions and only with the consent of Certificateholders representing 100% of
the aggregate voting rights of the outstanding Certificates. The Trustee shall
have no liability for any failure to act resulting from Certificateholders' late
return of, or failure to return, directions requested by the Trustee from the
Certificateholders.
In the event that an offer is made by the Underlying Securities Issuer to
issue new obligations in exchange and substitution for any of the Underlying
Securities, pursuant to a plan for the refunding or refinancing of the
outstanding Underlying Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders of each Class of
Certificates and the Rights Holder of such offer as promptly as practicable. The
Trustee must reject any such offer unless the Trustee is directed by the
affirmative vote of all of the Certificateholders and the Rights Holder to
accept such offer and the Trustee has received the tax opinion described above.
See '--Optional Exchange of Certificates.'
TERMINATION OF THE TRUST
The Trust shall terminate upon the earliest to occur of (i) the payment in
full at maturity or sale by the Trust in accordance with the Call Rights of all
of the Underlying Securities, (ii) the distribution in full of all amounts due
to the Certificateholders and (iii) the payment in full or sale of the
Underlying Securities by the Trust after a payment default or an acceleration of
the Underlying Securities. See 'Description of the Trust Agreement--
Termination' in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of the
Certificates. This discussion is a summary for general information only and does
not consider all aspects of federal income taxation that may be relevant to a
prospective investor in light of his personal circumstances. This summary is
based upon the U.S. Internal Revenue Code of 1986, as amended (the 'Code'),
existing and proposed regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change, possibly on a
retroactive basis.
The following discussion which is generally limited to the tax consequences
to initial holders does not address the federal income tax consequences of
ownership of Certificates not held as capital assets within the meaning of
Section 1221 of the Code, or the federal income tax consequences to investors
subject to special treatment under the federal income tax laws, such as dealers
in securities or foreign currency, banks, financial institutions, thrifts,
insurance companies, tax-exempt entities, persons that hold the Certificates as
part of a 'straddle,' a 'hedge' against currency risk, or a 'conversion
transaction,' persons that have a 'functional currency' other than the U.S.
dollar, and investors in pass-through entities. In addition, the discussion does
not describe any tax consequences arising out of the tax laws of any state,
local or foreign jurisdiction or under the federal estate tax or gift tax
provisions of the Code.
The following discussion, moreover, is generally limited to the U.S.
federal income tax consequences relevant to a holder of a Certificate that is
(i) a citizen or resident of the United States, (ii) a corporation organized
under the laws of the United States or any political subdivision thereof or
therein, (iii) an estate the income of which is subject to federal income tax
regardless of the source, or (iv) a trust with respect to which a court within
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the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries has the authority to
control all of its substantial decisions.
CLASSIFICATION OF INVESTMENT ARRANGEMENT
The proper characterization of the Trust for tax purposes is not clear. In
any case, in the opinion of Weil, Gotshal & Manges LLP, counsel to the
Depositor, the Trust will not be treated for federal income tax purposes as an
association (or publicly-traded partnership) taxable as a corporation. Although
there is no authority clearly on point, the Trustee intends to treat the Trust
as a grantor trust for federal income tax purposes and to report income, gain,
loss and deduction to the Internal Revenue Service (the 'IRS') accordingly. If
the Trust is properly characterized as a grantor trust, each Certificateholder
will be subject to federal income taxation as if it owned directly the portion
of the Underlying Securities allocable to such Certificates, as if it issued
directly the portion of the Call Rights allocable to such Certificates and as if
it paid directly its share of reasonable expenses paid by the Trust and would be
subject to federal income tax in the manner described below under the caption
'Income of Certificateholders.' If the Trust instead is properly characterized
as a partnership, the tax consequences to a Certificateholder other than an
initial Certificateholder may be different than those described herein. For
example, the amount of OID required to be accrued by a subsequent holder
ordinarily would not be affected by the amount paid by such holder for a
Certificate. The balance of this discussion assumes the characterization of the
Trust as a grantor trust for federal income tax purposes is correct.
INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
EFFECT UPON THEM OF INVESTING IN THE CERTIFICATES.
INCOME OF CERTIFICATEHOLDERS
In General. A Certificateholder should be deemed to have paid for its
Certificates the full fair market value of the portion of the Underlying
Securities that is allocable to its Certificates and, to the extent that the
aggregate amount of such fair market value exceeds the amount a
Certificateholder actually paid for a Certificate, should be deemed to have been
paid such excess by the Rights Holder as a Call Premium. Accordingly, a
Certificateholder should have a tax basis in its Certificates (which basis will
be allocated to its interest in the Underlying Securities) equal to the fair
market value of its interest in such assets (the 'Allocated Purchase Price').
The proper federal income tax treatment of the Certificates is unclear.
Under Code Section 1286, on the date the interest in the Underlying Securities
is deemed to be purchased, it will be treated as a newly-issued debt investment
that was issued with original issue discount ('OID') equal to the excess of (i)
its stated redemption price at maturity (namely all payments made with respect
to the Underlying Securities to the Certificateholder) and (ii) the Allocated
Purchase Price. Each Certificateholder, regardless of its normal method of
accounting, will accrue income each year in respect of its interest in the
Underlying Securities under the rules relating to OID under a method described
below that takes account of the compounding of interest, based on the particular
Certificateholder's expected yield to maturity.
OID. A holder of a Certificate, whether using the cash or accrual method of
accounting, generally will be required to include OID in income in advance of
the receipt of some or all of the related cash payments. The amount of OID
includable in income by such holder is the sum of the 'daily portions' of OID
with respect to each day during the taxable year or portion of the taxable year
in which such holder held such obligation ('accrued OID'). The daily portion is
determined by allocating to each day in any 'accrual period' a pro rata portion
of the OID allocable to the accrual period. Under the Treasury Regulations, the
'accrual period' for each obligation may be of any length and may vary in length
over the term of the obligation, provided that each accrual period is no longer
than one year. The amount of OID allocable to any accrual period is an amount
equal to the product of each obligation's adjusted issue price at the beginning
of such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period). If all accrual periods are of equal length
(except for either an initial short period or an initial and final short
period), the amount of OID allocable to the initial short accrual period may be
computed under any reasonable method. The 'adjusted issue price' of an interest
in an Underlying Security at the start of any accrual period is equal to its
purchase price (i.e., the Allocated Purchase Price) increased by the accrued OID
for each prior accrual period.
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Because the purchase of a Certificate will be treated as the original
issuance on the purchase date of an obligation to distribute the amounts
collected on the portion of the Underlying Securities allocable to the
Certificates, such purchase should not result in acquisition premium, bond
premium or market discount.
Tax Basis. A Certificateholder's initial tax basis in the Underlying
Securities allocable to its Certificates will equal the Allocated Purchase Price
(determined as described above) and will generally be increased by any amounts
of OID includable in income with respect thereto.
Sale, Exchange and Retirement of Underlying Securities. Upon the sale,
exchange or retirement of Underlying Securities allocable to its Certificates
(including a sale resulting from a sale or redemption for cash of Certificates),
a Certificateholder generally will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement of
the Underlying Securities and the Certificateholder's tax basis in such
Underlying Securities. The distribution, if any, to a Certificateholder of
Underlying Securities representing such Certificateholder's pro rata portion of
all of the Trust's Underlying Securities allocable to the Class of Certificates
held by such Certificateholder will not be treated as a sale or exchange, and
the Certificateholder will acquire the Underlying Securities with its tax basis
in such Underlying Securities while held by the Trust.
Gain or loss recognized by an initial Certificateholder on the sale,
exchange or retirement of Underlying Securities allocable to such Certificates
generally will be capital gain or loss, and will be long-term, mid-term or
short-term capital gain or loss if the Certificateholder is treated as having
held the Underlying Securities for the requisite holding periods at the time of
the disposition.
CALL PREMIUM; EXERCISE OF CALL RIGHT
As described above, each Certificateholder should be deemed to have
received at the time of its purchase of its Certificates a Call Premium in an
amount equal to the fair market value of the portion of the Call Rights
allocable to its Certificates. The receipt of such Call Premium should not be a
taxable event to the Certificateholder until such time as the Call Right so
allocable to its Certificates is exercised or lapses. If the Call Rights lapse
unexercised, the Certificateholder will be required to include the Call Premium
in income for the taxable year the Call Rights terminated as short term capital
gain. If the Call Rights are exercised, the Redemption Price will be increased
by the amount of the Call Premium. The gain from such sale will be long-term,
mid-term or short-term capital gain, depending upon whether the Certificates
were then held for the requisite holding period.
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its share of
reasonable administration fees, trustee fees, extraordinary expenses and other
fees, if any, paid or incurred by the Trust and paid out of the Trust corpus as
provided in Section 162 or 212 of the Code. If a Certificateholder is an
individual, estate or trust, the deduction for his share of such expenses will
be a miscellaneous itemized deduction that may be disallowed in whole or in
part.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a 'backup' withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
FOREIGN CERTIFICATEHOLDERS
To the extent that amounts paid to a Certificateholder that is not a United
States person (a 'Foreign Certificateholder') are treated as interest, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificateholder fulfills certain certification
requirements. Under such requirements, the holder must certify, under penalties
of perjury, that it is not a 'United States person' and provide its name and
address.
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STATE AND LOCAL INCOME TAX TREATMENT
The Underlying Securities Circular states that the Act exempts bonds issued
by the TVA from state and local taxation. With respect to Strips such as the
Underlying Securities, the Underlying Securities Circular further states:
'[a]lthough the Act provides that bonds issued by the TVA are exempt both as to
principal and interest from all state and local taxation (except estate,
inheritance and gift taxation), it is unclear whether this exemption applies to
Strips resulting from stripping transactions. ... Therefore, while it is
believed that the income on such Strip should qualify for the exemption provided
under the Act at least to the extent of the rate of interest payable on the
Bonds, there is no controlling precedential authority and there thus can be no
assurance that the income on a Strip will qualify in whole or in part for the
exemption provided in the Act.'
See 'United States Tax Matters--Tax Considerations Applicable to Strips, in
the Underlying Securities Circular.'
Certificateholders should consult their own tax advisors with respect to
the tax consequences to them of acquiring certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
and Section 4975 of the Code impose certain requirements on an employee benefit
plan (as defined in Section 3(3) of ERISA), a plan described in Section
4975(e)(l) of the Code or any entity whose underlying assets include plan assets
by reason of either such plan's investment in the entity (each, a 'Plan'). In
particular, ERISA and Section 4975 of the Code each sets forth 'prohibited
transaction' provisions which generally apply to a loan or other extension of
credit, the provision of services and certain other transactions directly or
indirectly involving the assets of a Plan and persons who have specified
relationships to such Plan (referred to as 'Parties in Interest' under Section
3(14) of ERISA and as 'Disqualified Persons' under Section 4975(e) of the Code),
unless an exemption from such prohibited transaction provisions applies.
Under a 'look-through rule' set forth in Section 2510.3-101 of the United
States Department of Labor regulations (the 'Plan Assets 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. A
beneficial interest in a trust is treated as an equity interest under the Plan
Assets Regulation. Thus, if a Plan acquires Certificates, for certain purposes
(including the prohibited transaction provisions) the Plan would be considered
to own its share of the underlying assets of the Trust unless, among other
exceptions, such Certificate is a 'publicly-offered security'.
A publicly-offered security is a security that is (1) freely transferable,
(2) part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another at the conclusion of the initial
offering and (3) either is (A) part of a class of securities registered under
Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the Plan as part of
an offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or such
later time as may be allowed by the Commission) after the end of the fiscal year
of the issuer during which the offering of such securities to the public
occurred. The Depositor anticipates that the Class A-1 Certificates will be
considered publicly-offered securities within the meaning of the Plan Assets
Regulation.
A Plan considering an investment in Certificates should determine whether
its acquisition or holding of Certificates might result in a non-exempt
prohibited transaction. In that regard, a Plan should consider whether the TVA
is a Party in Interest or Disqualified Person with respect to such Plan such
that the indirect extension of credit between the Plan and the TVA might be
treated as a prohibited transaction unless an exemption clearly applies.
However, it is possible that the TVA is not a Party in Interest or Disqualified
Person to a particular Plan and therefore the extension of credit would not be
treated as a prohibited transaction with respect to such Plan.
No Plan should acquire any Certificates unless it determines that the
acquisition or holding of such Certificates does not give rise to any non-exempt
prohibited transaction. Further, in accordance with ERISA's general fiduciary
standards, a Plan fiduciary should determine whether such an investment is
permitted under the
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governing Plan instruments and appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Any Plan or insurance company investing assets of its general account
proposing to acquire Certificates should consult with its counsel.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated October 31, 1997 (the 'Underwriting Agreement'), the Depositor
has agreed to sell to Lehman Brothers Inc. (an affiliate of the Depositor) (the
'Underwriter'), and the Underwriter has agreed to purchase, the Certificates.
The Depositor has been advised by the Underwriter that the Underwriter
proposes to offer the Certificates from time to time in negotiated transactions
or otherwise at varying prices to be determined at the time of sale. The
Underwriter may effect such transactions by selling Certificates to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter and any purchasers of
Certificates for whom they may act as agents. The Underwriter and any dealers
that participate with the Underwriter in the distribution of Certificates may be
deemed to be underwriters, and any profit on the resale of Certificates by them
may be deemed to be underwriting discounts, or commissions under the Securities
Act. Concessions to dealers will vary but will not exceed 0.3% of the face
amount of the Certificates. The value of the Call Rights (which initially will
be held by the Underwriter) may be deemed to be underwriting compensation.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and the Underwriter by Weil, Gotshal & Manges LLP, New York, New
York.
RATINGS
It is a condition to the issuance of the Certificates that the Certificates
have ratings assigned by Moody's Investors Service, Inc. ('Moody's') and by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ('S&P') of
'Aaa' and 'AAA,' respectively. The rating of the Certificates by Moody's
addresses the likelihood of the ultimate payment of principal of the
Certificates. The rating of the Certificates by S&P addresses the likelihood of
ultimate receipt of principal on the Certificates on or before the Scheduled
Distribution Date. The ratings address the likelihood of the receipt by
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Underlying Securities. The ratings on the
Certificates do not, however, constitute a statement regarding the occurrence of
an Optional Redemption of a Class or Classes of Certificates, and the
corresponding effect on yield to investors.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning Rating
Agency. Each security rating should be evaluated independently of similar
ratings on different securities.
The Depositor has not requested a rating on the Certificates by any rating
agency other than the Rating Agencies. However, there can be no assurance as to
whether any other rating agency will rate the Certificates, or, if it does, what
rating would be assigned by any such other rating agency. A rating on the
Certificates by another rating agency, if assigned at all, may be lower than the
ratings assigned to the Certificates by the Rating Agencies.
S-24
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
-------------------------
<S> <C>
accrued OID........................................................................... S-21
Additional Certificates............................................................... S-3, S-14
Additional Strips..................................................................... S-2, S-3, S-6, S-10
Additional Underlying Securities...................................................... S-2, S-3, S-6, S-10
accrual period........................................................................ S-21
adjusted issue price.................................................................. S-21
Act................................................................................... S-6, S-10
Allocated Purchase Price.............................................................. S-21
Allocation Ratio...................................................................... S-17
Available Funds....................................................................... S-15
Basic Resolutions..................................................................... S-10
Board................................................................................. S-10
Bonds................................................................................. S-6, S-9
Book-Entry System..................................................................... S-12
Business Day.......................................................................... S-15
Call Rights........................................................................... S-5
CEDE.................................................................................. S-14
Certificateholder..................................................................... S-1
Certificates.......................................................................... S-1, S-3
Class................................................................................. S-1, S-3
Clearing Agency....................................................................... S-14
Closing Date.......................................................................... S-1, S-3
Code.................................................................................. S-5, S-20
CUSIP Numbers......................................................................... S-5
Depositor............................................................................. S-1, S-3, S-18
Distribution Dates.................................................................... S-15
Disqualified Persons.................................................................. S-23
DTC................................................................................... S-2, S-5
ERISA................................................................................. S-5, S-23
Evidences of Indebtedness............................................................. S-11
Extraordinary Expenses................................................................ S-18
FISBS................................................................................. S-10
Fiscal Agency Agreement............................................................... S-11
Foreign Certificateholder............................................................. S-22
FRBNY................................................................................. S-13
Holders............................................................................... S-13
Holdings.............................................................................. S-18
Initial Strips........................................................................ S-1, S-3, S-9
Initial Underlying Securities......................................................... S-1, S-3, S-9
Installment Bonds..................................................................... S-10
Interest Component.................................................................... S-9, S-13
Interest Payment Date................................................................. S-12
IO.................................................................................... S-6
IRA................................................................................... S-5
IRS................................................................................... S-21
Keogh................................................................................. S-5
LCPI.................................................................................. S-18
Lehman Brothers....................................................................... S-18
Moody's............................................................................... S-1, S-5, S-24
Net Power Proceeds.................................................................... S-11
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
PAGE
-------------------------
<S> <C>
New Power Bonds....................................................................... S-10
NYSE.................................................................................. S-1
OID................................................................................... S-5, S-21
Optional Exchange Date................................................................ S-17
Optional Redemption................................................................... S-5, S-17
Ordinary Expenses..................................................................... S-18
Other Indebtedness.................................................................... S-10
Participants.......................................................................... S-2
Parties in Interest................................................................... S-23
Plan.................................................................................. S-5, S-23
Plan Assets Regulation................................................................ S-23
PO.................................................................................... S-6
Power Bonds........................................................................... S-11
publicly offered security............................................................. S-23
Principal Component................................................................... S-9, S-13
Redemption Date....................................................................... S-1, S-3
Redemption Prices..................................................................... S-4, S-16
Redemption Request.................................................................... S-5, S-17
Required Percentage-Amendment......................................................... S-19
Required Percentage-Remedies.......................................................... S-19
Resolutions........................................................................... S-11
Rights Holder......................................................................... S-5, S-17
S&P................................................................................... S-1, S-5, S-24
Scheduled Distribution Dates.......................................................... S-1, S-3
Series Supplement..................................................................... S-3, S-9
Standard Terms for Trust Agreements................................................... S-3
Statements............................................................................ S-10
stripped.............................................................................. S-13
Strips................................................................................ S-2, S-3, S-6, S-10, S-12
Supplemental Resolution............................................................... S-10
Trust................................................................................. S-1, S-3
Trust Agreement....................................................................... S-3, S-9
Trust Assets.......................................................................... S-3
Trustee............................................................................... S-1, S-3, S-18
TVA................................................................................... S-1, S-3, S-9
Underlying Securities................................................................. S-2, S-3, S-6, S-10
Underlying Securities Circular........................................................ S-6
Underlying Securities Fiscal Agent.................................................... S-11
Underlying Securities Issuer.......................................................... S-1, S-3, S-9
Underwriter........................................................................... S-1, S-24
Underwriting Agreement................................................................ S-24
</TABLE>
S-26
<PAGE>
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
LEHMAN ABS CORPORATION
DEPOSITOR
The Trust Certificates (the 'Certificates') offered hereby and by
supplements (each a 'Prospectus Supplement') to this Prospectus will be offered
from time to time in one or more series (each a 'Series') and in one or more
classes within each such Series (each a 'Class'), denominated in dollars or in
one or more foreign or composite currencies, including the European Currency
Unit ('ECU'). Certificates of each respective Series and Class will be offered
on terms to be determined at the time of sale as described in the related
Prospectus Supplement accompanying the delivery of this Prospectus. Certificates
may be sold for United States dollars or for one or more foreign or composite
currencies, and the principal of, premium 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 'Depositor') pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the 'Trust Agreement') among the
Depositor, the administrative agent, if any (the 'Administrative Agent') and the
trustee (the 'Trustee') named in the related Prospectus Supplement. The
Underlying Securities will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor), and will not be
acquired from the 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, letter of credit, reserve accounts and other types of
rights or assets designed to support or ensure the servicing and distribution of
amounts due in respect of the Deposited Assets (collectively, 'Credit Support').
See 'Description of Certificates' and 'Description of Deposited Assets and
Credit Support.'
Each Class of Certificates of any Series will represent the right, which
may be senior to those of one or more of the other Classes of such Series, to
receive specified portions of payments of principal, interest and certain other
amounts on the Deposited Assets in the manner described herein and in the
related Prospectus Supplement. A Series may include two or more Classes
differing as to the timing, sequential order or amount of distributions of
principal, interest or premium and one or more Classes within such Series may be
subordinated in certain respects to other Classes of such Series.
Except as otherwise provided herein and in the applicable prospectus
supplement, the Depositor's only obligations with respect to each Series of
Certificates will be, pursuant to certain representations and warranties
concerning the Deposited Assets, to assign and deliver the Deposited Assets and
certain related documents to the applicable Trustee and, in certain cases, to
provide for the Credit Support, if any. The principal obligations of an
Administrative Agent, if any is named in the applicable Prospectus Supplement,
with respect to a Series of Certificates will be pursuant to its contractual
administrative obligations and, only as and to the extent provided in the
related Prospectus Supplement, its obligation to make certain cash advances in
the event of payment delinquencies on the Deposited Assets. See 'Description of
the Certificates--Advances in Respect of Delinquencies.'
The Certificates of each Series will not represent an obligation of or
interest in the Depositor, any Administrative Agent or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor the Deposited Assets
(unless, 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 Depositor, any Administrative Agent or their
respective affiliates.
Prospective investors should consider the factors set forth herein under
'Risk Factors,' beginning on page 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
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.
LEHMAN BROTHERS
November 15, 1995
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount, (b) the currency or currencies in which the principal (the
'Specified Principal Currency'), premium, if any (the 'Specified Premium
Currency'), and any interest (the 'Specified Interest Currency') are
distributable (the Specified Principal Currency, the Specified Premium Currency
and the Specified Interest Currency being collectively referred to as the
'Specified Currency'), (c) the number of Classes of such Series and, with
respect to each Class of such Series, its designation, aggregate principal
amount or, if applicable, notional amount and authorized denominations, (d)
certain information concerning the type, characteristics and specifications of
the Deposited Assets and any Credit Support for such Series or Class, (e) the
relative rights and priorities of each such Class (including the method for
allocating collections from the Deposited Assets to the Certificateholders of
each Class and the relative ranking of the claims of the Certificateholders of
each Class to such Deposited Assets), (f) the name of the Trustee and the
Administrative Agent, if any, for such Series, (g) the Pass Through Rate (as
defined below) or the terms relating to the applicable method of calculation
thereof, (h) the time and place of distribution (each such date, a 'Distribution
Date') of any interest, premium (if any) and/or principal, (i) the date of
issue, (j) the scheduled final Distribution Date, if applicable, (k) the
offering price, (l) any exchange, whether mandatory or optional, the redemption
terms and any other specific terms of Certificates of each such Series or Class.
See 'Description of Certificates--General' for a listing of other items that may
be specified in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Depositor is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the 'Commission'). Reports and other information concerning
the Depositor can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Depositor does not intend to send any financial reports to
Certificateholders.
The Depositor has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the 'Registration
Statement') under the Securities Act of 1933, as amended (the 'Securities Act'),
relating to the Certificates. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Certificates shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by
2
<PAGE>
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 are issued, on each Distribution Date
unaudited reports containing information concerning the related Trust will be
prepared by the related Trustee and sent on behalf of each Trust only to Cede &
Co. ('Cede'), as nominee of DTC and registered holder of the Certificates. See
'Description of Certificates--Global Securities' and 'Description of the Trust
Agreement--Reports to Certificateholders; Notice.' Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Depositor, on behalf of each Trust, will cause to be
filed with the Commission such periodic reports as are required under the
Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited facilities
in the United States for conversion of U.S. dollars into foreign currencies and
vice versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Certificate having a Specified Principal Currency other than U.S.
dollars, Lehman Brothers Inc. (the 'Offering Agent') will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined below) preceding the date of delivery of such
Certificate or by such later date as is determined by the Offering Agent. Each
such exchange will be made by the Offering Agent on such terms and subject to
such conditions, limitations and charges as the Offering Agent may from time to
time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to 'U.S. dollars,' 'U.S.$,' USD, 'dollar' or '$' are to
the lawful currency of the United States.
3
<PAGE>
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class within
such Series) of Certificates prior to the issuance thereof, and there can be no
assurance that a secondary market will develop or, if it does develop, that it
will provide Certificateholders with liquidity of investment or will continue
for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement may set forth
certain legal considerations that are applicable to a specific Series (or Class
or Classes within such Series) of Certificates being offered in connection with
that Prospectus Supplement or the assets deposited in or assigned to the related
Trust.
Limited Obligations and Interests. The Certificates will not represent a
recourse obligation of or interest in the Depositor or any of its affiliates.
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of each Series will not be insured or guaranteed by any government
agency or instrumentality, the Depositor, any Person affiliated with the
Depositor or the Issuer, or any other Person. The obligations, if any, of the
Depositor with respect to the Certificates of any Series will only be pursuant
to certain limited representations and warranties. The Depositor does not have,
and is not expected in the future to have, any significant assets with which to
satisfy any claims arising from a breach of any representation or warranty. If,
for example, the Depositor were required to repurchase an Underlying Security
with respect to which the Depositor has breached a representation or warranty,
its only sources of funds to make such repurchase would be from funds obtained
from the enforcement of a corresponding obligation, if any, on the part of the
seller of such Underlying Security to the Depositor, or from a reserve fund
established to provide funds for such repurchases. The Depositor has no
obligation to establish or maintain any such reserve fund.
Credit Support; Limited Assets. Although the Trust for any Series (or Class
of such Series) of Certificates may include, or the Certificateholders of such
Certificates may have the benefit of, certain assets which are designed to
support the payment upon, or otherwise ensure the servicing or distribution with
respect to, the Deposited Assets related to such Series or Class as described in
the related Prospectus Supplement, the Certificates do not represent obligations
of the Depositor, any Administrative Agent or any of their affiliates and,
unless otherwise specified in the applicable Prospectus Supplement, are not
insured or guaranteed by the Depositor, any Administrative Agent, any of their
affiliates or any other person or entity. Accordingly, Certificateholders'
receipt of distributions in respect of the Certificates will depend entirely on
the performance of and the Trust's receipt of payments with respect to the
Deposited Assets and any Credit Support identified in the related Prospectus
Supplement. See 'Description of Deposited Assets and Credit Support.'
Maturity and Redemption Considerations. The timing of distributions of
interest, premium (if any) and principal of any Series (or of any Class within
such Series) of Certificates is affected by a number of factors, including the
performance of the related Deposited Assets, the extent of any early redemption,
repayment or extension of maturity with respect to the related Underlying
Securities and the manner and priority in which collections from such Underlying
Securities and any other Deposited Assets are allocated to each Class of such
Series. Certain of these factors may be influenced by a variety of accounting,
tax, economic, social and other factors. The related Prospectus Supplement will
discuss any calls, puts or other redemption options, any extension of maturity
provisions and certain other terms applicable to such Underlying Securities and
any other Deposited Assets. See 'Maturity and Yield Considerations.'
Tax Considerations. The Federal income tax consequences of the purchase,
ownership and disposition of the Certificates and the tax treatment of the Trust
will depend on the specific terms of the Certificates, the Trust, any Credit
Support and the Deposited Assets. See the description under 'Certain Federal
Income Tax Considerations' in the related Prospectus Supplement.
Ratings of the Certificates. At the time of issue, the Certificates of any
given Series (or each Class of such Series that is offered hereby) will be rated
in one of the investment grade categories recognized 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
4
<PAGE>
and any Credit Support. The rating is not a recommendation to purchase, hold or
sell Certificates, inasmuch as such rating does not comment as to market price
or suitability for a particular investor. There can be no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant. Any Class or Classes of a given Series
of Certificates may not be offered pursuant to this Prospectus, in which case
such Class or Classes may or may not be rated in an investment grade category by
a Rating Agency.
Global Securities. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series (or, if more than one Class exists,
each Class of such Series) will initially be represented by one or more Global
Securities deposited with, or on behalf of, a 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 demonstrated in a currency other than U.S. dollars to the extent
specified in the applicable Prospectus Supplement. This Prospectus does not
describe all the risks of an investment in such Certificates, and the Depositor
disclaims any responsibility to advise prospective purchasers of such risks as
they exist from time to time. Prospective purchasers of such Certificates should
consult their own financial and legal advisors as to the risks entailed by an
investment in such Certificates denominated in a currency other than U.S.
dollars. See 'Currency Risks.'
Passive Nature of the Trust. The Trustee with respect to any Series of
Certificates will hold the Deposited Assets for the benefit of the
Certificateholders. Each Trust will generally hold the related Deposited Assets
to maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any 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 DEPOSITOR
The Depositor was incorporated in the State of Delaware on January 29,
1988, as an indirect, wholly-owned, limited-purpose subsidiary of Lehman
Brothers Inc. The principal office of the Depositor is located in 3 World
Financial Center, New York, New York 10285. Its telephone number is (212)
526-5594.
The Certificate of Incorporation of the Depositor provides that the
Depositor may conduct any lawful activities necessary or incidental to serving
as depositor of one or more trusts that may issue and sell Certificates. The
Certificate of Incorporation of the Depositor provides that any securities,
except for subordinated securities, issued by the Depositor must be rated in one
of the four highest categories available by any Rating Agency rating the Series.
Formation of a grantor trust will not relieve the Depositor of its obligation to
issue only securities, except for subordinated securities, rated in one of the
four highest rating categories. Pursuant to the terms of the Trust Agreement,
the Depositor may not issue any securities which would result in the lowering of
the then current ratings of the outstanding Certificates of any Series.
5
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds to be received from the sale of each Series or Class of Certificates
(whether or not offered hereby) will be used by the Depositor to purchase the
related Deposited Assets and arrange certain Credit Support including, if
specified in the related Prospectus Supplement, making required deposits into
any reserve account or the applicable Certificate Account (as defined below) for
the benefit of the Certificateholders of such Series or Class. Any remaining net
proceeds, if any, will be used by the Depositor for general corporate purposes.
FORMATION OF THE TRUST
The Depositor will assign the Deposited Assets for each Series of
Certificates to the Trustee named in the applicable Prospectus Supplement, in
its capacity as Trustee, for the benefit of the Certificateholders of such
Series. See 'Description of the Trust Agreement--Assignment of Deposited
Assets.' The Trustee named in the applicable Prospectus Supplement will
administer the Deposited Assets pursuant to the Trust Agreement and will receive
a fee for such services (the 'Trustee's Fee'). Any Administrative Agent named in
the applicable Prospectus Supplement will perform such tasks as are specified
therein and in the Trust Agreement and will receive a fee for such services (the
'Administration Fee') as specified in the Prospectus Supplement. See
'Description of the Trust Agreement--Collection and Other Administrative
Procedures' and '--Retained Interest; Administrative Agent Compensation and
Payment of Expenses.' The Trustee or an Administrative Agent, if applicable,
will either cause the assignment of the Deposited Assets to be recorded or will
obtain an opinion of counsel that no recordation is required to obtain a first
priority perfected security interest in such Deposited Assets.
Unless otherwise stated in the Prospectus Supplement, the Depositor's
assignment of the Deposited Assets to the Trustee will be without recourse. To
the extent provided in the applicable Prospectus Supplement, the obligations of
an Administrative Agent so named therein with respect to the Deposited Assets
will consist primarily of its contractual administrative obligations, if any,
under the Trust Agreement, its obligation, if any, to make certain cash advances
in the event of delinquencies in payments on or with respect to any Deposited
Assets in amounts described under 'Description of the Trust Agreement--Advances
in Respect of Delinquencies,' and its obligations, if any, to purchase Deposited
Assets as to which there has been a breach of certain representations and
warranties or as to which the documentation is materially defective. The
obligations of an Administrative Agent, if any, named in the applicable
Prospectus Supplement to make advances will be limited to amounts which any such
Administrative Agent believes ultimately would be recoverable under any Credit
Support, insurance coverage, the proceeds of liquidation of the Deposited Assets
or from other sources available for such purposes. See 'Description of the Trust
Agreement--Advances in Respect of Delinquencies.'
Unless otherwise provided in the related Prospectus Supplement, each Trust
will consist of (i) such Deposited Assets, or interests therein, exclusive of
any interest in such assets (the 'Retained Interest') retained by the Depositor
or any previous owner thereof, as from time to time are specified in the Trust
Agreement; (ii) such assets as from time to time are identified as deposited in
the related Certificate Account; (iii) property, if any, acquired on behalf of
Certificateholders by foreclosure or repossession and any revenues received
thereon; (iv) those elements of Credit Support, if any, provided with respect to
any Class within such Series that are specified as being part of the related
Trust in the applicable Prospectus Supplement, as described therein and under
'Description of Deposited Assets and Credit Support--Credit Support'; (v) the
rights of the Depositor under the agreement or agreements entered into by the
Trustee on behalf of the Certificateholders which constitute, or pursuant to
which the Trustee has acquired, such Deposited Assets; and (vi) the rights of
the Trustee in any cash advances, reserve fund or surety bond, if any, as
described under 'Description of the Trust Agreement--Advances in Respect of
Delinquencies.'
In addition, to the extent provided in the applicable Prospectus
Supplement, the Depositor will obtain Credit Support for the benefit of the
Certificateholders of any related Series (or Class within such Series) of
Certificates.
6
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MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Underlying
Securities and the terms, if any, upon which such Underlying Securities may be
subject to early redemption (either by the applicable obligor or pursuant to a
third-party call option), repayment (at the option of the holders thereof) or
extension of maturity. The provisions of the Underlying Securities with respect
to the foregoing will, unless otherwise specified in the applicable Prospectus
Supplement, affect the weighted average life of the related Series of
Certificates.
The effective yield to holders of the Certificates of any Series (and Class
within such Series) may be affected by certain aspects of the Deposited Assets
or any Credit Support or the manner and priorities of allocations of collections
with respect to such Deposited Assets between the Classes of a given Series.
With respect to any Series of Certificates the Underlying Securities of which
consist of one or more redeemable securities, extendable securities or
securities subject to a third-party call option, the yield to maturity of such
Series (or Class within such Series) may be affected by any optional or
mandatory redemption or repayment or extension of the related Underlying
Securities prior to the stated maturity thereof. A variety of tax, accounting,
economic, and other factors will influence whether 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 Indenture.'
The extent to which the yield to maturity of such Certificates may vary
from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates will also be
affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that the
Pass-Through Rate for such Series (or Class) is based on variable or adjustable
interest rates. With respect to any Series of Certificates representing an
interest in a pool of corporate debt securities, disproportionate principal
payments (whether resulting from differences in amortization schedules, payments
due on scheduled maturity or upon early redemption) on the related Underlying
Securities having interest rates higher or lower than the then applicable
Pass-Through Rates applicable to such Certificates may affect the yield thereon.
The Prospectus Supplement for each Series of Certificates will set forth
additional information regarding yield and maturity considerations applicable to
such Series (and each Class within such Series) and the related Deposited
Assets, including the applicable Underlying Securities.
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DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within such
Series) of Certificates will be issued pursuant to a Trust Agreement and a
separate series supplement thereto among the Depositor, the Administrative
Agent, if any, and the Trustee named in the related Prospectus Supplement, a
form of which Trust Agreement is attached as an exhibit to the Registration
Statement. The provisions of the Trust Agreement (as so supplemented) may vary
depending upon the nature of the Certificates to be issued thereunder and the
nature of the Deposited Assets, Credit Support and related Trust. The following
summaries describe certain provisions of the Trust Agreement which may be
applicable to each Series of Certificates. The applicable Prospectus Supplement
for a Series of Certificates will describe any provision of the Trust Agreement
that materially differs from the description thereof contained in this
Prospectus. The following summaries do not purport to be complete and are
subject to the detailed provisions of the form of Trust Agreement to which
reference is hereby made for a full description of such provisions, including
the definition of certain terms used, and for other information regarding the
Certificates. Article and section references in parentheses below are to
articles and sections in the Trust Agreement. Wherever particular sections or
defined terms of the Trust Agreement are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference. As used herein
with respect to any Series, the term 'Certificate' refers to all the
Certificates of that Series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires.
A copy of the applicable series supplement to the Trust Agreement relating
to each Series of Certificates issued from time to time will be filed by the
Depositor as an exhibit to a Current Report on Form 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 Depositor (and, with respect to any Underlying Security
which at the time of such deposit represents a significant portion of all such
Deposited Assets and any related Credit Support, certain information concerning
the terms of each such Underlying Security, the identity of the issuer thereof
and where publicly available information regarding such issuer may be obtained);
(iv) the limit, if any, upon the aggregate principal amount or notional amount,
as applicable, of each Class thereof; (v) the dates on which or periods during
which such Series or Classes within such Series may be issued (each, an
'Original Issue Date'), the offering price thereof and the applicable
Distribution Dates on which the principal, if any, of (and premium, if any, on)
such Series or Classes within such Series will be distributable; (vi) if
applicable, the relative rights and priorities of each such Class (including the
method for allocating collections from and defaults or losses on the Deposited
Assets to the Certificateholders of each such Class); (vii) whether the
Certificates of such Series or each Class within such Series are Fixed Rate
Certificates or Floating Rate Certificates (each as defined below) and the
applicable interest rate (the 'Pass-Through Rate') 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, if any; (viii) the option, if
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any, of any Certificateholder of such Series or Class to withdraw a portion of
the assets of the Trust in exchange for surrendering such Certificateholder's
Certificate or of the Depositor or Administrative Agent, if any, or another
third party to purchase or repurchase any Deposited Assets (in each case to the
extent not inconsistent with the Depositor's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Depositor 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 Depositor or a Certificateholder, and the
currency or currencies in which any principal of or any premium or any interest
on such Series or Class are to be distributed pursuant to such election; (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
Depositor or the applicable Administrative Agent, if any, or Trustee under the
Trust Agreement or with respect to 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 ERISA consequences
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. In addition, any 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
Depositor, the Trustee, the Administrative Agent, if any, or an agent thereof as
exchange rate agent for each Series of Certificates (the 'Exchange Rate Agent').
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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 Depositor may at any time purchase Certificates at any price
in the open market or otherwise. Certificates so purchased by the Depositor may,
at the discretion of the Depositor, be held or resold or surrendered to the
Trustee for cancellation of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest on the
Certificates of each Series (and Class within such Series) will be made in the
Specified Currency for such Certificates by or on behalf of the Trustee on each
Distribution Date as specified in the related Prospectus Supplement and the
amount of each distribution will be determined as of the close of business on
the date specified in the related Prospectus Supplement (the 'Determination
Date'). If the Specified Currency for a given Series or Class within such Series
is other than U.S. dollars, the Administrative Agent, if any, or otherwise the
Trustee will (unless otherwise specified in the applicable Prospectus
Supplement) arrange to convert all payments in respect of each Certificate of
such Series or Class to U.S. dollars in the manner described in the following
paragraph. The Certificateholder of a Registered Certificate of a given Series
or Class within such Series denominated in a Specified Currency other than U.S.
dollars may (if the applicable Prospectus Supplement and such Certificate so
indicate) elect to receive all distributions in respect of such Certificate in
the Specified Currency by delivery of a written notice to the Trustee and
Administrative Agent, if any, for such Series not later than fifteen calendar
days prior to the applicable Distribution Date, except under the circumstances
described under 'Currency Risks--Payment Currency' below. Such election will
remain in effect until revoked by written notice to such Trustee and
Administrative Agent, if any, received by each of them not later than fifteen
calendar days prior to the applicable Distribution Date.
Unless otherwise specified in the applicable Prospectus Supplement, in the
case of a Registered Certificate of a given Series or Class within such Series
having a Specified Currency other than U.S. dollars, the amount of any U.S
dollar distribution in respect of such Registered Certificate will be determined
by the Exchange Rate Agent based on the highest firm bid quotation expressed in
U.S. dollars received by the Exchange Rate Agent at approximately 11:00 a.m.,
New York City time, on the second Business Day preceding the applicable
Distribution Date (or, if no such rate is quoted on such date, the last date on
which such rate was quoted), from three (or, if three are not available, then
two) recognized foreign exchange dealers in The City of New York (one of which
may be the Offering Agent and another of which may be the Exchange Rate Agent)
selected by the Exchange Rate Agent, for the purchase by the quoting dealer, for
settlement on such Distribution Date, of the aggregate amount payable in such
Specified Currency on such payment date in respect of all Registered
Certificates. All currency exchange costs will be borne by the
Certificateholders of such Registered Certificates by deductions from such
distributions. If no such bid quotations are available, such distributions will
be made in such Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond the Depositor's control, in which case such distributions will be made as
described under 'Currency Risks--Payment Currency' below. The applicable
Prospectus Supplement will specify such information with respect to Bearer
Certificates.
Unless otherwise provided in the applicable Prospectus Supplement and
except as provided in the succeeding paragraph, distributions with respect to
Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement in The City of New York; 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 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
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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.
Fixed Rate Certificates. Each Series (or, if more than one Class exists,
each Class within such Series) of Certificates with a fixed Pass-Through Rate
('Fixed Rate Certificates') will bear interest, on the outstanding Certificate
Principal Balance (or Notional Amount, if applicable), from its Original Issue
Date, or from the last date to which interest has been paid, at the fixed
Pass-Through Rate stated on the face thereof and in the applicable Prospectus
Supplement until the principal amount thereof is distributed or made available
for repayment (or in the case of Fixed Rate Certificates with no or a nominal
principal amount, until the Notional Amount thereof is reduced to zero), except
that, if so specified in the applicable Prospectus Supplement, the Pass-Through
Rate for such Series or any such Class or Classes may be subject to adjustment
from time to time in response to designated changes in the rating assigned to
such Certificates by one or more rating agencies, in accordance with a schedule
or otherwise, all as described in such Prospectus Supplement. Unless otherwise
set forth in the applicable Prospectus Supplement, interest on each Series or
Class of Fixed Rate Certificates will be distributable in arrears on each
Distribution Date specified in such Prospectus Supplement. Each such
distribution of interest shall include interest accrued through the day
specified in the applicable Prospectus Supplement. Unless otherwise specified in
the applicable Prospectus Supplement, interest on Fixed Rate Certificates will
be computed on the basis of a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a variable
Pass-Through Rate ('Floating Rate Certificates') will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the
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first Interest Reset Date (as defined below) for such Series or Class at the
Initial Pass-Through Rate set forth on the face thereof and in the applicable
Prospectus Supplement. Thereafter, the Pass-Through Rate on such Series or Class
for each Interest Reset Period (as defined below) will be determined by
reference to an interest rate basis (the 'Base Rate'), plus or minus the Spread,
if any, or multiplied by the Spread Multiplier, if any. The 'Spread' is the
number of basis points (one basis point equals one one-hundredth of a percentage
point) that may be specified in the applicable Prospectus Supplement as being
applicable to such Series or Class, and the 'Spread Multiplier' is the
percentage that may be specified in the applicable Prospectus Supplement as
being applicable to such Series or Class, except that if so specified in the
applicable Prospectus Supplement, the Spread or Spread Multiplier on such Series
or any such Class or Classes of Floating Rate Certificates may be subject to
adjustment from time to time in response to designated changes in the rating
assigned to such Certificates by one or more rating agencies, in accordance with
a schedule or otherwise, all as described in such Prospectus Supplement. The
applicable Prospectus Supplement, unless otherwise specified therein, will
designate one of the following Base Rates as applicable to a Floating Rate
Certificate: (i) LIBOR (a 'LIBOR Certificate'), (ii) the Commercial Paper Rate
(a 'Commercial Paper Rate Certificate'), (iii) the Treasury Rate (a 'Treasury
Rate Certificate'), (iv) the Federal Funds Rate (a 'Federal Funds Rate
Certificate'), (v) the CD Rate (a 'CD Rate Certificate') or (vi) such other Base
Rate (which may be based on, among other things, one or more market indices or
the interest and/or other payments (whether scheduled or otherwise) paid,
accrued or available with respect to a designated asset, pool of assets or type
of asset) as is set forth in such Prospectus Supplement and in such Certificate.
The 'Index Maturity' for any Series or Class of Floating Rate Certificates is
the period of maturity of the instrument or obligation from which the Base Rate
is calculated. 'H.15(519)' means the publication entitled 'Statistical Release
H.15(519), Selected Interest Rates,' or any successor 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 Depositor will appoint, and enter into agreements with, agents (each a
'Calculation Agent') to calculate Pass-Through Rates on each Series or Class of
Floating Rate Certificates. The applicable Prospectus Supplement will set forth
the identity of the Calculation Agent for each Series or Class of Floating Rate
Certificates. All determinations of interest by the Calculation Agent shall, in
the absence of manifest error, be conclusive for all purposes and binding on the
holders of Floating Rate Certificates of a given Series or Class.
The Pass-Through Rate on each Class of Floating Rate Certificates will be
reset daily, weekly, monthly, quarterly, semiannually or annually (such period
being the 'Interest Reset Period' for such Class, and the first day of each
Interest Reset Period being an 'Interest Reset Date'), as specified in the
applicable Prospectus Supplement. Interest Reset Dates with respect to each
Series, and any Class within such Series of Floating Rate Certificates will be
specified in the applicable Prospectus Supplement; provided, however, that
unless otherwise specified in such Prospectus Supplement, the Pass-Through Rate
in effect for the ten days immediately prior to the Scheduled Final Distribution
Date will be that in effect on the tenth day preceding such Scheduled Final
Distribution Date. If an Interest Reset Date for any Class of Floating Rate
Certificates would otherwise be a day that is not a Business Day, such Interest
Reset Date will occur on a prior or succeeding Business Day, specified in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Certificates shall be the accrued
interest from and including the Original Issue Date of such Series or Class
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or the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date.
With respect to a Floating Rate Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such Certificate
(or, in the case of a Strip Certificate with no or a nominal Certificate
Principal Balance, the Notional Amount specified in the applicable Prospectus
Supplement) by an accrued interest factor. Such accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. Unless otherwise specified in
the applicable Prospectus Supplement, the interest factor (expressed as a
decimal calculated to seven decimal places without rounding) for each such day
is computed by dividing the Pass-Through Rate in effect on such day by 360, in
the case of LIBOR Certificates, Commercial Paper Rate Certificates, Federal
Funds Rate Certificates and CD Rate Certificates or by the actual number of days
in the year, in the case of Treasury Rate Certificates. For purposes of making
the foregoing calculation, the variable Pass-Through Rate in effect on any
Interest Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Pass-Through Rate on a
Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of Floating Rate
Certificates will be distributable on the Distribution Dates and for the
interest accrual periods as and to the extent set forth in the applicable
Prospectus Supplement.
Upon the request of the holder of any Floating Rate Certificate of a given
Series or Class, the Calculation Agent for such Series or Class will provide the
Pass-Through Rate then in effect and, if determined, the Pass-Through Rate that
will become effective on the next Interest Reset Date with respect to such
Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Reset Period at the Pass-Through Rate calculated with reference to
the CD Rate and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the 'CD
Rate' for each Interest Reset Period shall be the rate as of the second Business
Day prior to the Interest Reset Date for such Interest Reset Period (a 'CD Rate
Determination Date') for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading 'CDs (Secondary Market).' In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
'CD Rate' for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Prospectus Supplement as published in Composite
Quotations under the heading 'Certificates of Deposit.' If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the 'CD Rate' for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Certificate and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for such CD
Rate Certificate for negotiable certificates of deposit of major United States
money center banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the 'CD Rate'
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial PassThrough Rate).
The 'Calculation Date' pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next
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succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
'Commercial Paper Rate' for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Certificate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
'Commercial Paper Rate Determination Date') and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading 'Commercial Paper.' In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
'Commercial Paper Rate' for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading 'Commercial Paper.' If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the 'Commercial Paper Rate' for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Certificate for commercial paper of the specified Index Maturity placed for
an industrial issuer whose bonds are rated 'AA' or the equivalent by a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by such 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:
D X 360 X 100
Money Market Yield = -------------
360 - (D X M)
where 'D' refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and 'M' refers to the actual
number of days in the specified Index Maturity.
The 'Calculation Date' pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
Business Day, the next succeeding Business Day or (b) the second Business Day
preceding the date any distribution of interest is required to be made following
the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable 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 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 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
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time, on such Calculation Date, the 'Federal Funds Rate' for such Interest Reset
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Pass-Through Rate). Unless otherwise specified in the applicable
Prospectus Supplement, in the case of a Federal Funds Rate Certificate that
resets daily, the Pass-Through Rate on such Certificate for the period from and
including a Monday to but excluding the succeeding Monday will be reset by the
Calculation Agent for such Certificate on such second Monday (or, if not a
Business Day, on the next succeeding Business Day) to a rate equal to the
average of the Federal Funds Rates in effect with respect to each such day in
such week.
The 'Calculation Date' pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear interest for each
Interest Reset Period at the Pass-Through Rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such Certificate
and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered 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 banks, for the period of
the specified Index Maturity, commencing on such Interest Reset Date, and
in a principal amount equal to an amount of not less than $1,000,000 that
is representative of a single transaction in such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as mentioned in this sentence,
'LIBOR' for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to the offered
rates for deposits in a currency other than U.S. dollars, the applicable
Prospectus Supplement will set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to the Treasury Rate and the Spread or Spread Multiplier, if any,
specified in such Certificate and in the applicable Prospectus Supplement.
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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 Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) on such Treasury Rate Determination Date as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are not published
or reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the 'Treasury Rate' for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Certificate
and shall be a yield to maturity (expressed as a bond equivalent on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the 'Treasury Rate' for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate.)
The 'Treasury Rate Determination Date' for such Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. Unless otherwise specified in the
applicable Prospectus Supplement, if an auction date shall fall on any day that
would otherwise be an Interest Reset Date for a Treasury Rate Certificate, then
such Interest Reset Date shall instead be the Business Day immediately following
such auction date.
The 'Calculation Date' pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise, each
Certificate (other than certain Classes of Strip Certificates) will have a
'Certificate Principal Balance' which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Unless otherwise specified in the related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Certificate of the Class or Classes entitled thereto (in the manner and
priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable pursuant
to the terms of the related Series, by the amount of any net losses realized on
any Deposited Asset ('Realized Losses') allocated thereto. Unless the related
Prospectus Supplement provides otherwise, the initial aggregate Certificate
Principal Balance of all Classes of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a Series and each Class thereof will be specified in the related Prospectus
Supplement. Distributions of principal of any Class of Certificates will be made
on a pro rata basis among all the Certificates of such Class. Strip Certificates
with no Certificate Principal Balance will not receive distributions of
principal.
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FOREIGN CURRENCY CERTIFICATES
If the specified currency of any Certificate is not U.S. dollars (a
'Foreign Currency Certificate'), certain provisions with respect thereto will be
set forth in the related Prospectus Supplement which will specify the
denominations, the currency or currencies in which the principal and interest
with respect to such Certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise applicable
to the Certificates.
INDEXED CERTIFICATES
From time to time, the Issuer may offer a Series of Certificates ('Indexed
Certificates'), the principal amount payable at the stated maturity date of
which (the 'Indexed Principal Amount') and/or interest with respect to which is
determined by reference to (i) the rate of exchange between the specified
currency for such Certificate and the other currency or composite currency (the
'Indexed Currency') specified therein; (ii) the difference in the price of a
specified commodity (the 'Indexed Commodity') on specified dates; (iii) the
difference in the level of a specified stock index (the 'Stock Index'), which
may be based on U.S. or foreign stocks, on specified dates; or (iv) such other
objective price or economic measure as are described in the related Prospectus
Supplement. The manner of determining the Indexed Principal Amount of an Indexed
Certificate, and historical and other information concerning the Indexed
Currency, Indexed Commodity, Stock Index or other price or economic measure used
in such determination, will be set forth in the related Prospectus Supplement,
together with any information concerning tax consequences to the Holders of such
Indexed Certificates.
Except as otherwise specified in the related Prospectus Supplement,
interest on an Indexed Certificate will be payable based on the amount
designated in the related Prospectus Supplement as the 'Face Amount' of such
Indexed Certificate. The related Prospectus Supplement will describe whether the
principal amount of the related Indexed Certificate that would be payable upon
redemption or repayment prior to the stated maturity date will be the Face
Amount of such Indexed Certificate, the Indexed Principal Amount of such Indexed
Certificate at the time of redemption or repayment, or another amount described
in such Prospectus Supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates ('Dual Currency
Certificates'), in which case payments of principal and/or interest in respect
of Dual Currency Certificates will be made in such currencies, and rates of
exchange will be calculated upon such bases, as indicated in the Certificates
and described in the related Prospectus Supplement. Other material terms and
conditions relating to Dual Currency Certificates will be set forth in the
Certificates and the related Prospectus Supplement.
OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for a pro rata
portion of the Deposited Assets, the applicable Prospectus Supplement will
designate such Series as an 'Exchangeable Series.' The terms upon which a holder
may exchange Certificates of any Exchangeable Series for a pro rata portion of
the Deposited Assets of the related Trust will be specified in the related
Prospectus Supplement; provided that any right of exchange shall be exercisable
only to the extent that such exchange would not be inconsistent with the
Depositor's and such Trust's continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder. Such
terms may relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Certificates of each Class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each Certificate tendered for exchange be an
integral multiple of an amount specified in the Prospectus Supplement;
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(d) specified dates during which a holder may effect such an exchange
(each, an 'Optional Exchange Date');
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any Credit Support or other non-Underlying
Securities deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and the
establishment of a reserve for any anticipated Extraordinary Trust
Expenses.
Unless otherwise specified in the related Prospectus Supplement, in order
for a Certificate of a given Exchangeable Series (or Class within such
Exchangeable Series) to be exchanged by the applicable Certificateholder, the
Trustee for such Certificate must receive, at least 30 (or such shorter period
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).
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, 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 Depositor as follows: The
Depositary Trust Company is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
'clearing corporation' within the meaning of the New York Uniform Commercial
Code, and a 'clearing agency' registered pursuant to the provisions of Section
17A of the Exchange Act. The Depository Trust Company was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among the institutions that have accounts with such
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 Depositor 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 of the individual Certificates represented by such
Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Certificates, or, if
such Certificates are offered and sold directly through one or more agents, by
the Depositor or such agent or agents. Ownership of beneficial interests in a
Global Security will be limited to participants or Persons that may hold
beneficial interests through participants. Ownership of beneficial interests in
a Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the 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.
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 Depositor, the Administrative Agent, if any, the
Trustee for such Certificates, any Paying Agent or the Certificate Registrar for
such Certificates will have responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in such
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
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The Depositor 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
Depositor also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in 'street name,' and will be the responsibility of such participants.
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 Depositor within ninety days, the Depositor will issue
individual Definitive Certificates in exchange for the Global Security or
Securities representing such Certificates. In addition, the Depositor may at any
time and in its sole discretion determine not to have any Certificates of a
given Class represented by one or more Global Securities and, in such event,
will issue individual Definitive Certificates of such Class in exchange for the
Global Security or Securities representing such Certificates. Further, if the
Depositor so specifies with respect to the Certificates of a given Class, an
owner of a beneficial interest in a Global Security representing Certificates of
such Class may, on terms acceptable to the Depositor and the 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 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 as Registered Certificates in denominations, unless
otherwise specified by the Depositor, 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.
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DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
Each Certificate of each Series (or if more than one Class exists, each
Class (whether or not each such Class is offered hereby) within such Series)
will represent an ownership interest specified for such Series (or Class) of
Certificates in a designated, publicly issued, fixed income debt security or a
pool of such debt securities (the 'Underlying Securities'), purchased by the
Depositor (or an affiliate thereof) in the secondary market and assigned to a
Trust as described in the applicable Prospectus Supplement. 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 Depositor in purely secondary market transactions. Based on
information contained in the prospectus pursuant to which any GSE Issuer's
securities were originally 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 Depositor 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
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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.
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 ('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
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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.
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 Depositor may also deposit
into a given Trust, or the Trustee on behalf of the Certificateholders of a
Trust may enter into an agreement constituting or providing for the purchase of,
to the extent described in the related Prospectus Supplement, certain assets
related or incidental to one or more of such Underlying Securities or to some
other asset deposited in the Trust, including hedging contracts and other
similar arrangements (such as puts, calls, interest rate swaps, currency swaps,
floors, caps and collars, cash and assets ancillary or incidental to the
foregoing or to the Underlying Securities (including assets obtained through
foreclosure or in settlement of claims with respect thereto) (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.
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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. 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
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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 may be distributed to
Certificateholders of such Class or group of Classes within such Series, or may
be used for other purposes, in the manner and to the extent provided in the
related Prospectus Supplement. Amounts deposited in any Reserve Account will be
invested in certain permitted investments by, or at the direction of, the
Trustee, the Depositor or such other person named in the related Prospectus
Supplement.
COLLECTIONS
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to administer
the related Deposited Assets, including making collections of all payments made
thereon, depositing from time to time prior to any applicable Distribution Date
such collections into a segregated account maintained or controlled by the
applicable Trustee for the benefit of such Series (each a 'Certificate
Account'). An Administrative Agent, if any is appointed pursuant to the
applicable Prospectus 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 Loss will be allocated among
the Classes of any Series of Certificates, if applicable.
The relative priorities of distributions with respect to collections from
the assets of the Trust assigned to Classes of a given Series of Certificates
may permanently or temporarily change over time upon the occurrence of certain
circumstances specified in the applicable Prospectus Supplement. Moreover, the
applicable Prospectus Supplement may specify that the relative distribution
priority assigned to each Class of a given Series for purposes of payments of
certain amounts, such as principal, may be different from the relative
distribution priority assigned to each such Class for payments of other amounts,
such as interest or premium.
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DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of certain provisions of the Trust Agreement and the
Certificates 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 Depositor will
cause the Underlying Securities to be included in the related Trust, and any
other Deposited Asset specified in the Prospectus Supplement, to be assigned to
the related Trustee, together with all principal, premium (if any) and interest
received by or on behalf of the Depositor on or with respect to such Deposited
Assets after the cut-off date specified in the Prospectus Supplement (the
'Cut-off Date'), other than principal, premium (if any) and interest due on or
before the Cut-off Date and other than any Retained Interest (Section 2.01). The
Trustee will, concurrently with such assignment, deliver the Certificates to the
Depositor in exchange for certain assets to be deposited in the Trust (Section
2.06). Each Deposited Asset will be identified in a schedule appearing as an
exhibit to the Trust Agreement. Such schedule will include certain statistical
information with respect to each Underlying Security and each other Deposited
Asset as of the Cut-off Date, and in the event any Underlying Security
represents ten percent or more of the total Underlying Securities with respect
to any Series of Certificates, such schedule will include, to the extent
applicable, information regarding the payment terms thereof, the Retained
Interest, if any, with respect thereto, the maturity or terms thereof, the
rating, if any, thereof and certain other information with respect thereto.
In addition, the Depositor will, with respect to each Deposited Asset,
deliver or cause to be delivered to the Trustee (or to the custodian hereinafter
referred to) all documents necessary to transfer ownership of such Deposited
Asset to the Trustee. The Trustee (or such custodian) will review such documents
upon receipt thereof or within such period as is permitted in the Prospectus
Supplement, and the Trustee (or such custodian) will hold such documents in
trust for the benefit of the Certificateholders (Sections 2.01 and 2.02).
Each of the Depositor and the Administrative Agent, if any, will make
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the Trust Agreement. Upon a
breach of any such representation of the Depositor or any such Administrative
Agent, as the case may be, which materially and adversely affects the interests
of the Certificateholders, the Depositor or any such Administrative Agent,
respectively, will be obligated to cure the breach in all material respects
(Section 2.05).
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates the Trustee or such
other person specified in the Prospectus Supplement directly or through
sub-administrative agents, will make reasonable efforts to collect all scheduled
payments under the Deposited Assets and will follow or cause to be followed such
collection procedures, if any, as it would follow with respect to comparable
financial assets that it held for its own account, provided that such procedures
are consistent with the Trust Agreement and any related instrument governing any
Credit Support (collectively, the 'Credit Support Instruments') and provided
that, except as otherwise expressly set forth in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability.
Sub-Administration. Any Trustee or Administrative Agent may delegate its
obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a 'Sub-Administrative Agent'), but
the Trustee or Administrative Agent will remain obligated with respect to such
obligations under the Trust Agreement. Each Sub-Administrative Agent will be
required to perform the customary functions of an administrator of comparable
financial assets, including, if applicable, collecting payments from obligors
and remitting such collections to the Trustee; maintaining accounting records
relating to the Deposited Assets,
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attempting to cure defaults and delinquencies; and enforcing any other remedies
with respect thereto all as and to the extent provided in the applicable
Sub-Administration Agreement (as defined below).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a 'Sub-Administration Agreement') will be consistent
with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust Agreement.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, although each such Sub-Administration Agreement
will be a contract solely between such Administrative Agent and the
Sub-Administrative Agent, the Trust Agreement pursuant to which a Series of
Certificates is issued will provide that, if for any reason such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, will be solely liable
for all fees owed by it to any Sub-Administrative Agent, irrespective of whether
the compensation of the Administrative Agent or Trustee, as applicable, pursuant
to the Trust Agreement with respect to the particular Series of Certificates is
sufficient to pay such fees. However, a Sub-Administrative Agent may be entitled
to a Retained Interest in certain Deposited Assets to the extent provided in the
related Prospectus Supplement. Each Sub-Administrative Agent will be reimbursed
by the Administrative Agent, if any, or otherwise the Trustee for certain
expenditures which it makes, generally to the same extent the Administrative
Agent or Trustee, as applicable, would be reimbursed under the terms of the
Trust Agreement relating to such Series. See '--Retained Interest;
Administrative Agent Compensation and Payment of Expenses.'
The Administrative Agent or Trustee, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. Unless otherwise specified in
the applicable Prospectus Supplement, as administrator with respect to the
Deposited Assets, the Trustee, on behalf of the Certificateholders of a given
Series (or any Class or Classes within such Series), will present claims under
each applicable Credit Support Instrument, and will take such reasonable steps
as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Deposited Assets. As set forth above, all collections by or
on behalf of the Trustee or Administrative Agent under any Credit Support
Instrument are to be deposited in the Certificate Account for the related Trust,
subject to withdrawal as described above.
Unless otherwise provided in the applicable Prospectus Supplement, if
recovery on a defaulted Deposited Asset under any related Credit Support
Instrument is not available, the Trustee will be obligated to follow or cause to
be followed such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Deposited Asset (Section 3.12), provided
that, except as otherwise expressly provided in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability. If the proceeds of any liquidation
of the defaulted Deposited Asset are less than the sum of (i) the outstanding
principal balance of the defaulted Deposited Asset, (ii) interest accrued
thereon at the applicable interest rate and (iii) the aggregate amount of
expenses incurred by the Administrative Agent and the Trustee, as applicable, in
connection with such proceedings to the extent reimbursable from the assets of
the Trust under the Trust Agreement, the Trust will realize a loss in the amount
of such difference. 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 (Section 3.12).
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RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify whether
there will be any Retained Interest in the Deposited Assets, and, if so, the
owner thereof. If so provided, the Retained Interest will be established on an
asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the Trust Agreement. A Retained Interest in a Deposited
Asset represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Deposited Assets as
received and, in general, will not be deposited in the applicable Certificate
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, after deduction of all applicable administration fees, will be
allocated between the Retained Interest (if any) and interest distributions to
Certificateholders on a pari passu basis.
The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus Supplement, in
addition to amounts payable to any Sub-Administrative Agent, the Administrative
Agent, if any, and otherwise the Trustee will pay from its compensation certain
expenses incurred in connection with its administration of the Deposited Assets,
including, without limitation, payment of the fees and disbursements of the
Trustee, if applicable, and independent accountants, payment of expenses
incurred in connection with distributions and reports to Certificateholders, and
payment of any other expenses described in the related Prospectus Supplement
(Section 3.14).
ADVANCES IN RESPECT OF DELINQUENCIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Administrative Agent, if any, specified therein will have no obligation to make
any advances with respect to collections on the Deposited Assets or in favor of
the Certificateholders of the related Series of Certificates. However, to the
extent provided in the applicable Prospectus Supplement, any such Administrative
Agent will advance on or before each Distribution Date its own funds or funds
held in the Certificate Account for such Series that are not part of the funds
available for distribution for such Distribution Date, in an amount equal to the
aggregate of payments of principal, premium (if any) and interest (net of
related administration fees and any Retained Interest) with respect to the
Deposited Assets that were due during the related Collection Period and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below) and (ii) such other
conditions as may be specified in the Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled interest,
premium (if any) and principal payments to holders of the Class or Classes of
Certificates entitled thereto, rather than to guarantee or insure against
losses. Unless otherwise provided in the related Prospectus Supplement, advances
of an Administrative Agent's funds, if any, will be reimbursable only out of
related recoveries on the Deposited Assets (and amounts received under any form
of Credit Support) for such Series with respect to which such advances were made
(as to any Deposited Assets, 'Related Proceeds'); provided, however, that any
such advance will be reimbursable from any amounts in the Certificate Account
for such Series to the extent that such Administrative Agent shall determine, in
its sole judgment, that such advance (a 'Nonrecoverable Advance') is not
ultimately recoverable from Related Proceeds. If advances have been made by such
Administrative Agent from excess funds in the Certificate Account for any
Series, such Administrative Agent will replace such funds in such Certificate
Account on any future Distribution Date to the extent that funds in such
Certificate Account on such Distribution Date are less than payments required to
be made to Certificateholders on such date (Section 4.03). If so specified in
the related Prospectus Supplement, the obligations, if any, of an Administrative
Agent to make advances may be secured by a cash advance reserve fund or a surety
bond. If applicable, information regarding the characteristics of, and the
identity of any obligor on, any such surety bond, will be set forth in the
related Prospectus Supplement.
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CERTAIN MATTERS REGARDING THE ADMINISTRATIVE AGENT AND THE DEPOSITOR
An Administrative Agent, if any, for each Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The entity
serving as Administrative Agent for any such Series may be the Trustee, the
Depositor, an affiliate of either thereof, the Deposited Asset Provider or any
third party and may have other normal business relationships with the Trustee,
the Depositor, their affiliates or the Deposited Asset Provider.
The Trust Agreement will provide that an Administrative Agent may resign
from its obligations and duties under the Trust Agreement with respect to any
Series of Certificates only if such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of any
Class of Certificates of such Series or upon a determination that its duties
under the Trust Agreement with respect to such Series are no longer permissible
under applicable law. No such resignation will become effective until the
Trustee or a successor has assumed the Administrative Agent's obligations and
duties under the Trust Agreement with respect to such Series (Section 6.04).
The Trust Agreement will further provide that neither such an
Administrative Agent, the Depositor nor any director, officer, employee, or
agent or the Administrative Agent or the Depositor will incur any liability to
the related Trust or Certificateholders for any action taken, or for refraining
from taking any action, in good faith pursuant to the Trust Agreement or for
errors in judgment; provided, however, that none of the Administrative Agent,
the Depositor nor any such person will be protected against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. The Trust Agreement will further
provide that, unless otherwise provided in the applicable series supplement
thereto, such an Administrative Agent, the Depositor and any director, officer,
employee or agent of the Administrative Agent or the Depositor will be entitled
to indemnification by the related Trust and will be held harmless against any
loss, liability or expense incurred in connection with any legal action relating
to the Trust Agreement or the Certificates, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Agreement will provide
that neither such an Administrative Agent nor the Depositor will be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to their respective responsibilities under the Trust Agreement or
which in its opinion may involve it in any expense or liability. Each of such
Administrative Agent or the Depositor may, however, in its discretion undertake
any such action which it may deem necessary or desirable with respect to the
Trust Agreement and the rights and duties of the parties thereto and the
interests of the Certificateholders thereunder (Section 6.03). The applicable
Prospectus Supplement will describe how such legal expenses and costs of such
action and any liability resulting therefrom will be allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to which
an Administrative Agent is a part, or any person succeeding to the business of
an Administrative Agent, will be the successor of the Administrative Agent under
the Trust Agreement with respect to the Certificates of any given Series
(Section 6.02).
ADMINISTRATIVE AGENT TERMINATION EVENTS; RIGHTS UPON ADMINISTRATIVE AGENT
TERMINATION EVENT
Unless otherwise provided in the related Prospectus Supplement,
'Administrative Agent Termination Events' under the Trust Agreement with respect
to any given Series of Certificates will 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 Depositor, or to the Administrative Agent, the Depositor and the
Trustee by the holders of such Certificates evidencing not less than 25% of the
Voting Rights (as defined below); (ii) any failure by an Administrative Agent
duly to observe or perform in any material respect any of its other covenants or
obligations under the Trust Agreement with respect to such Series which
continues unremedied for thirty days after the giving of written notice of such
failure to the Administrative Agent by the Trustee or the Depositor, or to the
Administrative Agent, the Depositor and the Trustee by the holders of such
Certificates evidencing not less than 25% of the
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Voting Rights; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain actions
by or on behalf of an Administrative Agent indicating its insolvency or
inability to pay its obligations (Section 7.01). Any additional Administrative
Agent Termination Events with respect to any given Series of Certificates will
be set forth in the applicable Prospectus Supplement. In addition, the
applicable Prospectus Supplement and the related series supplement to the Trust
Agreement will specify as to each matter requiring the vote of holders of
Certificates of a Class or group of Classes within a given Series, the
circumstances and manner in which the Required Percentage (as defined below)
applicable to each such matter is calculated. 'Required Percentage' means, with
respect to any matter requiring a vote of holders of Certificates of a given
Series, the specified percentage (computed on the basis of outstanding
Certificate Principal Balance or Notional Amount, as applicable) of Certificates
of a designated Class or group of Classes within such Series (either voting as
separate classes or as a single class) applicable to such matter, all as
specified in the applicable Prospectus Supplement and the related series
supplement to the Trust Agreement. 'Voting Rights' evidenced by any Certificate
will be the portion of the voting rights of all the Certificates in the related
Series allocated in the manner described in the related Prospectus Supplement
(Article I).
Unless otherwise specified in the applicable Prospectus Supplement, so long
as an Administrative Agent Termination Event under the Trust Agreement with
respect to a given Series of Certificates remains unremedied, the Depositor or
the Trustee may, and at the direction of holders of such Certificates evidencing
not less than the 'Required Percentage--Administrative Agent Termination' of the
Voting Rights, the Trustee will, terminate all 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 (Sections 7.01 and 7.02).
No Certificateholder will have the right under the Trust Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of breach and unless the holders of
Certificates evidencing not less than the 'Required Percentage-Remedies' of the
Voting Rights have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity, and the Trustee for fifteen days has neglected or refused
to institute any such proceeding (Section 10.03). The Trustee, however, is under
no obligation to exercise any of the trusts or powers vested in it by the Trust
Agreement or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the holders of Certificates covered by
the Trust Agreement, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby (Section 8.02).
MODIFICATION AND WAIVER
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement for each Series of Certificates may be amended by the Depositor
and the Trustee with respect to such Series, without notice to or consent of the
Certificateholders, for certain purposes including (i) to cure any ambiguity,
(ii) to correct or supplement any provision therein which may be inconsistent
with any other provision therein or in the Prospectus Supplement, (iii) to add
or supplement any Credit Support for the benefit of any Certificateholders
(provided that
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if any such addition affects any series or class of Certificateholders
differently than any other series or class of Certificateholders, then such
addition will not, as evidenced by an opinion of counsel, have a material
adverse effect on the interests of any affected series or class of
Certificateholders), (iv) to add to the covenants, restrictions or obligations
of the Depositor, the Administrative Agent, if any, or the Trustee for the
benefit of the Certificateholders, (v) to add, change or eliminate any other
provisions with respect to matters or questions arising under such Trust
Agreement so long as (x) any such addition, change or elimination will not, as
evidenced by an opinion of counsel, affect the tax status of the Trust or result
in a sale or exchange of any Certificate for tax purposes and (y) the Trustee
has received written confirmation from each Rating Agency rating such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) to comply with any
requirements imposed by the Code. Without limiting the generality of the
foregoing, unless otherwise specified in the applicable Prospectus Supplement,
the Trust Agreement may also be modified or amended from time to time by the
Depositor, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the 'Required Percentage--Amendment' of the Voting
Rights of those Certificates that are materially adversely affected by such
modification or amendment for the purpose of adding any provision to or changing
in any manner or eliminating any provision of the Trust Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
however, that in the event such modification or amendment would materially
adversely affect the rating of any Series or Class by each Rating Agency, the
'Required Percentage--Amendment' specified in the related series supplement to
the Trust Agreement shall include an additional specified percentage of the
Certificates of such Series or Class.
Except as otherwise set forth in the applicable Prospectus Supplement, no
such modification or amendment may, however, (i) reduce in any manner the amount
of or alter the timing of, distributions or payments which are required to be
made on any Certificate without the consent of the holder of such Certificate or
(ii) reduce the aforesaid Required Percentage of Voting Rights required for the
consent to any such amendment without the consent of the holders of all
Certificates covered by the Trust Agreement then outstanding.
Unless otherwise specified in the applicable Prospectus Supplement, holders
of Certificates evidencing not less than the 'Required Percentage--Waiver' of
the Voting Rights of a given Series may, on behalf of all Certificateholders of
that Series, (i) waive, insofar as that Series is concerned, compliance by the
Depositor, the Trustee or the Administrative Agent, if any, with certain
restrictive provisions, if any, of the Trust Agreement before the time for such
compliance and (ii) waive any past default under the Trust Agreement with
respect to Certificates of that Series, except a default in the failure to
distribute amounts received as principal of (and premium, if any) or any
interest on any such Certificate and except a default in respect of a covenant
or provision the modification or amendment of which would require the consent of
the holder of each outstanding Certificate affected thereby (Section 7.04).
REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in the applicable
Prospectus Supplement, with each distribution to Certificateholders of any Class
of Certificates of a given Series, the Administrative Agent or the Trustee, as
provided in the related Prospectus Supplement, will forward or cause to be
forwarded to each such Certificateholder, to the Depositor and to such other
parties as may be specified in the Trust Agreement, a statement setting forth:
(i) the amount of such distribution to Certificateholders of such
Class allocable to principal of or interest or premium, if any, on the
Certificates of such Class; and the amount of aggregate unpaid interest as
of such Distribution Date;
(ii) in the case of Certificates with a variable Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, as calculated
in accordance with the method specified herein and in the related
Prospectus Supplement;
(iii) the amount of compensation received by the Administrative Agent,
if any, and the Trustee for the period relating to such Distribution Date,
and such other customary information as the Administrative Agent, if any,
or otherwise the Trustee deems necessary or desirable to enable
Certificateholders to prepare their tax returns;
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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 4.02).
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
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that commencing on a certain date and on or before
a specified date in each year thereafter, a firm of independent public
accountants will furnish a statement to the Trustee to the effect that such firm
has examined certain documents and records relating to the administration of the
Deposited Assets during the related 12-month period (or, in the case of the
first such report, the period ending on or before the date specified in the
Prospectus Supplement, which date shall not be more than one year after the
related Original Issue Date) and that, on the basis of certain agreed upon
procedures considered appropriate under the circumstances, such firm is of the
opinion that such administration was conducted in compliance with the terms of
the Trust Agreement, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions and qualifications as shall be set forth in
such report (Section 3.16).
The Trust Agreement will also provide for delivery to the Depositor, the
Administrative Agent, if any, and the Trustee on behalf of the
Certificateholders, on or before a specified date in each year, of an annual
statement signed by two officers of the Trustee to the effect that the Trustee
has fulfilled its obligations under the Trust Agreement throughout the preceding
year with respect to any Series of Certificates (Section 3.15).
Copies of the annual accountants' statement, if any, and the statement of
officers of the Trustee may be obtained by Certificateholders without charge
upon written request to either the Administrative Agent or the Trustee, as
applicable, at the address set forth in the related Prospectus Supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Certificate is mutilated, destroyed, lost or stolen, it may be replaced at the
corporate trust office or agency of the applicable Trustee in the City and State
of New York, or such other location as may be specified in the applicable
Prospectus Supplement, upon
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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).
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates of any Series or any Deposited Asset or
related document and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Certificate Account or any other
account by or on behalf of such Administrative Agent (Section 8.03). If no
Administrative Agent Termination Event has occurred and is continuing with
respect to any given Series, the Trustee is required to perform only those
duties specifically required under the Trust Agreement with respect to such
Series. However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the Trustee is required to examine
such documents and to determine whether they conform to the applicable
requirements of the Trust Agreement (Section 8.01).
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THE TRUSTEE
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the related Prospectus Supplement. The commercial bank,
national banking association or trust company serving as Trustee will be
unaffiliated with, but may have normal banking relationships with, the
Depositor, any Administrative Agent and their respective affiliates.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Certificate having a Specified Currency other than U.S.
dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
Depositor has no control, such as economic and political events and the supply
of and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been highly volatile, and
such volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
Certificate. Depreciation of the Specified Currency for a Certificate against
the U.S. dollar would result in a decrease in the effective yield of such
Certificate below its Pass-Through Rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency for making distributions in respect of Certificates
denominated in such currency. At present, the Depositor has identified the
following currencies in which distributions of principal, premium and interest
on Certificates may be made: Australian dollars, Canadian dollars, Danish
kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU.
However, Certificates distributable with Specified Currencies other than those
listed may be issued at any time. There can be no assurance that exchange
controls will not restrict or prohibit distributions of principal, premium or
interest in any Specified Currency. Even if there are no actual exchange
controls, it is possible that, on a Distribution Date with respect to any
particular Certificate, the currency in which amounts then due to be distributed
in respect of such Certificate are distributable would not be available. In that
event, such payments will be made in the manner set forth above under
'Description of Certificates--General' or as otherwise specified in the
applicable Prospectus Supplement.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED
IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
The information set forth in this Prospectus is directed to prospective
purchasers of Certificates who are United States residents. The applicable
Prospectus Supplement for certain issuances of Certificates may set forth
certain information applicable to prospective purchasers who are residents of
countries other than the United States with respect to matters that may affect
the purchase or holding of, or receipt of distributions of principal, premium or
interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a description of such
currency, any exchange controls affecting such currency and any other required
information concerning such currency.
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PAYMENT CURRENCY
Except as set forth below or unless otherwise provided in the applicable
Prospectus Supplement, if distributions in respect of a Certificate are required
to be made in a Specified Currency other than U.S. dollars and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Depositor's control or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
distributions in respect of such Certificate shall be made in U.S. dollars until
such currency is again available or so used. The amounts so payable on any date
in such currency shall be converted into U.S. dollars on the basis of the most
recently available Market Exchange Rate for such currency or as otherwise
indicated in the applicable Prospectus Supplement.
If distribution in respect of a Certificate is required to be made in ECU
and ECU is no longer used in the European Monetary System, then all
distributions in respect of such Certificate shall be made in U.S. dollars until
ECU is again so used. The amount of each distribution in U.S. dollars shall be
computed on the basis of the equivalent of the ECU in U.S. dollars, determined
as described below, as of the second Business Day prior to the date on which
such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the 'Day of
Valuation') shall be determined for the Certificates of any Series and Class by
the applicable Trustee on the following basis. The component currencies of the
ECU for this purpose (the 'Components') shall be the currency amounts that were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
All determinations referred to above made by the applicable Trustee shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the related Certificateholders of
such Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates will be governed by and construed in accordance with the law of the
State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through underwriters
or dealers; (ii) directly to one or more purchasers; or (iii) through agents.
The applicable Prospectus Supplement will set forth the terms of the offering of
any Series of Certificates, which may include the names of any underwriters, or
initial purchasers, the purchase price of such Certificates and the proceeds to
the Depositor from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price, any
discounts or
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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 represented by
managing underwriters or by underwriters without a syndicate. Such managing
underwriters or underwriters in the United States will include Lehman Brothers
Inc., an affiliate of the Depositor. Unless otherwise set forth in the
applicable Prospectus Supplement, the obligations of the underwriters to
purchase such Certificates will be subject to certain conditions precedent, and
the underwriters will be obligated to purchase all such Certificates if any of
such Certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Certificates may also be sold through agents designated by the Depositor
from time to time. Any agent involved in the offer or sale of Certificates will
be named, and any commissions payable by the Depositor to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Depositor will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Certificates at the public offering price described in
such Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in such Prospectus Supplement.
Such contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Certificates may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Depositor to
indemnification by the Depositor against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Depositor or its affiliates in the ordinary
course of business.
Lehman Brothers Inc. is an affiliate of the Depositor. Lehman Brothers
Inc.'s participation in the offer and sale of Certificates complies with the
requirements of Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
As to each Series of Certificates, only those Classes rated in one of the
investment grade rating categories by a Rating Agency will be offered hereby.
Any unrated Classes or Classes rated below investment grade may be retained by
the Depositor or sold at any time to one or more purchasers.
Affiliates of the Underwriters may act as agents or underwriters in
connection with the sale of the Certificates. Any affiliate of the Underwriters
so acting will be named, and its affiliation with the Underwriters described, in
the related Prospectus Supplement. Also, affiliates of the Underwriters may act
as principals or agents in connection with market-making transactions relating
to the Certificates.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be passed upon
for the Depositor and the underwriters by Weil, Gotshal & Manges, New York, New
York or other counsel identified in the applicable Prospectus Supplement.
36
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR LEHMAN BROTHERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
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TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary........................................... S-3
Risk Factors...................................... S-8
The Trust......................................... S-9
Description of the Underlying Securities.......... S-9
Description of the Certificates................... S-14
The Depositor..................................... S-18
Description of the Trust Agreement................ S-18
Certain Federal Income Tax Consequences........... S-20
State and Local Income Tax Treatment.............. S-23
ERISA Considerations.............................. S-23
Method of Distribution............................ S-24
Legal Matters..................................... S-24
Ratings........................................... S-24
Index of Defined Terms............................ S-25
PROSPECTUS
Prospectus Supplement............................. 2
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
Reports to Certificateholders..................... 3
Important Currency Information.................... 3
Risk Factors...................................... 4
The Depositor..................................... 5
Use of Proceeds................................... 6
Formation of the Trust............................ 6
Maturity and Yield Considerations................. 7
Description of Certificates....................... 8
Description of Deposited Assets and Credit
Support......................................... 21
Description of the Trust Agreement................ 26
Currency Risks.................................... 34
Plan of Distribution.............................. 35
Legal Opinions.................................... 36
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$227,086,000
CALLABLE ZERO COUPON
TRUST CERTIFICATES,
SERIES 1997-TVA-2
(UNDERLYING SECURITIES WILL BE
PRINCIPAL AND INTEREST STRIPS FROM
TENNESSEE VALLEY AUTHORITY BONDS
DUE NOVEMBER 1, 2025)
LEHMAN ABS CORPORATION
(DEPOSITOR)
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PROSPECTUS SUPPLEMENT
OCTOBER 28, 1997
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LEHMAN BROTHERS
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