As filed with the Securities and Exchange Commission on December 12, 1997
Registration No. 333-32105
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
AND POST-EFFECTIVE AMENDMENT NO. 2 UNDER
THE SECURITIES ACT OF 1933
LEHMAN ABS CORPORATION
(Exact name of Registrant as specified in governing instruments)
DELAWARE 13-3447441
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Address of principal executive offices)
TED JANULIS
LEHMAN ABS CORPORATION
3 WORLD TRADE CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Name and address of agent for services)
Copy to:
SCOTT KIMMEL, ESQ. WALTER G. McNEILL, Esq.
LEHMAN BROTHERS INC. Weil, Gotshal & Manges LLP
3 WORLD FINANCIAL CENTER 767 Fifth Avenue
NEW YORK, NEW YORK 10285 New York, New York 10153
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE
FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
--------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Securities being Amount being Proposed maximum offering Proposed maximum aggregate Amount of
registered registered price per unit offering price(1)(2) registration fee(2)(3)
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Trust Certificates $1,000,000,000 100% $1,000,000,000 $295,008.03
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<FN>
(1) Estimated solely for purposes of calculating the registration fee.
(2) $88,120,986 aggregate principal amount of securities registered by the
Registrant under Registration Statement No. 33-73438 referred to below are
consolidated in this Registration Statement pursuant to Rule 429. All
registration fees in connection with such unsold amount of securities have
been previously paid by the Registrant under the foregoing Registration
Statement. Accordingly, the total amount registered under the Registration
Statement as so consolidated as of the date of this filing is
$1,088,120,986.
(3) $303.03 was previously paid.
</FN>
</TABLE>
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Registration Statement is a combined Prospectus and relates to
this Registration Statement and Registration Statement No. 33-73438 previously
filed by the Registrant on Form S-3 and declared effective on November 28, 1995.
This Registration Statement also constitutes Post-Effective Amendment No. 2 to
Registration Statement No. 33-73438 and such Post-Effective Amendment shall
hereafter become effective concurrently with the effectiveness of this
Registration Statement in accordance with Section 8(c) of the Securities Act of
1933.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement includes three different basic prospectuses
with corresponding forms of prospectus supplement for offering Series of
Certificates representing the entire beneficial ownership interest in various
trusts to be created from time to time, the assets of which will consist
primarily of a publicly issued, fixed income debt security or pool of such debt
securities together with certain other assets as described herein deposited in
trust by Lehman ABS Corporation. Following this Explanatory Note in sequential
order are the basic prospectus and form of prospectus supplement for trusts
consisting of obligations of (i) U.S. corporations, banking organizations and
insurance companies subject to the informational requirements of the Securities
Exchange Act of 1934, as amended; (ii) the United States of America and U.S.
government sponsored entities; and (iii) certain foreign governments,
subnationals and agencies or instrumentalities thereof.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
Subject to Completion Dated December 12, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 12, 1997)
CORPORATE BOND-BACKED CERTIFICATES, SERIES 1997 -- [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 199[7]-[ ] offered hereby will consist of
classes of Certificates, designated as Class Certificates[,] [and]
Class Certificates [and list others], [all] of which [only the Class
Certificates[,] [and] Class Corporate Bond-Backed Certificates [and list
others]] are being offered hereby (collectively, the "Certificates") and will
represent a fractional undivided beneficial interest in the Series 1997-[ ]
Trust (the "Trust") to be formed pursuant to the Trust Agreement dated as of
[ ], between Lehman ABS Corporation (the "Depositor") and [ ], as
trustee (the "Trustee"), as supplemented by the Series 1997-[ ] Supplement
dated as of [ ] (collectively, the "Trust Agreement"). The property of the Trust
will consist in part of [$][ ] aggregate principal amount of [a %]
[floating rate] [specify publicly issued debt security] due of [specify
issuer]] [a pool of [ %] [floating rate] publicly issued debt securities
having a term of [not less than years and not more than years] issued
by one or more corporations, banking organizations, or insurance
companies organized under the laws of the United States or any State [(other
than the Retained Interest referred to herein)] (collectively, the "Underlying
Securities"), and having the characteristics described herein under "Description
of the Deposited Assets." Terms used but not otherwise defined herein are
defined in the Prospectus attached hereto (the "Prospectus").
The Underlying Securities will be acquired by the Depositor and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [ ].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year]-[to be conformed to interest payment
dates for Underlying Securities], or, if any such date is not a business day,
then on the immediately following business day (each, a "Distribution Date")
commencing[ ]. The last day on which distributions are scheduled to be made
on the Certificates is [ ] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 7.
(cover continued on next page)
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THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE DEPOSITOR OR ANY OF ITS RESPECTIVE AFFILIATES.
THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The Underwriter has agreed to purchase the Certificates from the Depositor at
[ ]% of the Certificate Principal Balance thereof ($[ ] aggregate proceeds
to the Depositor, before deducting expenses estimated at $[ ]) plus accrued
interest, if any, at the Pass-Through Rate calculated from [ ], 1997 (the
"Expected Settlement Date"), subject to the terms and conditions set forth in
the Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution."
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
December __, 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class Certificates [and specify other classes].] As and to the
extent described herein, losses realized on the Deposited Assets will be borne
by the holders of the Class Certificates [and specify other classes] before
such losses will be borne by the holders of the other classes of Offered
Certificates [and the Class Certificates [and specify other classes]]. To
the extent described herein, the relative priorities of each class of
Certificates with respect to collections from and losses on the Deposited Assets
may each change over time, either permanently or temporarily, upon the
occurrence of certain circumstances specified herein. See "Description of the
Certificates-Allocation of Losses; Subordination."
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" in the Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO ITS
PROSPECTUS DATED [__________], 1997, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport
to be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the headings "Description of the Certificates", "Description of the Deposited
Assets" and "Description of Credit Support." Certain capitalized terms used
herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
The Trust......................... Series 1997-[ ]Trust. The Trust will be
formed pursuant to the Trust Agreement dated
as of [ ] (the "Base Trust Agreement"),
between the Depositor and the Trustee, as
supplemented by the Series 1997-[ ]
Supplement dated as of the Expected
Settlement Date (the "Series Supplement"
and, together with the Base Trust Agreement,
the "Trust Agreement").
Securities
Offered........................... Corporate Bond-Backed Certificates, Series
1997-[ ], consisting of Class [ ]
Certificates[,] [and] Class [ ] Certificates
[and specify others] (collectively, the
"Certificates").
[Initial Certificate
Principal Balance]
[Notional
Amount].......................... Class [ ]: [$] [ ].
Class [ ]: [$] [ ].
Final Scheduled Distribution
Date............................. Class [ ].
Class [ ].
Pass-Through
Rates............................ [The Variable Pass-Through Rates applicable
to the calculation of the interest
distributable on any Distribution Date on
the Certificates [(other than the Class [ ]
Certificates)] are equal to [describe method
for determining variable rates]. The initial
Variable Pass-Through Rates for the Class [
] Certificates [,] [and] the Class [ ]
Certificates [and specify others] are
approximately __% [,] [and] ___% [and ___%]
per annum, respectively.] [The Pass-Through
Rate applicable to the calculation of the
interest distributable on any Distribution
Date on the [specify classes] Certificates
is fixed at ___% [and ___%, respectively,]
per annum.]
S-3
<PAGE>
Deposited
Assets........................... The Deposited Assets shall consist of the
Underlying Securities [and describe any
assets which are ancillary or incidental to
the Underlying Securities]. See "--The
Underlying Securities" [, "-- Other
Deposited Assets"] and "Description of the
Deposited Assets" below.
Original Issue
Date............................ [ ].
Cut-off Date.................... [ ].
Distribution
Date............................ [ ], commencing [ ].
Record Date..................... The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified
Currency........................ The Class [ ] Certificates [,] [and]
Class [ ] Certificates [and specify
others] will be denominated and payable in
[U.S. dollars] [ ] (the "Specified
Currency") and will be available for
purchase in minimum denominations of [$]
[ ] and [integral multiples thereof]
[multiples of [$][ ] in excess thereof].
Interest Accrual
Periods......................... [Monthly] [Quarterly] [Semi-annually] (or,
in the case of the first Interest Accrual
Period, from and including the Original
Issue Date to but excluding the first
Distribution Date).
Form of
Security........................ Book-entry Certificates with The Depository
Trust Company ("DTC"), except in certain
limited circumstances. See "Description of
the Certificates -- Definitive
Certificates." Distributions thereon will be
settled in [immediately available
(same-day)] [clearinghouse (next-day)]
funds.
Trustee......................... [ ], as trustee.
Ratings......................... [ ] by [ ] [and [ ] by [ ]]. [Specify
specific ratings requirements for particular
classes, including the extent to which the
issuance of the Certificates of a given
class is conditioned upon satisfaction of
the ratings of each other class of
Certificates.] See "Ratings."
Collection Period............... With respect to a Distribution Date, the
period beginning on [ ] and ending at the
close of business on [ ].
S-4
<PAGE>
THE UNDERLYING SECURITIES
Underlying Securities........... [A [ ]%] [floating rate] [publicly issued
debt security due [ ] [A pool of publicly
issued debt securities of various issuers,
exclusive of the Retained Interest]
[in/having] an aggregate principal amount of
[$][ ].
Underlying Securities
Issuer.......................... [Specify issuer] [Pool of various domestic
corporations, banking organizations and
insurance companies.]
Underlying Securities Original
Issue Date...................... [ ].
Underlying Securities Final
Payment Date.................... [ ].
Amortization.................... [Describe amortization schedule, if any].
Denominations;
Underlying Securities
Currency........................ The Underlying Securities are denominated
and payable in [U.S. dollars] [ ] (the
"Underlying Securities Currency") and are
available in minimum denominations of [$]
[ ] and [integral multiples thereof]
[multiples of [$][ ] in excess thereof].
Underlying Securities
Payment Dates................... [ ], commencing [ ].
Underlying Securities
Rate............................ [ % per annum.] [A [Weighted Average] rate
per annum equal to [specify interest rate
formula for debt security].]
Underlying Securities Interest
Accrual Periods................. [Monthly] [Quarterly] [Semi-annually].
Priority........................ [Describe senior or subordinated status of
Underlying Securities].
Security........................ [Describe existence of any security for
obligations or state that Underlying
Securities are unsecured].
Redemption/Put/
Other Features.................. [Describe existence of any redemption, put
or other material features applicable to the
Underlying Securities].
Form of
Security........................ Book-entry debt securities with DTC [listed
on the [New York] [American] Stock Exchange
[specify other listing]].
S-5
<PAGE>
Underlying Securities
Trustee [Fiscal
and Paying
Agent].......................... [ ]. The Underlying Securities have been
issued pursuant to [an indenture dated as of
[ ], 19[ ] (the "Indenture"), between the
Underlying Securities Trustee and the
Underlying Securities Issuer].
Ratings......................... [ ] by [ ] [and [ ] by [ ]]. See
"Description of the Underlying
Securities--Ratings of Underlying
Securities."
OTHER DEPOSITED ASSETS
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is
qualified in its entirety by reference to the detailed information appearing
elsewhere herein and in the Prospectus.
Depositor....................... Lehman ABS Corporation (the "Depositor"), an
indirect wholly- owned subsidiary of Lehman
Brothers Inc. See "The Depositor" in the
Prospectus.
Certificates.................... The Certificates, each of which represents a
fractional undivided beneficial interest in
the Trust, will be issued pursuant to the
Trust Agreement. The Certificates will
consist of [ ] classes, designated as
Class [ ] Certificates [and] [,] Class
[ ] Certificates [and [specify other
classes]], [all] of which [all but the Class
[ ] Certificates] are being offered
hereby (collectively, the "Certificates").
The Certificate Principal Balance of a
Certificate outstanding at any time
represents the maximum amount that the
holder thereof is entitled to receive as
distributions allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the extent
distributions allocable to principal are
made to such holder. [The Notional Amount of
the Class [ ] Certificates as of any date
of determination is equal to [specify].
Reference to the Notional Amount of the
Class [ ] Certificates is solely for
convenience in determining the basis on
which distributions on the Class [ ]
Certificates are calculated [and determining
the relative voting rights of
Certificateholders of Class [ ]
Certificates for purposes of voting on a
class-by-class basis or otherwise]. The
Notional Amount does not represent the right
to receive any distributions allocable to
principal.]
[The Class [ ] Certificates, which are not
being offered hereby, have in the aggregate
an initial Certificate Principal Balance of
[$] __ (approximate) and a [Variable]
Pass-Through Rate [of __%]. The Class [ ]
Certificates represent the right to receive
distributions in respect of their
Certificate Principal Balance and interest
thereon at their applicable Pass-Through
Rate.] Shortfalls in collections with
respect to the Deposited Assets will be
allocated solely to the Class [ ]
Certificates to the extent provided herein
and, thereafter, will be allocated among the
Certificates and the Class [ ]
Certificates, as provided herein. [The Class
[ ] Certificates will be transferred by the
Depositor to an affiliate on or about ,
1997 (the "Closing Date"), and may be sold
at any time in accordance with any
restrictions in the Trust Agreement.]]
S-7
<PAGE>
The Underlying
Securities...................... Interest on the Underlying Securities
accrues at the Underlying Securities Rate
for each Underlying Securities Accrual
Period and is payable on each Underlying
Securities Payment Date. The entire
principal amount of the Underlying
Securities will be payable on the Underlying
Securities Final Payment Date. [The
Underlying Securities have a remaining term
to maturity of approximately years.]
[As of the Cut-off Date, the pool of
Underlying Securities have a weighted
average interest rate of % and a weighted
average remaining term to maturity of
approximately years. Approximately %
[specify if greater than 10%] of such
Underlying Securities consist of debt
securities of [U.S. corporate issuers].]
[Name such obligor] is a U.S. corporation
whose principal executive offices are
located at [specify address]. The obligor is
subject to the informational requirements of
the Exchange Act and in accordance therewith
files reports and other information
(including financial information) with the
Commission. See "Description of the
Deposited Assets."
[Other Deposited
Assets and Credit
Support......................... The Deposited Assets will also include
[direct obligations of the United States]
[describe any assets which are ancillary or
incidental to the Underlying Securities,
including hedging contracts such as puts,
calls, interest rate swaps, currency swaps,
floors, caps and collars] (such assets,
together with the Underlying Securities, the
"Deposited Assets"). See "Description of the
Deposited Assets."
The Certificateholders of the [specify
particular classes] Certificates will have
the benefit of [describe credit support] to
support or ensure the [servicing and]
[timely] [ultimate] distribution of amounts
due with respect to the Deposited Assets,
including providing certain coverage with
respect to losses thereon.]
Distributions................... Holders of the Certificates will be entitled
to receive on each Distribution Date, to the
extent of available funds on such
Distribution Date, after payment of the
expenses of the Trustee and its respective
agents up to the Allowable Expense Amount,
(i) [in the case of each class of
Certificates other than the Class [ ]
Certificates,] distributions allocable to
interest at the applicable Pass-Through Rate
on the applicable Certificate Principal
Balance, (ii) [in the case of each class of
Certificates other than the Class [ ]
Certificates,] distributions allocable to
principal and (iii) [in the case of each
class of Certificates other than the Class
[ ] Certificates,] distributions allocable
to premium (if any) in an
S-8
<PAGE>
amount equal to all payments of premium (if
any) received on the Underlying Securities
for the applicable Collection Period.
Distributions will be made to
Certificateholders only if, and to the
extent that, payments are made with respect
to the Deposited Assets or are otherwise
covered by any Credit Support. [The holders
of the Class [ ] Certificates will be
entitled to receive on each Distribution
Date distributions allocable to interest in
an amount equal to [describe Stripped
Interest].] [The holders of the Class [ ]
Certificates will not be entitled to receive
any distributions allocable to principal or
premium (if any).] See "Description of the
Certificates--Distributions."
Special
Distribution
Dates........................... If a payment with respect to the Underlying
Securities is made to the Trustee after the
Underlying Securities Payment Date on which
such payment was due, then the Trustee shall
distribute any such amounts received on the
next occurring Business Day (a "Special
Distribution Date") as if such funds had
constituted Available Funds on the
Distribution Date immediately preceding such
Special Distribution Date; provided,
however, that the Record Date for such
Special Distribution Date shall be [five
Business Days (as such term is defined in
the Prospectus, "Business Day") prior to the
day on] which the related payment was
received from the Underlying Securities
Trustee.
Subordination................... As and to the extent described herein, the
rights of the holders of the Class [ ]
Certificates [and specify other classes] to
receive distributions of principal, premium
(if any), and interest with respect to the
Deposited Assets will be subordinated to the
rights of the holders of the other classes
of Certificates with respect to losses
attributable to principal, premium (if any)
and interest realized on a Deposited Asset
(such losses, "Realized Losses"). See
"Description of the Certificate-Allocation
of Losses; Subordination."
Optional
Termination..................... At its option, the [Depositor] may purchase
all the Deposited Assets in the Trust, and
thereby cause the termination of the Trust
and early retirement of the Certificates, on
any Distribution Date on which the aggregate
principal amount of the Deposited Assets
remaining in the Trust is less than [10%] of
the aggregate principal amount of the
Deposited Assets as of the Cut-off Date.
[Specify any other purchase or repurchase
option of the Depositor.] See "Description
of the Trust Agreement-- Termination" herein
and "Description of Trust Agreement--
Termination" in the Prospectus.
S-9
<PAGE>
Certain Federal
Income Tax
Consequences.................... In the opinion of tax counsel to the Trust,
the Trust will be classified for Federal
income tax purposes [as a grantor trust] [as
a partnership] [as a financial asset
securitization investment trust ("FASIT")]
and not as an association taxable as a
corporation. See "Certain Federal Income Tax
Consequences."
Ratings......................... It is a condition to the issuance of the
Certificates that the Certificates have the
ratings specified above under "Summary of
Principal Economic Terms--The
Certificates--Ratings." A security rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning
rating agency. A security rating does not
address the occurrence or frequency of
redemptions or prepayments on, or extensions
of the maturity of, the Deposited Assets,
the corresponding effect on yield to
investors [or whether investors in the Class
[ ] Certificates may fail to recover fully
their initial investment]. See "Ratings."
ERISA
Considerations.................. An employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and an
individual retirement account (each, a
"Plan") may purchase Certificates of any
class if either (i) the Depositor is able to
confirm the existence of at least 100
independent purchasers of such class or (ii)
the Plan can represent that its purchase of
the Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
S-10
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement (including
the Series [ ] Supplement) between the Depositor and the Trustee. Concurrently
with the execution and delivery of the Series [ ] Supplement, the Depositor will
deposit the Underlying Securities in the Trust. The Trustee, on behalf of the
Trust, will accept such Underlying Securities and will deliver the Certificates
to or upon the order of the Depositor.
The Underlying Securities will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor). The
Underlying Securities will not be acquired from the Underlying Securities Issuer
as part of any distribution by or pursuant to any agreement with the Underlying
Securities Issuer. The Underlying Securities Issuer is not participating in this
offering and will not receive any of the proceeds of the sale of the Underlying
Securities to the Depositor or the issuance of the Certificates. [Neither the
Depositor nor any of its affiliates participated in the initial public offering
of the Underlying Securities] [Lehman Brothers Inc., an affiliate of the
Depositor, participated in the initial public offering of the Underlying
Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets and the terms
thereof, as described elsewhere herein.] See "Risk Factors" and "Maturity and
Yield Considerations" in the Prospectus.
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
This Prospectus Supplement sets forth certain relevant terms with
respect to the Underlying Securities, but does not provide detailed information
with respect to the Underlying Securities. This Prospectus Supplement relates
only to the Certificates offered hereby and does not relate to the Deposited
Assets. All disclosure contained herein with respect to the Underlying
Securities is derived from publicly available documents. [Describe publicly
available documents.] [The] [Each] Underlying Securities Issuer is subject to
the information reporting requirements of the Exchange Act. Although the
Depositor has no reason to believe the information concerning the Underlying
Securities, [the] [each] Underlying Securities Issuer or each Underlying
Securities prospectus related to the Underlying Securities is not reliable,
neither the Depositor nor any of the Underwriters has participated in the
preparation of such documents, or made any due diligence inquiry with respect to
the information provided therein. There can be no assurance that events
affecting the Underlying Securities or the Underlying Securities Issuer have not
occurred, which have not yet been publicly disclosed, which would affect the
accuracy or completeness of the publicly available documents described above.
[Use the following where the Underlying Securities consist of a pool of
obligations of multiple obligors.]
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of publicly issued debt securities of [domestic
corporations, banking organizations and insurance companies]. The Underlying
Securities will be purchased by the Depositor in the secondary market (either
directly or through an affiliate of the Depositor) and will be deposited into
the Trust. The Underlying Securities will not be acquired
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either from the respective obligors on the Underlying Securities or pursuant to
any distribution by or agreement with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
COMPOSITION OF THE UNDERLYING SECURITIES POOL
AS OF THE CUT-OFF DATE
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
DISTRIBUTION BY INDUSTRY CLASSIFICATION
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Industry Principal Principal
Classification Number Balance Balance
- -------------- ------ ------- -------
------ ------ ------
Total
------ ------ ------
DISTRIBUTION BY RATINGS OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ ------- -------
------ ------ ------
Total
------ ------ ------
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DISTRIBUTION BY REMAINING TERM TO MATURITY
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
----------- ------ ------- -------
------ ------ ------
Total
------ ------ ------
DISTRIBUTION BY INTEREST RATE OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
- ------------------- ------ ------- -------
% to % [$] %
Greater than %
Total [$] 100%
========= ========= =========
The Underlying Securities consist of debt securities of [domestic
corporate issuers [specify other]]. As of the Cut-off Date, [all of]
[approximately % of] such Underlying Securities were rated [investment grade]
[specify particular rating] by at least one nationally recognized rating agency,
and no obligor of any Underlying Security was in default in the payment of any
installments of principal, interest or premium (if any) with respect thereto.
Any such rating of any of the Underlying Securities is not a recommendation to
purchase, hold or sell such Underlying Security or the Certificates, and there
can be no assurance that a rating will remain for any given period of time or
that a rating will not be lowered or withdrawn entirely by a rating agency if in
its judgment circumstances in the future so warrant. See "Ratings" herein and
"Risk Factors--Ratings of the Certificates" in the accompanying Prospectus
regarding certain considerations applicable to the ratings of the Certificates.]
UNDERLYING SECURITIES INDENTURE
The Underlying Securities have been issued pursuant to [an]
agreement[s] ([each,] an "Indenture") between the [various] Underlying
Securities Issuer[s] and Underlying Securities Trustee[s]. The following summary
describes certain general terms of such Indenture[s], but investors should refer
to the Indenture[s] [itself] [themselves] for all the terms governing the
Underlying Securities.
Each of the Indenture[s] limits the [respective] Underlying
Securities Issuer's ability to engage in certain activities and transactions and
requires that the Underlying Securities Issuer perform certain obligations
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with respect to the Underlying Securities. [Describe common restrictive,
financial and other covenants on the Underlying Securities Issuer contained in
the Indentures.]
[The following is a summary of the typical Underlying Security
Events of Default for each series of Outstanding Debt Securities. [Any
additional Underlying Security Events of Default unique to a Concentrated
Underlying Security have been described following the summary]:
(a) failure to make payments of principal (and premium, if any) and
interest to holders of the Outstanding Debt Securities in the time periods
given in the Indentures;
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement under an Indenture continuing for a specified period
of time after notice thereof is given to the Underlying Securities Issuer
by the Underlying Securities Trustee or the holders of not less than a
specified percentage of the Outstanding Debt Securities;
(c) failure by the Underlying Securities Issuer to make any required
payment of principal (and premium, if any) or interest with respect to
certain of the other outstanding debt obligations of the Underlying
Securities Issuer or the acceleration by or on behalf of the holders
thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to the
Underlying Securities [Issuer]; and
[(e) describe any additional common events of default with respect
to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately ___% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities as well
as the nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral].]
The [pool of] Underlying Securities, together with any other assets
described below and any Credit Support described under "Description of Credit
Support," represent the sole assets of the Trust that are available to make
distributions in respect of the Certificates.]
[Use the following with respect to each obligor the Underlying Securities of
which represent more than 10% of the total Underlying Securities available to
make distributions in respect of the Certificates--only a single obligor is
referred to for purposes of this section of the form of Prospectus Supplement.]
[A significant portion of] [Virtually all of] [All of] the Deposited
Assets of the Trust will consist of the [___%] [floating rate] [specify publicly
issued debt security] due of [specify issuer][, exclusive of the interest
therein retained by [the Depositor] as described below (the "Retained
Interest")], having an aggregate principal amount outstanding as of the Cut-off
Date of approximately [$][specify currency] (the "Underlying Securities"). The
Underlying Securities will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor) and will be deposited
into the Trust. The Underlying Securities will not be acquired either from [name
such obligor] or pursuant to any distribution by or agreement with [name such
obligor]. [Describe any put, call or other conversion or redemption options
applicable to the Underlying Securities, as well as the nature of the obligation
represented by such Underlying Securities (i.e., senior, subordinate, secured)].
As of the Cut-off Date, the foregoing debt security comprising [ %] of the
Underlying
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Securities was rated [specify investment grade rating] [investment grade] by
[specify nationally recognized rating agency or agencies], and the obligor
thereon was not in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any such rating of such
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Securities or the Certificates, and there can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk
Factors--Ratings of the Certificates" in the accompanying Prospectus regarding
certain considerations applicable to the ratings of the Certificates.
According to [name such obligor]'s publicly available documents,
[name such obligor] is a [identify form of domestic corporation, banking
organization or insurance company] whose principal executive offices are located
at [specify address]. The Depositor is not an affiliate of [name such obligor].
[Name such obligor] is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information (including
financial information) with the Commission [and makes available to the public
upon request certain annual reports containing financial and other information].
Copies of such reports and other information [may be inspected and copied at the
Commission locations listed under "Available Information" in the accompanying
Prospectus and may be obtained from the Public Reference Section of the
Commission at Washington, D.C. 20549, at prescribed rates. In addition, such
reports and other information [can be inspected at the offices of the [New York
Stock Exchange at 20 Broad Street, New York, New York 10005] [American Stock
Exchange, 86 Trinity Place, New York, New York 10013]] [may be obtained from
[name such obligor], according to its most recent annual report, upon written or
oral request to [name such obligor]].
The Trust will have no other significant assets [other than any
Credit Support or those assets referred to below] from which to make
distributions of amounts due in respect of the Certificates. Consequently, the
ability of Certificateholders to receive distributions in respect of the
Certificates will depend [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'s
financial condition and its ability to make payments in respect of such
Underlying Securities. This Prospectus Supplement relates only to the
Certificates being offered hereby and does not relate to the Underlying
Securities of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Depositor nor [any
of] the Underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
The Deposited Assets will also include [direct obligations of the
United States of America][describe any assets which are ancillary or incidental
to the Underlying Securities, including hedging contracts such as puts, calls,
interest rate swaps, currency swaps, floors, caps and collars, and any cash or
other security pledged to support the Underlying Securities] (such assets,
together with the Underlying Securities, the "Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ] Certificates
[and the Class [ ] Certificates]], Credit Support will be obtained [and will
constitute part of the Trust to the extent provided below] to support or ensure
the [servicing and] [timely] [ultimate] distribution of amounts due with respect
to the Deposited Assets, in the form and amount described below.
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[THE LETTER OF CREDIT
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Letter of Credit from [ ]
(the "Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely][ultimate] remittance of amounts due with respect to the Deposited
Assets]. [The maximum amount that the Trustee may draw under the Letter of
Credit will initially be equal to . The initial amount of the Letter of
Credit will be [$] . Thereafter, the amount of the Letter of Credit with
respect to any Distribution Date will equal [the lesser of (i) % of the
aggregate Certificate Principal Balance outstanding on the preceding
Distribution Date (after giving effect to any payment of principal made on such
preceding Distribution Date) but in any event not less than [$] , and
(ii)] the amount of the Letter of Credit on the preceding Distribution Date,
plus [(a) reimbursement of certain advances under the Letter of Credit and (b)
recoveries on defaulted Deposited Assets] [describe other methods]. The Letter
of Credit expires on , 19 . The Trustee will be obligated, in the event of a
drawing on the Letter of Credit, to pursue appropriate remedies against the
Deposited Assets and other collateral, and any realization thereon shall be paid
to the Letter of Credit Bank to the extent of any amounts owing, in the manner
and priority specified herein.]
[Add language regarding the Letter of Credit Bank with respect to
its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank, if necessary.]]
[THE SURETY BOND
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Surety Bond from [ ] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered][Class[ ]]
Certificates. The Surety Bond expires on , 19 . The Trustee will be obligated,
in the event of a drawing on the Surety Bond, to pursue appropriate remedies
against the Deposited Assets and other collateral, and any realization thereon
shall be paid to the Surety to the extent of any amounts owing, in the manner
and priority specified herein.
[Add language regarding the issuer of the Surety Bond with respect
to its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Surety. In addition, to the
extent that the Surety Bond will cover payment of 20% or more of the aggregate
principal amount of the Certificates covered thereby, provide information of
financial and other matters with respect to the issuer of the Surety Bond, if
necessary.]]
[RESERVE ACCOUNT
The Depositor will deposit with the Trustee on the Closing Date
cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Certificates in the amount of [$] . [Collections
with respect to the Deposited Assets not distributed with respect to the
Certificates shall be deposited in the Reserve Account.] Amounts so deposited in
such Reserve Account will be used by the Trustee to make payments of principal
of and premium (if any) and interest on the Certificates to the extent that
funds are not
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<PAGE>
otherwise available. Immediately after any Distribution Date, amounts in the
Reserve Account in excess of [indicate formula] [may be paid to the Depositor].]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms
thereof and the manner and priority in which collections thereon are allocated
to the Certificateholders of each class of the Certificates, as described
elsewhere herein.] See "Maturity and Yield Considerations" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ][,] [and] Class [ ] [and Class___] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]________ (approximate) and a [___%] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$]________ (approximate)
and a [___%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in
the aggregate an initial [Certificate Principal Balance] [Notional Amount] of
[$]________ (approximate) and a [___%] [Variable] Pass-Through Rate.] [The Class
[ ] Certificates, which are not being offered hereby, will be transferred by the
Depositor to an affiliate on the Closing Date, and may be sold at any time by
the Depositor in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and
specify others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of [$ ] and [integral multiples thereof] [multiples of [$ ] in
excess thereof]. [The Class [ ] Certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal Balances,
as applicable, of [$ ] and integral multiples thereof, except that one
Certificate of each such class may be issued with an initial Notional Amount or
Certificate Principal Balance, as applicable, equal to an integral multiple of
[$ ] plus the excess of the initial aggregate Notional Amount or Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$ ] that is not more than such initial aggregate Notional
Amount or Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the 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.
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Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC will take action permitted to be taken by a
Certificateholder under the Trust Agreement only at the direction of one or more
Participants to whose DTC account such Certificates are credited. Additionally,
DTC will take such actions with respect to specified Voting Rights only at the
direction and on behalf of Participants whose holdings of such Certificates
evidence such specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose holdings of
Certificates evidence such Voting Rights, authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Certificate Owners or
their nominees, respectively, rather than to DTC or its nominee, only if (i) the
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
each class of Certificates [(other than the Definitive Classes)] and the
Depositor is unable to locate a qualified successor or (ii) the Depositor, at
its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates [(other than the
Definitive Classes of Certificates)] and receipt of instructions for
re-registration, the Trustee will reissue such Certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as Certificateholders under the Trust
Agreement.
DISTRIBUTIONS
Collections on the Deposited Assets that are received by the Trustee
for a given Collection Period pursuant to the collection procedures described
herein and in the Prospectus and deposited from time to time into the
Certificate Account will be applied by the Trustee on each applicable
Distribution Date to the following distributions in the following order of
priority, solely to the extent of Available Funds (as defined below) on such
Distribution Date:
(i) to the Trustee, all unpaid fees and expenses of the Trustee and its
respective agents, up to the Allowable Expense Amount (as defined below)
for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support Providers"),
any amounts required to be paid or reimbursed to, or deposited with, any
such person (collectively, "Credit Support Payments");
(iii)] to the Certificateholders of each Class of such Series, first, to
the payment of Required Interest [and on a pro rata basis to the Credit
Support Providers for the payment of any Credit Support Payments], second,
to the payment of Required Principal and third, to the payment of Required
Premium, in each case applicable to such Class, commencing with the most
highly ranked Class and, to the extent Available Funds remain available,
to each other Class in accordance with the ranking specified herein under
"--Allocation of Losses; Subordination";
[(iii) to the Credit Support Providers, any Credit Support Payments;]
[(iv)] to the Trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to clause (i)
above;
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[(v) all remaining amounts, if any, to the Depositor].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection Period,
the sum of (x) [$]__________ and (y) amounts in respect of the Allowable
Expense Amount from the preceding Collection Period that have not been
applied on the Distribution Date for such preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum of (a) all
amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period[,] [and] (b) amounts available as of such Distribution
Date pursuant to the Credit Support described herein [and (c) any
additional amount that the [Depositor] may remit to the Trustee from time
to time according to the terms of the Trust Agreement for application as
Available Funds].
"Call Premium Percentage" for any given Distribution Date means [a
fixed percentage] [a percentage that varies depending on [describe basis
for variable formula, such as the applicable date or other factors or
indices]].
"Eligible Investments" means, with respect to the Certificates,
those investments acceptable to the Rating Agency as being consistent with
the rating of such Certificates, as specified in the Trust Agreement.
Generally, Eligible Investments must be limited to obligations or
securities that mature not later than the business day prior to the next
succeeding Distribution Date.
"Required Interest" for the Certificates or any Class thereof on any
given Distribution Date means the accrued and unpaid interest on the
outstanding Certificate Principal Balance [or Notional Amount] of such
Certificates, computed at the applicable Pass-Through Rate.
"Required Premium" for the Certificates or any Class thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof for
any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection
Period, to the extent allocable to such Certificates. The Certificate
Principal Balance of a Certificate outstanding at any time represents the
maximum amount that the holder thereof is entitled to receive as
distributions allocable to principal from the cash flow on the Underlying
Securities, the other assets in the Trust and any Credit Support obtained
for the benefit of such holder. The Certificate Principal Balance of any
class of Certificates [(other than the Class [ ] Certificates)] as of any
date of determination is equal to the initial Certificate Principal
Balance thereof, reduced by the aggregate of (a) all amounts allocable to
principal previously distributed with respect to such Certificate and (b)
any
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reductions in the Certificate Principal Balance deemed to have occurred in
connection with allocations of (i) Realized Losses allocable to principal
on the Deposited Assets and (ii) Extraordinary Trust Expenses, as
described herein. [The Notional Amount of the Class [ ] Certificates as of
any date of determination is equal to [specify amount].] [Holders of the
Class [ ] Certificates are not entitled to receive any distributions
allocable to principal.]
[Notwithstanding the priorities described above, holders of the
Class [ ] Certificates and the Class [ ] Certificates will be entitled to
receive on any Distribution Date 100% of all principal collections received in
the related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] in reduction of the Certificate Principal
Balance of the Class [ ] Certificates and the Class [ ] Certificates, if any of
the following conditions shall be satisfied: [describe conditions, if any, by
which a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be obligated
to advance or cause to be advanced on or before each Distribution Date its own
funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are deemed
by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the Certificates.
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ]
Certificates [and the Class [ ] Certificates] is designed to protect holders of
the remaining classes of Certificates from certain losses and other shortfalls
with respect to the Deposited Assets. As a result, losses and other shortfalls
with respect to the Deposited Assets will be borne by the remaining classes of
Certificates, to the extent described below, only if such losses and other
shortfalls are not so covered, or the coverage in respect thereof has been
exhausted.
[Realized Losses and Extraordinary Trust Expenses will be allocated
on any Distribution Date as follows: [describe allocation among the various
classes].]
[An "Extraordinary Trust Expense" is an expense of a given Trust in
excess of the Allowable Expense Amount, including certain reimbursements to the
Depositor described in the Prospectus under
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"Description of Certificates-[Certain Matters Regarding the Administrative Agent
and the Depositor"] and certain reimbursements to the Trustee described under
"Description of the Trust Agreement-The Trustee" herein.]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Class
[ ] Certificates and the Class [ ] Certificates to the extent set forth
herein, the Class [ ] Certificates may not be purchased by or transferred to a
Plan except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations."]
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a
form of which is filed as an exhibit to the Registration Statement. A Current
Report on Form 8-K relating to the Certificates containing a copy of the Trust
Agreement as executed will be filed by the Depositor with the Commission
following the issuance and sale of the Certificates. The Trust created under the
Trust Agreement (including the Series 1997-[ ] Supplement) will consist of (i)
the Deposited Assets (exclusive of any Retained Interest, which is not part of
the Trust), (ii) all payments on or collections in respect of the Deposited
Assets due after the Cut-off Date, together with any proceeds thereof[,] [and]
[(iii) any Credit Support in respect of any class or classes of Certificates]
[and (iv) the rights of the Depositor under the Purchase Agreement between the
Depositor and the Seller]. [In addition, the Certificateholders of the
Certificates may also have the benefit of certain Credit Support discussed
above. See "Description of Credit Support."] Reference is made to the Prospectus
for important information in addition to that set forth herein regarding the
Trust, the terms and conditions of the Trust Agreement and the Certificates. The
following summaries of certain provisions of the Trust Agreement do not purport
to be complete and are subject to the detailed provisions contained in the form
of Trust Agreement, to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein.
THE TRUSTEE
[ ], a [ ] corporation, will act as trustee for the
Certificates and the Trust pursuant to the Trust Agreement. The Trustee's
offices are located at [ ] and its telephone number is [ ].
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be indemnified by the Trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of Certificates under
the Trust Agreement (an "Event of Default") will consist of [(i) a default in
the payment of any interest on any Underlying Security after the same becomes
due and payable (subject to any applicable grace period); (ii) a default in the
payment of the principal of or any installment of principal of any Underlying
Security when the same becomes due and payable; and (iii) the occurrence and
continuance of such other events specified in the applicable series supplement.]
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[Describe remedies available to Certificateholders upon the occurrence and
continuance of an Event of Default, including, as applicable, directing the
Trustee to vote the Underlying Securities in favor of declaring the principal
balance of and any accrued interest on the Outstanding Debt Securities to be
immediately due and payable].
The Trust Agreement will provide that, within 30 days after the
occurrence of an Event of Default in respect of the Certificates of any class,
the Trustee will give to the holders of such Certificates notice, transmitted by
mail, of all such uncured or unwaived Events of Default known to it. However,
except in the case of an Event of Default relating to the payment of principal
of or premium, if any, or interest on any of the Underlying Securities, the
Trustee will be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of the Certificates of such class.
No holder of any Certificate will have the right to institute any
proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders have offered the Trustee reasonable indemnity, (iv) the Trustee has
for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to the Trustee during such
15-day period by the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all
Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [ ]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights
might change from the foregoing percentages.] ["Required Percentage-Amendment"
of Voting Rights necessary to consent to amendment or modification of the Trust
shall be [ %].] ["Required Percentage-Waiver" shall mean [ %] of the Voting
Rights.]
VOTING OF UNDERLYING SECURITIES, MODIFICATION OF INDENTURE
The Trustee, as holder of the Underlying Securities, has the right
to vote and give consents and waivers in respect of such Underlying Securities
as permitted by DTC and except as otherwise limited by the Trust Agreement. In
the event that the Trustee receives a request from DTC, the Underlying
Securities Trustee or the Underlying Securities Issuer for its consent to any
amendment, modification or waiver of the Underlying Securities, the Indenture or
any other document thereunder or relating thereto, or receives any other
solicitation for any action with respect to the Underlying Securities, the
Trustee shall mail a notice of such proposed amendment, modification, waiver or
solicitation to each Certificateholder of record as of such date. The Trustee
shall request instructions from the Certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative Certificate Principal
Balances and Notional Amounts of the Certificates, as applicable) as the
Certificates of the Trust were actually voted or not voted by the
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Certificateholders thereof as of a date determined by the Trustee prior to the
date on which such consent or vote is required; provided, however, that,
notwithstanding anything to the contrary, the Trustee shall at no time vote or
consent to any matter (i) unless such vote or consent would not (based on an
opinion of counsel) alter the status of the Trust as a grantor trust for Federal
income tax purposes, (ii) which would alter the timing or amount of any payment
on the Underlying Securities, including, without limitation, any demand to
accelerate the Underlying Securities, except in the event of a Underlying
Securities Event of Default or an event which with the passage of time would
become a Underlying Securities Event of Default and with the unanimous consent
of all holders of Outstanding Certificates or (iii) which would result in the
exchange or substitution of any of the outstanding Underlying Securities
pursuant to a plan for the refunding or refinancing of such Underlying
Securities except in the event of a default under the Indenture and only with
the consent of Certificateholders representing 100% of the aggregate voting
rights of each outstanding Class of the Certificates. The Trustee shall have no
liability for any failure to act resulting from Certificateholders' late return
of, or failure to return, directions requested by the Trustee from the
Certificateholders.
In the event that an offer is made by the Underlying Securities
Issuer to issue new obligations in exchange and substitution for any of the
Underlying Securities, pursuant to a plan for the refunding or refinancing of
the Outstanding Debt Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders of such offer as
promptly as practicable. The Trustee must reject any such offer unless an event
of default under the Indenture has occurred, the Trustee is directed by the
affirmative vote of all of the Certificateholders to accept such offer and the
Trustee has received the tax opinion described above. Accordingly, a
Certificateholder generally would be required to effect a withdrawal of
Requested Underlying Securities from the Trust in order to accept such offer.
See "Description of Certificates-Optional Exchange" in the Prospectus.
If an event of default under the Indenture occurs and is continuing
and if directed by all the holders of outstanding Class [ ] Certificates and,
unless the Class [ ] Certificates are no longer outstanding, by all the holders
of outstanding Class [ ] Certificates, the Trustee shall vote the Underlying
Securities in favor of directing, or take such other action as may be
appropriate to direct, the Underlying Securities Trustee to declare the unpaid
principal amount of the Underlying Securities and any accrued and unpaid
interest thereon to be due and payable. In connection with a vote concerning
whether to declare the acceleration of the Underlying Securities, the
Certificateholders' interests of each Class may differ and the interests of
either Class may differ from holders of other Outstanding Debt Securities.
TERMINATION
The circumstances under which the obligations created by the Trust
Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus. The Depositor will
have the right to purchase all remaining Deposited Assets in the Trust and
thereby effect early retirement of the Certificates on any Distribution Date,
[(a)] once the aggregate principal amount of the Deposited Assets at the time of
any such purchase is less than [10%] of the aggregate principal amount of the
Deposited Assets as of the Cut-off Date [and (b) at the option of the Depositor
at [specify when and on what terms any such option may be exercised]]; provided,
however, that the right to exercise any such option is contingent on such
exercise being consistent with the Depositor's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations
thereunder. In the event the Depositor exercises any such option, the portion of
the purchase price allocable to the Certificates of each class will be, to the
extent of available funds, [100% of their then aggregate outstanding Certificate
Principal Balance or Notional Amount, as applicable, plus with respect to the
Certificates [one month's] [three month's] [specify other period] interest
thereon at the Fixed Pass-Through Rate or the then applicable Variable
Pass-Through Rate, as the case may be, plus, with respect to each class of
Certificates, any
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previously accrued but unpaid interest thereon.] [Specify alternative allocation
method if different from above.] In no event will the Trust created by the Trust
Agreement for the Certificates continue beyond the expiration of 21 years from
the death of the survivor of the person or persons named in the Trust Agreement.
See "Description of Trust Agreement-Termination" in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or
relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal income
tax consequences of the purchase, ownership and disposition of the Certificates
by an initial holder of Certificates. Such consequences will depend on the terms
of the Certificate, whether the Trust is treated as a grantor trust, a
partnership or FASIT for Federal income tax purposes, and the assets
collateralizing or otherwise supporting such Certificate. The consequences of
owning Certificates which are deemed for Federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions ["Grantor Trust Certificates"],
["Partnership Certificates"] and ["FASIT Certificates"] respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related Certificates.
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
Certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. Investors should consult their own tax
advisors to determine the Federal, state, local and other tax consequences of
the purchase, ownership and disposition of the Certificates. [The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto.]
The Trust will be provided with an opinion of Weil, Gotshal & Manges
LLP (a limited liability partnership including professional corporations),
special Federal tax counsel to the Depositor ("Federal Tax Counsel") regarding
certain Federal income tax matters discussed below. An opinion of Federal Tax
Counsel, however, is not binding on the Internal Revenue Service (the "Service")
or the courts. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to any of the Federal income tax
consequences discussed below, and no assurance can be given that the Service
will not take contrary positions.
TAX STATUS OF TRUST
In the opinion of Federal Tax Counsel, the Trust will be classified
as a grantor trust and not as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes. Accordingly, each
owner of a Certificate (a "Certificate Owner") will be subject to Federal income
taxation as if it owned directly the portion of the Deposited Assets allocable
to such Certificates, and as if it paid directly its
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share of expenses paid by the Trust. The following discussion assumes that the
Underlying Securities were not issued with original issue discount ("OID") and,
accordingly, the Certificate owners will not realize OID except with respect to
a "stripped interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays for
its Certificate among the Underlying Securities and the Deposited Assets in the
Trust other than the Underlying Securities (the "other Deposited Assets")
allocable to such Certificate, in proportion to their relative fair market
values on the date of purchase of the Certificate. A Certificate Owner would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.
The Federal income tax treatment of a holder of a particular class
of Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part, to
be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will not
be considered to represent a stripped interest in the Underlying Securities to
the extent the Certificate is entitled to receive a proportionate amount of all
principal and interest on the Underlying Securities. A class of Certificates
will be considered in its entirety to represent a stripped interest in the
underlying Underlying Securities if it is entitled to receive interest on the
Underlying Securities which is disproportionately less than the principal which
it is entitled to receive on the Underlying Securities, or if it is entitled to
receive all or part of the interest on the Underlying Securities but no
principal on the Underlying Securities. In addition, if a class of Certificates
is entitled to receive interest and principal on the Underlying Securities, but
the interest it is entitled to receive on the Underlying Securities is
disproportionately more than the principal it is entitled to receive on the
Underlying Securities, it could be argued that the Certificates represents (a)
an interest in the Underlying Securities that is not a stripped interest to the
extent it represents a proportional amount of all the principal and interest on
the Underlying Securities and (b) a stripped interest in the Underlying
Securities to the extent of any additional interest to which it is entitled on
the Underlying Securities. If a Certificate represents in part a stripped
interest and in part not a stripped interest, such interests will be treated as
two separate items for tax purposes and a purchaser of Certificates will be
required to allocate its purchase price among the two items (as well as any
other Deposited Assets) in proportion to their relative fair market values on
the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not Stripped
Interests. To the extent a class of Certificates does not represent a stripped
interest in the Underlying Securities, each Certificate Owner will be required
to report on its Federal income tax return, in a manner consistent with its
method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a
Certificate allocated to a Certificate Owner's undivided interest in a
Underlying Security is greater than or less than the portion of the principal
balance of the Underlying Security allocable to the Certificate, such interest
in the Underlying Security will have been acquired at a premium or discount, as
the case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued
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interest were a separate asset, thus, in each case, reducing the portion of the
purchase price allocable to the Certificate Owner's undivided interest in the
Underlying Securities (the "allocated Purchase Price"). To the extent that the
allocated Purchase Price is less than the principal balance of an Underlying
Security, the Certificate Owner's interest in such Underlying Security will be
treated as purchased at a "market discount." The market discount on a Underlying
Security will, however, be considered to be zero if it is less than a
statutorily defined de minimis amount. Conversely, to the extent that the
allocated Purchase Price exceeds the principal balance of an Underlying
Security, the Certificate Owner's interest therein will be treated as purchased
with "bond premium." See the discussion below under "Bond Premium."
For example, if the allocated Purchase Price paid by a Certificate
Owner who purchases a Certificate in the initial public offering were equal or
almost equal to the portion of the principal balance of the Underlying Security
that is allocable to the Certificate, there would be no significant amount of
discount or premium with respect to its interest in such Underlying Security.
Moreover, if the total purchase price of a Certificate is equal to the principal
amount of the Underlying Securities allocable to the Certificate, because a
portion of such purchase price will be allocated to the other Deposited Assets
of the Trust, in the aggregate a Certificate Owner's interest in the Underlying
Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of Certificates represents a stripped interest
in the Underlying Securities, each such Certificate will be subject to the OID
rules. The amount of OID on a stripped interest is equal to the excess of all
amounts payable on the stripped interest (other than qualified stated interest)
over the portion of the purchase price for the Certificate allocable to the
stripped interest.
Under the Treasury regulations issued under Section 1286 of the Code
(the "Regulations"), the interest payable with respect to the stripped interest
will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the Certificate
Owner) is also entitled. If none of the amounts payable to a Certificate Owner
with respect to a stripped interest constitute qualified stated interest, then
the stripped interest will have OID in an amount equal to the excess of all
payments to be received on the stripped interest over the purchase price for the
Certificate allocable to the stripped interest. Moreover, in determining the
amount paid for the stripped interest, a portion of the purchase price for a
Certificate must be allocated to the Certificate Owner's share of other
Deposited Assets and to accrued interest.
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The tax treatment of a Certificate Owner will depend upon whether
the amount of OID on the stripped interest represented by the Certificate is
less than a statutorily defined de minimis amount. In general, under the
Regulations, the amount of OID with respect to the stripped interest will be de
minimis if it is less than 1/4 of one percent multiplied by the product of the
"stated redemption price at maturity" and the number of full years remaining
after the purchase date until the maturity of such stripped interest. However,
if the stripped interest provides for amortization of principal, the amount of
OID will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the stated redemption price at maturity and the weighted average
maturity (i.e., the sum of the amounts obtained by multiplying the amount of
each payment under the stripped interest (other than a payment of qualified
stated interest) by a fraction, the numerator of which is the number of complete
years from the purchase date until the payment is made and the denominator of
which is the stated redemption price at maturity) of the stripped interest. In
general, "stated redemption price at maturity" means the sum of all amounts
payable on the stripped interest other than qualified stated interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each Certificate Owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass-Through Rate on the Certificate by an amount equal to the
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Certificate. Each Certificate Owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the Certificate Owner's
holding period in the Certificate. The Certificate Owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificate Owner from any Credit Support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report its
share of the income of the Trust under its usual method of accounting.
Accordingly, except as described below, interest on an Underlying Security would
be includible in a Certificate Owner's gross income when it accrues on the
Underlying Securities, or, in the case of Certificate Owners who are cash basis
taxpayers, when received by the Administrative Agent, if any, or otherwise the
Trustee on behalf of Certificate Owners. Because the interest collected on the
Underlying Securities generally is paid to Certificate Owners in the following
month, the amount of interest includible in a Certificate Owner's gross income
during any calendar month will not equal the interest distributed in that month.
If the OID with respect to the stripped interest in the Underlying
Securities represented by a Certificate is not treated as being de minimis, a
Certificate Owner will be required to include in income, in addition to any
qualified stated interest on the stripped interest as described above, any OID
on the stripped interest. OID must be included in income as it accrues on a
daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
In general, if a stripped interest has OID the Certificate Owner
will be required, whether such Certificate Owner uses the cash or the accrual
method of tax accounting, to include in ordinary gross income the sum of the
"daily portions" of OID on the stripped interest for all days during the taxable
year that the Certificate Owner owns the Certificate. The daily portions of OID
on a stripped interest are determined by allocating to each
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day in any "accrual period" a ratable portion of the OID allocable to that
accrual period. The amount of OID on a stripped interest allocable to each
accrual period is determined by (i) multiplying the "adjusted issue price" (as
defined below) of the stripped interest by a fraction, the numerator of which is
the annual yield to maturity of the stripped interest and the denominator of
which is the number of accrual periods in a year and (ii) subtracting from that
product the amount of qualified stated interest (if any) payable on the stripped
interest during (or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the beginning
of any accrual period is the purchase price for a Certificate allocable to the
stripped interest (including accrued interest, if any) (i) increased by the
amount of OID allocable to all prior accrual periods and (ii) reduced by the
amount of all payments other than qualified stated interest payments (if any) in
all prior accrual periods. In addition, if an interval between payments of
qualified stated interest contains more than one accrual period, the adjusted
issue price at the beginning of each accrual period in the interval is increased
by the amount of qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
Bond Premium. In the event that a Certificate represents either an
unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than qualified
stated interest), such premium will be amortizable by the Certificate Owner as
an offset to interest income (with a corresponding reduction in the Certificate
Owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the Certificate Owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest using the constant yield method described
above, treating the instrument as having been issued on the Certificate Owner's
acquisition date at an issue price equal to such owner's adjusted basis with no
interest payments being qualified stated interest. Such an election with respect
to a unstripped or stripped interest having amortizable bond premium or market
discount would constitute, respectively, an election to apply the market
discount rules or bond premium rules with respect to all other debt instruments
with market discount or amortizable bond premium, as the case may be, of such
Certificate Owner.
Modification or Exchange of Underlying Securities. Depending upon
the circumstances, it is possible that a modification of the terms of the
Underlying Securities, or a substitution of other assets for the Underlying
Securities following a default on the Underlying Securities, would be a taxable
event to Certificate Owners on which they would recognize gain or loss.
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OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate Owner
will be entitled to deduct, consistent with its method of accounting, its share
of reasonable administrative fees, trustee fees and other fees paid or incurred
by the Trust as provided in Section 162 or 212 of the Code and any allowable
amortization deductions with respect to certain other assets of the Trust. If a
Certificate Owner is an individual, estate or trust, the deduction for his share
of fees will be a miscellaneous itemized deduction that may be disallowed in
whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
A Certificate Owner's tax basis in a Certificate generally will
equal the cost of such Certificate, increased by any amounts of undistributed
taxable income (e.g., OID or market discount) and reduced by any amortized
premium (each as described above) and any payments other than payments of
qualified stated interest on an underlying Underlying Security made on such
Certificate.
If a Certificate is sold, gain or loss will be recognized equal to
the difference between the proceeds of sale allocable to each of the assets of
the Trust and the Certificate Owner's adjusted basis in each of the foregoing.
Any gain or loss will be a capital gain or loss if the Certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the Certificate Owner's interest in accrued
market discount not previously taken into income on Underlying Securities.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificate Owner fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are not
United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." Under
such requirements, the holder must certify, under penalties of perjury, that it
is not a "United States person" and provide its name and address.
[Describe the Federal income tax consequences to Foreign Certificate
Owners of an interest in any other Deposited assets of the Trust.]
S-29
<PAGE>
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or any political subdivision thereof, or an estate or trust the
income of which is includible in gross income for U.S. Federal income tax
purposes, regardless of its source, or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Depositor and the Administrative Agent, if any, have agreed, and
the Certificate Owners will agree by their purchase of Certificates, to treat
the Trust as a partnership for purposes of Federal, state and local income,
franchise and any other tax measured in whole or in part by income. However, the
proper characterization of the arrangement involving the Trust, the Certificate
Owners, the Depositor and the Administrative Agent, if any, is not entirely
clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership" it
could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust). A publicly traded partnership is taxed in the
same manner as a corporation unless at least 90% of its gross income consists of
specified types of "qualifying income." Such qualifying income includes, among
other things, interest income not derived in the conduct of a financial or
insurance business, dividend income, and gain from the disposition of assets
producing such income. In the opinion of Federal Tax Counsel, because of the
nature of the income of the Trust, the Trust will not be a publicly traded
partnership taxable as a corporation.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal income
tax, but each Certificate Owner will be required to separately take into account
such holder's allocable share of income, gains, losses, deductions and credits
of the Trust. The Trust's income will consist primarily of [ ] and any gain upon
collection or disposition [ ]. The Trust's deductions will consist primarily of
[ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities that corresponds to any excess of the principal amount of such class
of Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
S-30
<PAGE>
An individual taxpayer's miscellaneous itemized deductions (which do
not include interest expense) are subject to limitations and as a result may be
disallowed in whole or in part. Those limitations, which also apply to estates
and trusts, would apply to a Certificate Owner's share of expenses of the Trust
(including fees to the Administrative Agent, if any) and might result in such
holder being taxed on an amount of income that exceeds the amount of cash
actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis in its
Certificate for its allocable share of the Trust's income or loss, respectively.
Any cash distributions by the Trust to a Certificate Owner will constitute (i)
first, a return of capital to the extent of such Certificate Owner's tax basis
in the Certificate (with a corresponding dollar-for-dollar reduction in such tax
basis), and (ii) thereafter, to the extent in excess thereof, gain on the sale
or exchange of such Certificate Owner's Certificate. See "Disposition of
Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not
issued with original issue discount ("OID") and, therefore, the Trust should not
have OID income. However, the purchase price paid by the Trust for the
Underlying Securities may be greater or less than the remaining principal
balance of the Underlying Securities at the time of purchase. If so, the
Underlying Securities will have been acquired at a premium or discount, as the
case may be. (As indicated above, if the Trust acquires a large number of
Underlying Securities it will make this calculation on an aggregate basis, but
might be required to recompute it on an instrument-by- instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
MODIFICATION OR EXCHANGE OF UNDERLYING SECURITIES
Depending upon the circumstances, it is possible that a modification
of the terms of the Underlying Securities, or a substitution of other assets for
the Underlying Securities following a default on the Underlying Securities,
would be a taxable event to Certificate Owners on which they would recognize
gain or loss.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of the
Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
S-31
<PAGE>
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to terminate
for Federal income tax purposes if 50% or more of the capital and profits
interests in the Trust are sold or exchanged within a 12-month period. Were such
a termination to occur, the Trust would be considered to have contributed its
assets to a new partnership and distributed the interests in the new partnership
in liquidation to the Certificate Owners. If any such constructive termination
occurs, the Trust does not intend to comply with certain technical requirements
that might be applicable for various reasons including the likely lack of
relevant data. As a result, the Trust may be subject to certain tax penalties
and may incur additional expenses. Moreover, the Schedule K-1 information
thereafter distributed to the Certificate Owners may be incorrect.
DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or
other disposition of Certificates in an amount equal to the difference between
the amount realized and the seller's tax basis in the Certificates sold. A
Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to such Certificate. In addition,
both his tax basis in, and the amount realized on a sale of, a Certificate would
include the holder's share of liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such aggregate tax
basis to the Certificates sold (rather than maintaining a separate tax basis in
each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
On the sale of a Certificate, any gain attributable to the holder's
share of any accrued market discount on the Underlying Securities that has not
otherwise been included in the holder's income would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust does not expect to have any other assets that would give
rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust will elect to include market discount in
income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month allocable to a
particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by
existing regulations. If such a convention is not allowed (or only applies to
transfers of less than all of a partner's interest), taxable income or losses of
the Trust might be reallocated among the Certificate Owners. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
S-32
<PAGE>
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates at a
profit (loss), the purchasing Certificate Owner will have a higher (lower) basis
in the Certificates than the selling Certificate Owner had. The tax basis of the
Trust's assets will not be adjusted to reflect that higher (or lower) basis
unless the Trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate accounting records, as well as potentially onerous information
reporting requirements, the Trust will not make such election. As a result
Certificate Owners might be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of the
Trust. Such books will be maintained for financial reporting and tax purposes on
an accrual basis and the fiscal year of the Trust will be the calendar year. The
Trustee will file a partnership information return (Internal Revenue Service
Form 1065) with the Service for each taxable year of the Trust and will report
each Certificate Owner's allocable share of items of Trust income and expense to
holders and the Service on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed by
the Trust or be subject to penalties, unless the holder notifies the Service of
all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Depositor, as the tax matters partner, will be responsible for
representing the Certificate Owners in any dispute with the Service. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificate Owner's returns and adjustments of
items not related to the income (or loss) of the Trust.
S-33
<PAGE>
TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be engaged
in a trade or business in the United States for purposes of Federal withholding
taxes with respect to non-U.S. persons because there is no clear authority
dealing with that issue under facts substantially similar to those described
herein. [Although it is not expected that the Trust would be engaged in a trade
or business in the United States for such purposes, the Trust expects to
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the Service and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to reflect
differences caused by the precise nature of the Deposited Assets relating to a
given Series of Certificates.]
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificate Owner fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing interests in
a FASIT and the promulgation of Treasury regulations relating to the federal
income taxation of FASITs and to the federal income tax consequences of the
ownership of FASIT interests, the Prospectus Supplement relating to such
Certificates will describe the requirements for the classification of the Trust
as a FASIT and the consequences to a holder of owning such Certificates.]
[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given Series of Certificates or the degree of servicing required with respect
to such Deposited Assets.]]
S-34
<PAGE>
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing in
a Certificate, a Plan fiduciary should determine whether such an investment is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its investment policy and the composition of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions involving the
assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering an investment in Certificates should also consider whether such an
investment might constitute or give rise to a non-exempt prohibited transaction
under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets
of the Trust being deemed to constitute Plan assets which, in turn, might mean
that certain aspects of such investment, including the operation of the Trust,
might be non-exempt prohibited transactions under ERISA and the Code. Neither
ERISA nor the Code defines the term "plan assets." Under Section 2510.3-101 of
the United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include an interest in the underlying assets of an entity
(such as a trust) for certain purposes, including the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an "equity interest" in
such entity. The Regulation states that a beneficial interest in a trust is an
equity interest. Thus, if a Plan acquired a Certificate of a particular class
the Plan might be considered to own its share of the underlying assets of the
Trust unless, among other exceptions set forth in the Regulation, (1) such
Certificate is a "publicly-offered security" or (2) equity participation by
benefit plan investors in each class of equity interests is not "significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, and (3) either is (A) part of a class of securities registered
under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the Plan as a
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which such public offering occurred. The
Depositor does not anticipate that the Certificates of any class will be
considered publicly-offered securities within the meaning of the Regulation.
Participation by benefit plan investors in any class of Certificates
would not be significant if, immediately after the most recent acquisition of
any equity interest in the Trust (whether or not from the Depositor or an Agent
or Underwriter), less than 25 percent of the value of each class of equity
interest were held by benefit plan investors, which are defined as Plans and
employee benefit plans not subject to ERISA (for example, governmental plans).
For purposes of such less than 25 percent limit, the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or provides investment advice for a fee with respect to
the assets of the entity, or any affiliate thereof, shall be disregarded. There
can be no assurance that less than 25 percent of the value of any given class of
Certificates will be held by benefit plan investors.
S-35
<PAGE>
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
Certificate, the acquisition of the Certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95-60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of Certificates. In addition, any Plan acquiring Certificates shall
be deemed to have represented that its acquisition and holding of Certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the Certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a Certificate.
S-36
<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [ ], 199[ ] (the "Underwriting Agreement"), the Depositor
has agreed to sell and [Lehman Brothers Inc. (an affiliate of the Depositor)]
[each of the Underwriters named below, including Lehman Brothers Inc. (an
affiliate of the Depositor)] (the "Underwriter[s]")[,] has [severally] agreed to
purchase, the [Certificates] [the principal amount of each class of Certificates
set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
----------- ------------ -----------
Lehman Brothers Inc.... $ $ $
----------- ------------ -----------
Total............ $ $ $
============ ============ ===========
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Depositor has been advised by the Underwriter[s] that [it][they]
propose[s] to offer the Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter[s] may effect such transactions by selling Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] in the
distribution of Certificates may be deemed to be underwriters, and any profit on
the resale of Certificates by them may be deemed to be underwriting discounts,
or commissions under the Securities Act.
The Underwriting Agreement provides that the Depositor will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Depositor, and the
participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's")][Moody's Investors
Service, Inc. ("Moody's")][Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")](the
"Rating[Agency][Agencies]"). The ratings address the likelihood of the receipt
by the Certificateholders of payments required under the Trust Agreement, and
are based primarily on the credit
S-37
<PAGE>
quality of the Deposited Assets and any providers of Credit Support, as well as
on the relative priorities of the Certificateholders of each class of the
Certificates with respect to collections and losses with respect to the
Deposited Assets. The rating on the Certificates does not, however, constitute a
statement regarding the occurrence or frequency of redemptions or prepayments
on, or extensions of the maturity of, the Deposited Assets, the corresponding
effect on yield to investors, or whether investors in the Class [ ] Certificates
[specify class with Notional Amount] may fail to recover fully their initial
investment.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of any other security rating.
The Depositor has not requested a rating on the Certificates by any
rating agency other than the Rating [Agency] [Agencies]. However, there can be
no assurance as to whether any other rating agency will rate the Certificates,
or, if it does, what rating would be assigned by any such other rating agency. A
rating on the Certificates by another rating agency, if assigned at all, may be
lower than the ratings assigned to the Certificates by the Rating [Agency]
[Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed
upon for the Depositor and the Underwriter[s] by [Weil, Gotshal & Manges LLP,
New York, New York].
S-38
<PAGE>
INDEX OF TERMS
[LIST DEFINED TERMS AND PAGE NUMBER
WHERE DEFINED IN THE PROSPECTUS SUPPLEMENT]
S-39
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
LEHMAN ABS CORPORATION
DEPOSITOR
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class"), denominated in dollars or in one or more
foreign or composite currencies, including the European Currency Unit ("ECU").
Certificates of each respective Series and Class will be offered on terms to be
determined at the time of sale as described in the related Prospectus Supplement
accompanying the delivery of this Prospectus. Certificates may be sold for
United States dollars or for one or more foreign or composite currencies, and
the principal of, premium on, if any, and any interest to be distributed in
respect of Certificates may be payable in United States dollars or in one or
more foreign or composite currencies. Each Series and Class of Certificates may
be issuable as individual securities in registered form without coupons
("Registered Certificates") or in bearer form with or without coupons attached
("Bearer Certificates") or as one or more global securities in registered or
bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
or a pool of such debt securities (the "Underlying Securities"), together with
certain other assets described herein and in the related Prospectus Supplement
(such assets, together with the Underlying Securities, the "Deposited Assets"),
to be deposited in a trust (the "Trust") for the benefit of holders of
Certificates of such Series ("Certificateholders") by Lehman ABS Corporation
(the "Depositor") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Depositor, the administrative agent, if any (the "Administrative Agent") and the
trustee (the "Trustee") named in the related Prospectus Supplement. The
Underlying Securities will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor), and will not be
acquired from the issuer thereof as part of any distribution by or pursuant to
any agreement with such issuer. The Underlying Securities discussed herein and
in the related Prospectus Supplement represent the obligation of one or more
corporations, banking organizations or insurance companies organized under the
laws of the United States or any State, which are subject to the information
requirements of the Securities Exchange Act of 1934, as amended, and which, in
accordance therewith, file reports and other information with the Securities
Exchange Commission. If so specified in the related Prospectus Supplement, the
Trust for a Series of Certificates may also include, or the Certificateholders
of such Certificates may have the benefit of, any combination of insurance
policies, letters of credit, reserve accounts and other types of rights or
assets designed to support or ensure the servicing and distribution of amounts
due in respect of the Deposited Assets (collectively, "Credit Support"). See
"Description of Certificates" and "Description of Deposited Assets and Credit
Support."
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount
LEHMAN BROTHERS
DECEMBER 12, 1997
<PAGE>
of distributions of principal, interest or premium and one or more Classes
within such Series may be subordinated in certain respects to other Classes of
such Series.
Except as otherwise provided herein and in the applicable Prospectus Supplement,
the 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 specified in the applicable Prospectus Supplement, with respect to a
Series of Certificates will be pursuant to its contractual administrative
obligations and, only as and to the extent provided in the related Prospectus
Supplement, its obligation to make certain cash advances in the event of payment
delinquencies on the Deposited Assets. See "Description of the Trust
Agreement--Advances in Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the 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 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered thereby and hereby will set forth, among other things, the following
with respect to such Series: (a) the specific designation and aggregate
principal amount or, if applicable, notional amount, (b) the currency or
currencies in which the principal (the "Specified Principal Currency"), premium,
if any (the "Specified Premium Currency"), and any interest (the "Specified
Interest Currency") are distributable (the Specified Principal Currency, the
Specified Premium Currency and the Specified Interest Currency being
collectively referred to as the "Specified Currency"), (c) the number of Classes
of such Series and, with respect to each Class of such Series, its designation,
aggregate principal amount or, if applicable, notional amount and authorized
denominations, (d) certain information concerning the type, characteristics and
specifications of the Deposited Assets and any Credit Support for such Series or
Class, (e) the relative rights and priorities of each such Class (including the
method for allocating collections from the Deposited Assets to the
Certificateholders of each Class and the relative ranking of the claims of the
Certificateholders of each Class to such Deposited Assets), (f) the name of the
Trustee and the Administrative Agent, if any, for such Series, (g) the Pass
Through Rate (as defined below) or the terms relating to the applicable method
of calculation thereof, (h) the time and place of distribution (each such date,
a "Distribution Date") of any interest, premium (if any) and/or principal (if
any), (i) the date of issue, (j) the Final Scheduled Distribution Date (as
defined below), if applicable, (k) the offering price, (l) any exchange, whether
mandatory or optional, the redemption terms and any other specific terms of
Certificates of each such Series or Class. See "Description of
Certificates--General" for a listing of other items that may be specified in the
applicable Prospectus Supplement.
AVAILABLE INFORMATION
Each Trust is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith the Depositor files on behalf of each Trust reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports with respect to each Trust and other information
concerning each Trust can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a site on the World Wide Web
(the "Web") at "http://www.sec.gov" at which users can view and download copies
of reports, proxy, information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The Depositor does not intend to send any financial reports to
Certificateholders.
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Reports and other information concerning each Trust can also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
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 prior to and subsequent to the date of
this Prospectus and prior to the termination of the offering of the Certificates
shall be deemed to be incorporated by reference in this Prospectus. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference,
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Secretary of Lehman ABS Corporation, 3 World Financial
Center, New York, New York 10285. Telephone requests for such copies should be
directed to the Secretary of Lehman ABS Corporation at (212) 526-5594.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus
Supplement, unless and until Definitive Certificates (as defined below) are
issued, on each Distribution Date unaudited reports containing information
concerning the related Trust will be prepared by the related Trustee and sent on
behalf of each Trust only to Cede & Co. ("Cede"), as nominee of DTC and
registered holder of the Certificates. See "Description of Certificates--Global
Securities" and "Description of the Trust Agreement--Reports to
Certificateholders; Notice." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Depositor, on behalf of each Trust, will cause to be filed with the
Commission such periodic reports as are required under the Exchange Act.
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IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited facilities
in the United States for conversion of U.S. dollars into foreign currencies and
vice versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Certificate having a Specified Principal Currency other than U.S.
dollars, Lehman Brothers Inc. (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined below) preceding the date of delivery of such
Certificate or by such later date as is determined by the Offering Agent. Each
such exchange will be made by the Offering Agent on such terms and subject to
such conditions, limitations and charges as the Offering Agent may from time to
time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$," USD, "dollar" or "$"
are to the lawful currency of the United States.
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class
within such Series) of Certificates prior to the issuance thereof, and there can
be no assurance that a secondary market will develop or, if it does develop,
that it will provide Certificateholders with liquidity of investment or will
continue for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement may set
forth certain legal considerations that are applicable to a specific Series (or
Class or Classes within such Series) of Certificates being offered in connection
with that Prospectus Supplement or the assets deposited in or assigned to the
related Trust.
Limited Obligations and Interests. The Certificates will not
represent a recourse obligation of or interest in the 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 Trust, 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
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funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, 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 (including acceleration resulting from any default or
rescheduling resulting from the bankruptcy or similar proceeding with respect to
a Underlying Securities Issuer (as defined below)) and the manner and priority
in which collections from such Underlying Securities and any other Deposited
Assets are allocated to each Class of such Series. Certain of these factors may
be influenced by a variety of accounting, tax, economic, social and other
factors. The related Prospectus Supplement will discuss any calls, puts or other
redemption options, any extension of maturity provisions and certain other terms
applicable to such Underlying Securities and any other Deposited Assets. See
"Maturity and Yield Considerations."
Tax Considerations. The Federal income tax consequences of the
purchase, ownership and disposition of the Certificates and the tax treatment of
the Trust will depend on the specific terms of the Certificates, the Trust, any
Credit Support and the Deposited Assets. See the description under "Certain
Federal Income Tax Consequences" in the related Prospectus Supplement.
Ratings of the Certificates. At the time of issue, the Certificates
of any given Series (or each Class of such Series that is offered hereby) will
be rated in one of the investment grade categories recognized by one or more
nationally recognized rating agencies (a "Rating Agency"). Unless otherwise
specified in the applicable Prospectus Supplement, the rating of any Series or
Class of Certificates is based primarily on the related Deposited Assets and any
Credit Support and the relative priorities of the Certificateholders of such
Series or Class to receive collections from, and to assert claims against, the
Trust with respect to such Deposited Assets and any Credit Support. The rating
is not a recommendation to purchase, hold or sell Certificates, inasmuch as such
rating does not comment as to market price or suitability for a particular
investor. There can be no assurance that the rating will remain for any given
period of time or that the rating will not be lowered or
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<PAGE>
withdrawn entirely by the Rating Agency if in its judgment circumstances in the
future so warrant. Any Class or Classes of a given Series of Certificates may
not be offered pursuant to this Prospectus, in which case such Class or Classes
may or may not be rated in an investment grade category by a Rating Agency.
Global Securities. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series (or, if more than one
Class exists, each Class of such Series) will initially be represented by one or
more Global Securities deposited with, or on behalf of, a Depositary (as defined
below) and will not be issued as individual Definitive Certificates to the
purchasers of such Certificates. Consequently, unless and until such individual
Definitive Certificates of a particular Series or Class are issued, such
purchasers will not be recognized as Certificateholders under the Trust
Agreement. Hence, until such time, such purchasers will only be able to exercise
the rights of Certificateholders indirectly through the Depositary and its
respective participating organizations and, as a result, the ability of any such
purchaser to pledge that Certificate to persons or entities that do not
participate in the Depositary's system, or to otherwise act with respect to such
Certificate, may be limited. See "Description of Certificates--Global
Securities" and "Limitations on Issuance of Bearer Certificates" and any further
description contained in the related Prospectus Supplement.
Currency Risks. The Certificates of any given Series (or Class
within such Series) may be denominated in a currency other than U.S. dollars to
the extent specified in the applicable Prospectus Supplement. This Prospectus
does not describe all the risks of an investment in such Certificates, and the
Depositor disclaims any responsibility to advise prospective purchasers of such
risks as they exist from time to time. Prospective purchasers of such
Certificates should consult their own financial and legal advisors as to the
risks entailed by an investment in such Certificates denominated in a currency
other than U.S. dollars. See "Currency Risks."
Passive Nature of the Trust. The Trustee with respect to any Series
of Certificates will hold the Deposited Assets for the benefit of the
Certificateholders. Each Trust will generally hold the related Deposited Assets
to maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any Underlying Securities Issuer or the value of the
Deposited Assets. Under certain circumstances the holders of the Certificates
may direct the Trustee to dispose of the Underlying Securities or take certain
other actions in respect of the Deposited Assets.
In addition, the Prospectus Supplement for each Series of
Certificates will set forth information regarding additional risk factors, if
any, applicable to such Series (and each Class within such Series).
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<PAGE>
THE 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.
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
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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.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable, contain
information with respect to the type and maturities of the related Underlying
Securities and the terms, if any, upon which such Underlying Securities may be
subject to early redemption (either by the applicable obligor or pursuant to a
third-party call option), repayment (at the option of the holders thereof) or
extension
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of maturity. The provisions of the Underlying Securities with respect to the
foregoing will, unless otherwise specified in the applicable Prospectus
Supplement, affect the weighted average life of the related Series of
Certificates.
The effective yield to holders of the Certificates of any Series
(and Class within such Series) may be affected by certain aspects of the
Deposited Assets or any Credit Support or the manner and priorities of
allocations of collections with respect to such Deposited Assets between the
Classes of a given Series. With respect to any Series of Certificates the
Underlying Securities of which consist of one or more redeemable securities,
extendable securities or securities subject to a third-party call option, the
yield to maturity of such Series (or Class within such Series) may be affected
by any optional or mandatory redemption or repayment or extension of the related
Underlying Securities prior to the stated maturity thereof. A variety of tax,
accounting, economic, and other factors will influence whether a corporate
issuer exercises any right of redemption in respect of its securities. All else
remaining equal, if prevailing interest rates fall significantly below the
interest rates on the related Underlying Securities, the likelihood of
redemption would be expected to increase. There can be no certainty as to
whether any Underlying Security redeemable at the option of the Underlying
Security Issuer will be repaid prior to its stated maturity.
Unless otherwise specified in the related Prospectus Supplement,
each of the Underlying Securities will be subject to acceleration upon the
occurrence of certain Underlying Security Events of Default (as defined below).
The maturity and yield on the Certificates will be affected by any early
repayment of the Underlying Securities as a result of the acceleration of the
Outstanding Debt Securities by the holders thereof. See "Description of the
Deposited Assets -- Underlying Securities Indenture." If a Underlying Securities
Issuer becomes subject to a bankruptcy proceeding, the timing and amount of
payments with respect to both interest and principal may be materially and
adversely affected. A variety of factors influence the performance of private
debt issuers and correspondingly may affect a Underlying Securities Issuer's
ability to satisfy its obligations under the Underlying Securities, including
the company's operating and financial condition, leverage, and social,
geographic, legal and economic factors.
The extent to which the yield to maturity of such Certificates may
vary from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates will
also be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that the
Pass-Through Rate (as defined below) for such Series (or Class) is based on
variable or adjustable interest rates. With respect to any Series of
Certificates representing an interest in a pool of corporate debt securities,
disproportionate principal payments (whether resulting from differences in
amortization schedules, payments due on scheduled maturity or upon early
redemption) on the related Underlying Securities having interest rates higher or
lower than the then applicable Pass-Through Rates applicable to such
Certificates may affect the yield thereon.
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The Prospectus Supplement for each Series of Certificates will set
forth additional information regarding yield and maturity considerations
applicable to such Series (and each Class within such Series) and the related
Deposited Assets, including the applicable Underlying Securities.
DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes within
such Series) of Certificates will be issued pursuant to a Trust Agreement and a
separate series supplement thereto among the 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."
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Reference is made to the related Prospectus Supplement for a
description of the following terms of the Series (and, if applicable, Classes
within such Series) of Certificates in respect of which this Prospectus and such
Prospectus Supplement are being delivered: (i) the title of such Certificates;
(ii) the Series of such Certificates and, if applicable, the number and
designation of Classes of such Series; (iii) certain information concerning the
type, characteristics and specifications of the Deposited Assets being deposited
into the related Trust by the 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 (as defined in the related Prospectus Supplement), if any; (viii) the
option, if any, of any Certificateholder of such Series or Class to withdraw a
portion of the assets of the Trust in exchange for surrendering such
Certificateholder's Certificate or of the Depositor or Administrative Agent, if
any, or another third party to purchase or repurchase any Deposited Assets (in
each case to the extent not inconsistent with the Depositor's continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder) and the periods within which or the dates on which,
and the terms and conditions upon which any such option may be exercised, in
whole or in part; (ix) the rating of each Series or each Class within such
Series offered hereby (provided, however, that one or more Classes within such
Series not offered hereunder may be unrated or may be rated below investment
grade); (x) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which such Series or Class within such Series will
be issuable; (xi) whether the Certificates of any Class within a given Series
are to be entitled to (1) principal distributions, with disproportionate,
nominal or no interest distributions, or (2) interest distributions, with
disproportionate, nominal or no principal distributions ("Strip Certificates"),
and the applicable terms thereof; (xii) whether the Certificates of such Series
or of any Class within such Series are to be issued as Registered Certificates
or Bearer Certificates or both and, if Bearer Certificates are to be issued,
whether coupons ("Coupons") will be attached thereto; whether Bearer
Certificates of such Series or Class may be exchanged for Registered
Certificates of such Series or Class and the circumstances under which and the
place or places at which any such exchanges, if permitted, may be made; (xiii)
whether the Certificates of such Series
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or of any Class within such series are to be issued in the form of one or more
Global Securities and, if so, the identity of the Depositary (as defined below),
if other than The Depository Trust Company, for such Global Security or
Securities; (xiv) if a temporary Certificate is to be issued with respect to
such Series or any Class within such Series, whether any interest thereon
distributable on a Distribution Date prior to the issuance of a Definitive
Certificate of such Series or Class will be credited to the account of the
persons entitled thereto on such Distribution Date; (xv) if a temporary Global
Security is to be issued with respect to such Series or Class, the terms upon
which beneficial interests in such temporary Global Security may be exchanged in
whole or in part for beneficial interests in a definitive Global Security or for
individual Definitive Certificates (as defined below) of such Series or Class
and the terms upon which beneficial interests in a definitive Global Security,
if any, may be exchanged for individual Definitive Certificates of such Series
or Class; (xvi) if other than U.S. dollars, the Specified Currency applicable to
the Certificates of such Series or Class for purposes of denominations and
distributions on such Series or each Class within such Series and the
circumstances and conditions, if any, when such Specified Currency may be
changed, at the election of the Depositor or a Certificateholder, and the
currency or currencies in which any principal of or any premium or any interest
on such Series or Class are to be distributed pursuant to such election; (xvii)
any additional Administrative Agent Termination Events (as defined below), if
applicable, provided for with respect to such Class; (xviii) all applicable
Required Percentages and Voting Rights (each as defined below) relating to the
manner and percentage of votes of Certificateholders of such Series and each
Class within such Series required with respect to certain actions by the
Depositor or the applicable Administrative Agent, if any, or Trustee under the
Trust Agreement or with respect to the applicable Trust; and (xix) any other
terms of such Series or Class within such Series of Certificates not
inconsistent with the provisions of the Trust Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus Supplement,
Certificates of each Series (including any Class of Certificates not offered
hereby) will be issued only as Registered Certificates in denominations of
$1,000 and any integral multiple thereof and will be payable only in U.S.
dollars (Section 5.01). The authorized denominations of Registered Certificates
of a given Series or Class within such Series having a Specified Currency other
than U.S. dollars will be set forth in the applicable Prospectus Supplement.
The United States Federal income tax consequences and the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the issuance of any Series or Class
within such Series of Bearer Certificates or Certificates on which the principal
of and any premium and interest are distributable in a Specified Currency other
than U.S. dollars will be described in the applicable Prospectus Supplement
relating to such
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Series or Class. Unless otherwise specified in the applicable Prospectus
Supplement, the U.S. dollar equivalent of the public offering price or purchase
price of a Certificate having a Specified Principal Currency other than U.S.
dollars will be determined on the basis of the noon buying rate in New York City
for cable transfers in foreign currencies as certified for customs purposes by
the Federal Reserve Bank of New York (the "Market Exchange Rate") for such
Specified Principal Currency on the applicable issue date. As specified in the
applicable Prospectus Supplement, such determination will be made by the
Depositor, the Trustee, the Administrative Agent, if any, or an agent thereof as
exchange rate agent for each Series of Certificates (the "Exchange Rate Agent").
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Certificates may be transferred or exchanged for like Certificates of
the same Series and Class at the corporate trust office or agency of the
applicable Trustee in the City and State of New York, subject to the limitations
provided in the Trust Agreement, without the payment of any service charge,
other than any tax or governmental charge payable in connection therewith
(Section 5.04). Bearer Certificates will be transferable by delivery. Provisions
with respect to the exchange of Bearer Certificates will be described in the
applicable Prospectus Supplement. Unless otherwise specified in the applicable
Prospectus Supplement, Registered Certificates may not be exchanged for Bearer
Certificates. The Depositor may at any time purchase Certificates at any price
in the open market or otherwise. Certificates so purchased by the Depositor may,
at the discretion of the Depositor, be held or resold or surrendered to the
Trustee for cancellation of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest
on the Certificates of each Series (and Class within such Series) will be made
in the Specified Currency for such Certificates by or on behalf of the Trustee
on each Distribution Date as specified in the related Prospectus Supplement and
the amount of each distribution will be determined as of the close of business
on the date specified in the related Prospectus Supplement (the "Determination
Date"). If the Specified Currency for a given Series or Class within such Series
is other than U.S. dollars, the Administrative Agent, if any, or otherwise the
Trustee will (unless otherwise specified in the applicable Prospectus
Supplement) arrange to convert all payments in respect of each Certificate of
such Series or Class to U.S. dollars in the manner described in the following
paragraph. The Certificateholder of a Registered Certificate of a given Series
or Class within such Series denominated in a Specified Currency other than U.S.
dollars may (if the applicable Prospectus Supplement and such Certificate so
indicate) elect to receive all distributions in respect of such Certificate in
the Specified Currency by delivery of a written notice to the Trustee and
Administrative Agent, if any, for such Series not later than fifteen calendar
days prior to the applicable Distribution Date, except under the circumstances
described under "Currency Risks -- Payment Currency" below. Such election will
remain in effect until revoked by written notice to such Trustee and
Administrative Agent, if any, received by each of them not later than fifteen
calendar days prior to the applicable Distribution Date.
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Unless otherwise specified in the applicable Prospectus Supplement,
in the case of a Registered Certificate of a given Series or Class within such
Series having a Specified Currency other than U.S. dollars, the amount of any
U.S dollar distribution in respect of such Registered Certificate will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable Distribution Date (or, if no such rate is quoted on such date, the
last date on which such rate was quoted), from three (or, if three are not
available, then two) recognized foreign exchange dealers in The City of New York
(one of which may be the Offering Agent and another of which may be the Exchange
Rate Agent) selected by the Exchange Rate Agent, for the purchase by the quoting
dealer, for settlement on such Distribution Date, of the aggregate amount
payable in such Specified Currency on such payment date in respect of all
Registered Certificates. All currency exchange costs will be borne by the
Certificateholders of such Registered Certificates by deductions from such
distributions. If no such bid quotations are available, such distributions will
be made in such Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond the Depositor's control, in which case such distributions will be made as
described under "Currency Risks -- Payment Currency" below. The applicable
Prospectus Supplement will specify such information with respect to Bearer
Certificates.
Unless otherwise provided in the applicable Prospectus Supplement
and except as provided in the succeeding paragraph, distributions with respect
to Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement in The City of New York or (in the case of Bearer
Certificates) at the principal London office of the applicable Trustee;
provided, however, that any such amounts distributable on the final Distribution
Date of a Certificate will be distributed only upon surrender of such
Certificate at the applicable location set forth above (Sections 4.01 and 9.01).
Except as otherwise provided in the applicable Prospectus Supplement, no
distribution on a Bearer Certificate will be made by mail to an address in the
United States or by wire transfer to an account maintained by the
Certificateholder thereof in the United States.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions on Registered Certificates in U.S. dollars will be made, except as
provided below, by check mailed to the Registered Certificateholders of such
Certificates (which, in the case of Global Securities, will be a nominee of the
Depositary); provided, however, that, in the case of a Series or Class of
Registered Certificates issued between a Record Date and the related
Distribution Dates, interest for the period beginning on the issue date for such
Series or Class and ending on the last day of the interest accrual period ending
immediately prior to or coincident with such Distribution Date will, unless
otherwise specified in the applicable Prospectus Supplement, be distributed on
the next succeeding Distribution Date to the Registered Certificateholders of
the Registered Certificates of such Series or Class on the related Record Date.
A Certificateholder of $10,000,000 (or the equivalent thereof in a Specified
Principal Currency other than U.S. dollars) or more in aggregate principal
amount of Registered Certificates of a given Series shall be entitled to receive
such U.S. dollar distributions by wire transfer of immediately available funds,
but only if appropriate wire transfer instructions have been
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received in writing by the Trustee for such Series not later than fifteen
calendar days prior to the applicable Distribution Date. Simultaneously with the
election by any Certificateholder to receive payments in a Specified Currency
other than U.S. dollars (as provided above), such Certificateholder shall
provide appropriate wire transfer instructions to the Trustee for such Series,
and all such payments will be made by wire transfer of immediately available
funds to an account maintained by the payee with a bank located outside the
United States.
Except as otherwise specified in the applicable Prospectus
Supplement, "Business Day" with respect to any Certificate means any day, other
than a Saturday or Sunday, that is (i) not a day on which banking institutions
are authorized or required by law or regulation to be closed in (a) The City of
New York or (b) if the Specified Currency for such Certificate is other than
U.S. dollars, the financial center of the country issuing such Specified
Currency (which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such Certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Certificate means any day on which
dealings in deposits in the Specified Currency of such Certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
INTEREST ON THE CERTIFICATES
General. Each Class of Certificates (other than certain Classes of
Strip Certificates) of a given Series may have a different Pass-Through Rate,
which may be a Fixed or Variable Pass- Through Rate, as described below. In the
case of Strip Certificates with no or, in certain cases, a nominal Certificate
Principal Balance, such distributions of interest will be in an amount (as to
any Distribution Date, "Stripped Interest") described in the related Prospectus
Supplement. For purposes hereof, "Notional Amount" means the notional principal
amount specified in the applicable Prospectus Supplement on which interest on
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance will be made on each Distribution Date. Reference to the Notional Amount
of a Class of Strip Certificates herein or in a Prospectus Supplement does not
indicate that such Certificates represent the right to receive any distribution
in respect of principal in such amount, but rather the term "Notional Amount" is
used solely as a basis for calculating the amount of required distributions and
determining certain relative voting rights, all as specified in the related
Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a Fixed Pass-Through
Rate ("Fixed Rate Certificates") will bear interest, on the outstanding
Certificate Principal Balance (as defined below) (or Notional Amount, if
applicable), from its Original Issue Date, or from the last date to which
interest has been paid, at the fixed Pass-Through Rate stated on the face
thereof and in the applicable Prospectus Supplement until the principal amount
thereof is distributed or made available for repayment (or in the case of Fixed
Rate Certificates with no or a nominal principal amount, until the Notional
Amount thereof is reduced to zero), except that, if so specified in the
applicable Prospectus Supplement, the Pass-Through Rate for such Series or any
such Class or Classes may be subject to adjustment from
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time to time in response to designated changes in the rating assigned to such
Certificates by one or more rating agencies, in accordance with a schedule or
otherwise, all as described in such Prospectus Supplement. Unless otherwise set
forth in the applicable Prospectus Supplement, interest on each Series or Class
of Fixed Rate Certificates will be distributable in arrears on each Distribution
Date specified in such Prospectus Supplement. Each such distribution of interest
shall include interest accrued through the day specified in the applicable
Prospectus Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, interest on Fixed Rate Certificates will be computed on the basis of
a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a Variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the first Interest Reset Date (as defined below)
for such Series or Class at the initial Pass-Through Rate set forth on the face
thereof and in the applicable Prospectus Supplement ("Initial Pass-Through
Rate"). Thereafter, the Pass-Through Rate on such Series or Class for each
Interest Reset Period (as defined below) will be determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points (one basis point equals one one-hundredth of a percentage point) that may
be specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, and the "Spread Multiplier" is the percentage that may be
specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, except that if so specified in the applicable Prospectus
Supplement, the Spread or Spread Multiplier on such Series or any such Class or
Classes of Floating Rate Certificates may be subject to adjustment from time to
time in response to designated changes in the rating assigned to such
Certificates by one or more rating agencies, in accordance with a schedule or
otherwise, all as described in such Prospectus Supplement. The applicable
Prospectus Supplement, unless otherwise specified therein, will designate one of
the following Base Rates as applicable to a Floating Rate Certificate: (i) LIBOR
(a "LIBOR Certificate"), (ii) the Commercial Paper Rate (a "Commercial Paper
Rate Certificate"), (iii) the Treasury Rate (a "Treasury Rate Certificate"),
(iv) the Federal Funds Rate (a "Federal Funds Rate Certificate"), (v) the CD
Rate (a "CD Rate Certificate") or (vi) such other Base Rate (which may be based
on, among other things, one or more market indices or the interest and/or other
payments (whether scheduled or otherwise) paid, accrued or available with
respect to a designated asset, pool of assets or type of asset) as is set forth
in such Prospectus Supplement and in such Certificate. The "Index Maturity" for
any Series or Class of Floating Rate Certificates is the period of maturity of
the instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), Selected Interest
Rates," or any successor publications, published by the Board of Governors of
the Federal Reserve System. "Composite Quotations" means the daily statistical
release entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities"
published by the Federal Reserve Bank of New York.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given Series or Class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which
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interest may accrue during any interest accrual period specified in the
applicable Prospectus Supplement ("Maximum Pass-Through Rate") and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any such interest accrual period ("Minimum Pass-Through Rate"). In addition to
any Maximum Pass-Through Rate that may be applicable to any Series or Class of
Floating Rate Certificates, the Pass-Through Rate applicable to any Series or
Class of Floating Rate Certificates will in no event be higher than the maximum
rate permitted by applicable law, as the same may be modified by United States
law of general application. The Floating Rate Certificates will be governed by
the law of the State of New York and, under such law as of the date of this
Prospectus, the maximum rate of interest, with certain exceptions, is 25% per
annum on a simple interest basis.
The 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 Final Scheduled Distribution
Date (as defined in the Prospectus Supplement) will be that in effect on the
tenth day preceding such Final Scheduled Distribution Date. If an Interest Reset
Date for any Class of Floating Rate Certificates would otherwise be a day that
is not a Business Day, such Interest Reset Date will occur on a prior or
succeeding Business Day, specified in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Certificates shall be the accrued
interest from and including the Original Issue Date of such Series or Class or
the last Interest Reset Date to which interest has accrued and been distributed,
as the case may be, to but excluding the immediately following Distribution
Date.
With respect to a Floating Rate Certificate, accrued interest shall
be calculated by multiplying the Certificate Principal Balance of such
Certificate (or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the applicable
Prospectus Supplement) by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Prospectus Supplement, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding) for
each such day is
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computed by dividing the Pass-Through Rate in effect on such day by 360, in the
case of LIBOR Certificates, Commercial Paper Rate Certificates, Federal Funds
Rate Certificates and CD Rate Certificates or by the actual number of days in
the year, in the case of Treasury Rate Certificates. For purposes of making the
foregoing calculation, the variable Pass-Through Rate in effect on any Interest
Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Prospectus Supplement,
all percentages resulting from any calculation of the Pass-Through Rate on a
Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of Floating
Rate Certificates will be distributable on the Distribution Dates and for the
interest accrual periods as and to the extent set forth in the applicable
Prospectus Supplement.
Upon the request of the holder of any Floating Rate Certificate of a
given Series or Class, the Calculation Agent for such Series or Class will
provide the Pass-Through Rate then in effect and, if determined, the
Pass-Through Rate that will become effective on the next Interest Reset Date
with respect to such Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any, specified
in such Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "CD Rate" for each Interest Reset Period shall be the rate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"CD Rate Determination Date") for negotiable certificates of deposit having the
Index Maturity designated in the applicable Prospectus Supplement as published
in H.15(519) under the heading "CDs (Secondary Market)." In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the CD Rate
Calculation Date (as defined below) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
p.m., New York City time, on such CD Rate Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "CD Rate" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Rate Certificate and will be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such CD Rate
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for such CD Rate Certificate for negotiable certificates of deposit of
major United States money center banks of the highest credit standing (in the
market for negotiable
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certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD Rate"
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "CD Rate Calculation Date" pertaining to any CD Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such CD Rate Determination Date or, if such day is not a Business Day, the
next succeeding Business Day or (b) the second Business Day preceding the date
any distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Commercial Paper Rate" for each Interest Reset Period will be determined by
the Calculation Agent for such Commercial Paper Rate Certificate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "Commercial Paper Rate Determination Date") and shall be the Money
Market Yield (as defined below) on such Commercial Paper Rate Determination Date
of the rate for commercial paper having the Index Maturity specified in the
applicable Prospectus Supplement, as such rate shall be published in H.15(519)
under the heading "Commercial Paper." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Commercial Paper Rate
Calculation Date (as defined below) pertaining to such Commercial Paper Rate
Determination Date, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper." If by 3:00 p.m., New York City time, on such Commercial Paper Rate
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "Commercial Paper Rate" for such Interest Reset Period
shall be the Money Market Yield of the arithmetic mean of the offered rates, as
of 11:00 a.m., New York City time, on such Commercial Paper Rate Determination
Date of three leading dealers of commercial paper in The City of New York
selected by the Calculation Agent for such Commercial Paper Rate Certificate for
commercial paper of the specified Index Maturity placed for an industrial issuer
whose bonds are rated "AA" or the equivalent by a nationally recognized rating
agency; provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting offered rates as mentioned in this sentence,
the "Commercial Paper Rate" for such Interest Reset Period will be the same as
the Commercial Paper Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the Initial Pass-Through Rate).
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"Money Market Yield" shall be a yield calculated in accordance with
the following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Commercial Rate Paper Calculation Date" pertaining to any
Commercial Paper Rate Determination Date shall be the first to occur of (a) the
tenth calendar day after such Commercial Paper Rate Determination Date or, if
such day is not a Business Day, the next succeeding Business Day or (b) the
second Business Day preceding the date any distribution of interest is required
to be made following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for such Interest Reset Period (a "Federal Funds
Rate Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Federal Funds Rate
Calculation Date (as defined below) pertaining to such Federal Funds Rate
Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date made publicly available by the Federal
Reserve Bank of New York which is equivalent to the rate which appears in
H.15(519) under the heading "Federal Funds (Effective)"; provided, however, that
if such rate is not made publicly available by the Federal Reserve Bank of New
York by 3:00 p.m., New York City time, on such Federal Funds Rate Calculation
Date, the "Federal Funds Rate" for such Interest Reset Period will be the same
as the Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Pass-Through
Rate). Unless otherwise specified in the applicable Prospectus Supplement, in
the case of a Federal Funds Rate Certificate that resets daily, the Pass-Through
Rate on such Certificate for the period from and including a Monday to but
excluding the succeeding Monday will be reset by the Calculation Agent for such
Certificate on such second Monday (or, if not a Business Day, on the next
succeeding
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Business Day) to a rate equal to the average of the Federal Funds Rate in effect
with respect to each such day in such week.
The "Federal Funds Rate Calculation Date" pertaining to any Federal
Funds Rate Determination Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear interest
for each Interest Reset Period at the Pass-Through Rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
such Certificate and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rate for U.S. dollar
deposits, unless otherwise specified in the applicable Prospectus Supplement,
"LIBOR" for each Interest Reset Period will be determined by the Calculation
Agent for any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset
Date for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Certificate will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement,
commencing on such Interest Reset Date, which appear on the Reuters Screen
LIBO Page at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. "Reuters Screen LIBO Page" means the display
designated as page "LIBOR" on the Reuters Monitor Money Rates Service (or
such other page may replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major banks). If at least
two such offered rates appear on the Reuters Screen LIBO Page, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of such offered
rates as determined by the Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters Screen
LIBO Page on such LIBOR Determination Date, the Calculation Agent for such
LIBOR Certificate will request the principal London offices of each of
four major banks in the London interbank market selected by such
Calculation Agent to provide such Calculation Agent with its offered
quotations for deposits in U.S. dollars for the period of the specified
Index Maturity, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single transaction
in such market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of such
quotations. If fewer than two such quotations are provided, "LIBOR" for
such Interest Reset Period will be the arithmetic mean of rates quoted by
three major banks in The City of New York selected by the Calculation
Agent for such LIBOR Certificate at approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date for loans in U.S. dollars to
leading European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal to
an amount of not less than $1,000,000 that is
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representative of a single transaction in such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as specified in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to the
offered rates for deposits in a currency other than U.S. dollars, the applicable
Prospectus Supplement will set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will
bear interest for each Interest Reset Period at the Pass-Through Rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any,
specified in such Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H.15(519) under the heading "U.S.
Government Certificates-Treasury bills-auction average (investment)" or, in the
event that such rate is not published prior to 3:00 p.m., New York City time, on
the Treasury Rate Calculation Date (as defined below) pertaining to such
Treasury Rate Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the specified Index Maturity are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Treasury Rate Calculation Date, or if no such auction is held on such
Treasury Rate Determination Date, then the "Treasury Rate" for such Interest
Reset Period shall be calculated by the Calculation Agent for such Treasury Rate
Certificate and shall be a yield to maturity (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such Treasury Rate Determination
Date, of three leading primary United States government securities dealers
selected by such Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Reset
Period will be the day of the week in which the Interest Reset Date for such
Interest Reset Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday
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of each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as the result of a legal holiday, an auction is so
held on the preceding Friday, such Friday will be the Treasury Rate
Determination Date pertaining to the Interest Reset Period commencing in the
next succeeding week. Unless otherwise specified in the applicable Prospectus
Supplement, if an auction date shall fall on any day that would otherwise be an
Interest Reset Date for a Treasury Rate Certificate, then such Interest Reset
Date shall instead be the Business Day immediately following such auction date.
The "Treasury Rate Calculation Date" pertaining to any Treasury Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Treasury Rate Determination Date or, if such a day is not a Business
Day, the next succeeding Business Day or (b) the second Business Day preceding
the date any distribution of interest is required to be made following the
applicable Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise, each
Certificate (other than certain Classes of Strip Certificates) will have a
"Certificate Principal Balance" which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Unless otherwise specified in the related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Certificate of the Class or Classes entitled thereto (in the manner and
priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable pursuant
to the terms of the related Series, by the amount of any net losses realized on
any Deposited Asset ("Realized Losses") allocated thereto. Unless the related
Prospectus Supplement provides otherwise, the initial aggregate Certificate
Principal Balance of all Classes of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a Series and each Class thereof will be specified in the related Prospectus
Supplement. Distributions of principal of any Class of Certificates will be made
on a pro rata basis among all the Certificates of such Class. Strip Certificates
with no Certificate Principal Balance will not receive distributions of
principal.
FOREIGN CURRENCY CERTIFICATES
If the specified currency of any Certificate is not U.S. dollars (a
"Foreign Currency Certificate"), certain provisions with respect thereto will be
set forth in the related Prospectus Supplement which will specify the
denominations, the currency or currencies in which the principal and interest
with respect to such Certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise applicable
to the Certificates.
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INDEXED CERTIFICATES
From time to time, the Trust may offer a Series of Certificates
("Indexed Certificates"), the principal amount payable at the stated maturity
date of which (the "Indexed Principal Amount") and/or interest with respect to
which is determined by reference to (i) the rate of exchange between the
specified currency for such Certificate and the other currency or composite
currency (the "Indexed Currency") specified therein; (ii) the difference in the
price of a specified commodity (the "Indexed Commodity") on specified dates;
(iii) the difference in the level of a specified stock index (the "Stock
Index"), which may be based on U.S. or foreign stocks, on specified dates; or
(iv) such other objective price or economic measure as are described in the
related Prospectus Supplement. The manner of determining the Indexed Principal
Amount of an Indexed Certificate, and historical and other information
concerning the Indexed Currency, Indexed Commodity, Stock Index or other price
or economic measure used in such determination, will be set forth in the related
Prospectus Supplement, together with any information concerning tax consequences
to the Holders of such Indexed Certificates.
Except as otherwise specified in the related Prospectus Supplement,
interest on an Indexed Certificate will be payable based on the amount
designated in the related Prospectus Supplement as the "Face Amount" of such
Indexed Certificate. The related Prospectus Supplement will describe whether the
principal amount of the related Indexed Certificate that would be payable upon
redemption or repayment prior to the stated maturity date will be the Face
Amount of such Indexed Certificate, the Indexed Principal Amount of such Indexed
Certificate at the time of redemption or repayment, or another amount described
in such Prospectus Supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates ("Dual
Currency Certificates"), in which case payments of principal and/or interest in
respect of Dual Currency Certificates will be made in such currencies, and rates
of exchange will be calculated upon such bases, as indicated in the Certificates
and described in the related Prospectus Supplement. Other material terms and
conditions relating to Dual Currency Certificates will be set forth in the
Certificates and the related Prospectus Supplement.
OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for a pro
rata portion of the Deposited Assets, an "Exchangeable Series," the terms upon
which a holder may exchange Certificates of any Exchangeable Series for a pro
rata portion of the Deposited Assets of the related Trust will be specified in
the related Prospectus Supplement and/or the related Trust Agreement; provided
that any right of exchange shall be exercisable only to the extent that such
exchange would not be inconsistent with the 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
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applicable rules, regulations and interpretations thereunder. Such terms may
relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee
Certificates of each Class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance or Notional
Amount, as applicable, of each Certificate tendered for exchange be an
integral multiple of an amount specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such an
exchange (each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any Credit Support or other non-Underlying
Securities deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and the
establishment of a reserve for any anticipated Extraordinary Trust
Expenses as set forth in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in
order for a Certificate of a given Exchangeable Series (or Class within such
Exchangeable Series) to be exchanged by the applicable Certificateholder, the
Trustee for such Certificate must receive, at least 30 (or such shorter period
acceptable to the Trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such Certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
Registered Certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such Registered Certificate, the Certificate
Principal Balance or Notional Amount of such Registered Certificate to be
exchanged, the certificate number or a description of the tenor and terms of
such Registration Certificate, a statement that the option to elect exchange is
being exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by such Trustee not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Certificate and form duly
completed must be received by such Trustee by such fifth Business Day. Any
tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of
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such Certificate provided that the Certificate Principal Balance or Notional
Amount, as applicable, of such Certificate remaining outstanding after
redemption is an authorized denomination and all other exchange requirements set
forth in the related Prospectus Supplement are satisfied. Upon such partial
exchange, such Certificate shall be cancelled and a new Certificate or
Certificates for the remaining Certificate Principal Balance thereof shall be
issued (which, in the case of any Registered Certificate, shall be in the name
of the holder of such exchanged Certificate).
Unless otherwise specified in the applicable Prospectus Supplement,
because initially and until Definitive Certificates are issued each Certificate
will be represented by a Global Security, the Depositary's nominee will be the
Certificateholder of such Certificate and therefore will be the only entity that
can exercise a right of exchange. In order to ensure that the Depositary's
nominee will timely exercise a right of exchange with respect to a particular
Certificate, the beneficial owner of such Certificate must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Certificate to notify the Depositary of its desire to exercise a right of
exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Certificate in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus Supplement,
upon the satisfaction of the foregoing conditions and any applicable conditions
with respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Certificateholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described in such
Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement,
all Certificates of a given Series (or, if more than one Class exists, any given
Class within that Series) will, upon issuance, be represented by one or more
Global Securities that will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York (for Registered Certificates denominated and
payable in U.S. dollars), or such other depositary identified in the related
Prospectus Supplement (the "Depositary"), and registered in the name of a
nominee of the Depositary. Global Securities may be issued in either registered
or bearer form and in either temporary or definitive form. See "Limitations on
Issuance of Bearer Certificates" for provisions applicable to Certificates
issued in bearer form. Unless and until it is exchanged in whole or in part for
the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole
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by the Depositary for such Global Security to a nominee of such Depositary or by
a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Depositor as follows:
The Depository Trust Company is a limited-purpose trust company organized under
the laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depository Trust Company was created to hold
securities of its participating organizations and to facilitate the clearance
and settlement of securities transactions among the institutions that have
accounts with such Depositary ("participants") in such securities through
electronic book-entry changes in the accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. Such
Depositary's participants include securities brokers and dealers (including the
Offering Agent), banks, trust companies, clearing corporations, and certain
other organizations, some of whom (and/or their representatives) own such
Depositary. Access to such Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The Depository Trust Company has confirmed to the 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 or notional amounts, if applicable, of the
individual Certificates represented by such Global Security to the accounts of
its participants. The accounts to be accredited shall be designated by the
underwriters of such Certificates, or, if such Certificates are offered and sold
directly through one or more agents, by the 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
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persons or entities that do not participate in the Depositary's system, or to
otherwise act with respect to such Certificate, may be limited due to the lack
of a physical certificate for such Certificate.
Subject to the restrictions discussed under "Limitations on Issuance
of Bearer Certificates" below, distributions of principal of (and premium, if
any) and any interest on individual Certificates represented by a Global
Security will be made to the Depositary or its nominee, as the case may be, as
the Certificateholder of such Global Security. None of the Depositor, the
Administrative Agent, if any, the Trustee for such Certificates, any paying
agent or the Certificate registrar for such Certificates will have
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Depositor expects that the 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. Receipt
by owners of beneficial interests in a temporary Global Security of payments of
principal, premium or interest in respect thereof will be subject to the
restrictions discussed below under "Limitations on Issuance of Bearer
Certificates" below.
If the Depositary for Certificates of a given Class of any Series is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the 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 or notional amount, if applicable, to such
beneficial interest and to have such Definitive Certificates registered in its
name (if the Certificates of such Class are issuable as Registered
Certificates). Individual Definitive Certificates of such Class so issued will
be issued (a) as Registered Certificates in denominations, unless otherwise
specified by the Depositor or in the related Prospectus Supplement, of $1,000
and integral multiples thereof if the Certificates of such Class are issuable as
Registered Certificates, (b) as Bearer
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Certificates in the denomination or denominations specified by the Depositor or
as specified in the related Prospectus Supplement if the Certificates of such
Class are issuable as Bearer Certificates or (c) as either Registered or Bearer
Certificates, if the Certificates of such Class are issuable in either form
(Section 5.03). See, however, "Limitations on Issuance of Bearer Certificates"
below for a description of certain restrictions on the issuance of individual
Bearer Certificates in exchange for beneficial interests in a Global Security.
The applicable Prospectus Supplement will set forth any specific
terms of the depositary arrangement with respect to any Class or Series of
Certificates being offered thereby to the extent not set forth or different from
the description set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
Each Certificate of each Series (or if more than one Class exists,
each Class (whether or not each such Class is offered hereby) within such
Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Underlying Securities"),
purchased by the Depositor (or an affiliate thereof) in the secondary market and
assigned to a Trust as described in the applicable Prospectus Supplement. The
Underlying Securities will represent direct obligations of one or more
corporations, banking organizations or insurance companies organized under the
laws of the United States or any state, which are subject to the informational
requirements of the Exchange Act and which, in accordance therewith, file
reports and other information with the Commission (with respect to each
Underlying Security, an "Underlying Securities Issuer").
This Prospectus relates only to the Certificates offered hereby and
does not relate to the Underlying Securities. The following description of the
Underlying Securities is intended only to summarize certain characteristics of
the Underlying Securities the Depositor is permitted to deposit in a Trust and
does not purport to be a complete description of any Underlying Security
prospectus, and Underlying Securities Indenture (as defined below) and as
qualified by the applicable Underlying Securities Indenture.
UNDERLYING SECURITIES INDENTURE
General. Unless otherwise specified in the related Prospectus
Supplement, each Underlying Security will have been issued pursuant to an
agreement (each, a "Underlying Securities Indenture") between the Underlying
Securities Issuer and a trustee (the "Underlying Securities Trustee"). Unless
otherwise specified, the Underlying Securities Indenture and the Underlying
Securities Trustee will be qualified under the Trust Indenture Act of 1939 (the
"Trust Indenture Act") and the Underlying Securities Indenture will contain
certain provisions required by the Trust Indenture Act.
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Certain Covenants. Indentures generally contain covenants intended
to protect security holders against the occurrence or effects of certain
specified events, including restrictions limiting the issuer's, and in some
cases any of its subsidiary's, ability to: (i) consolidate, merge, or transfer
or lease assets; (ii) incur or suffer to exist any lien, charge, or encumbrance
upon any of its property or assets, or to incur, assume, guarantee or suffer to
exist any indebtedness for borrowed money if the payment of such indebtedness is
secured by the grant of such a lien; (iii) declare or pay any cash dividends, or
make any distributions on or in respect of, or purchase, redeem, exchange or
otherwise acquire or retire for value any capital stock or subordinated
indebtedness of the issuer or its subsidiaries, if any. An indenture may also
contain financial covenants which, among other things, require the maintenance
of certain financial ratios or the creation or maintenance of reserves. Subject
to certain exceptions, indentures typically may be amended or supplemented and
past defaults may be waived with the consent of the indenture trustee, the
consent of the holders of not less than a specified percentage of the
outstanding securities, or both.
The Underlying Securities Indenture related to one or more
Underlying Securities included in a Trust may include some, all or none of the
foregoing provisions or variations thereof or additional covenants not discussed
herein. To the extent that the Underlying Securities are investment grade debt
they are unlikely to contain significant restrictive covenants although certain
non-investment grade debt may not be subject to restrictive covenants either.
There can be no assurance that any such provision will protect the Trust as a
holder of the Underlying Securities against losses. The Prospectus Supplement
used to offer any Series of Certificates will describe material covenants in
relation to any Concentrated Underlying Security (as defined below) and, as
applicable, will describe material covenants which are common to any pool of
Underlying Securities.
Events of Default. Indentures generally provide that any one of a
number of specified events will constitute an event of default with respect to
the securities issued thereunder. Such events of default typically include the
following or variations thereof: (i) failure by the issuer to pay an installment
of interest or principal on the securities at the time required (subject to any
specified grace period) or to redeem any of the securities when required
(subject to any specified grace period); (ii) failure by the issuer to observe
or perform any covenant, agreement or condition contained in the securities or
the indenture which failure is materially adverse to security holders and
continues for a specified period after notice thereof is given to the issuer by
the indenture trustee or the holders of not less than a specified percentage of
the outstanding securities; (iii) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to certain
of the other outstanding debt obligations of the issuer or the acceleration by
or on behalf of the holders thereof of such securities; and (iv) certain events
of insolvency or bankruptcy with respect to the Underlying Securities Issuer.
Remedies. Indentures generally provide that upon the occurrence of
an event of default, the indenture trustee may, and upon the written request of
the holders of not less than a specified percentage of the outstanding
securities must, take such action as it may deem appropriate to protect and
enforce the rights of the security holders. Certain indentures provide that the
indenture trustee or a specified percentage of the holders of the outstanding
securities have the right to declare
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all or a portion of the principal and accrued interest on the outstanding
securities immediately due and payable upon the occurrence of certain events of
default, subject to the issuer's right to cure, if applicable. Generally, an
indenture will contain a provision entitling the trustee thereunder to be
indemnified by the security holders prior to proceeding to exercise any right or
power under such indenture with respect to such securities at the request of
such security holders. An indenture is also likely to limit a security holder's
right to institute certain actions or proceedings to pursue any remedy under the
indenture unless certain conditions are satisfied, including consent of the
indenture trustee, that the proceeding be brought for the ratable benefit of all
holders of the security, and/or the indenture trustee, after being requested to
institute a proceeding by the owners of at least a specified minimum percentage
of the securities, shall have refused or neglected to comply with such request
within a reasonable time.
Each Underlying Securities Indenture may include some, all or none
of the foregoing provisions or variations thereof or additional events of
default not discussed herein. The Prospectus Supplement with respect to any
Series of Certificates will describe the events of default under the Underlying
Securities Indenture with respect to any Concentrated Underlying Security
("Underlying Security Events of Default") and applicable remedies with respect
thereto. With respect to any Trust comprised of a pool of securities, the
applicable Prospectus Supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no assurance
that any such provision will protect the Trust, as a holder of the Underlying
Securities, against losses. If an Underlying Security Event of Default occurs
and the Trustee as a holder of the Underlying Securities is entitled to vote or
take such other action to declare the principal amount of an Underlying Security
and any accrued and unpaid interest thereon to be due and payable, the
Certificateholders' objectives may differ from those of holders of other
securities of the same series and class as any Underlying Security ("Outstanding
Debt Securities") in determining whether to declare the acceleration of the
Underlying Securities.
Subordination. As set forth in the applicable Prospectus Supplement,
certain of the Underlying Securities with respect to any Trust may be either
senior ("Senior Underlying Securities") or subordinated ("Subordinated
Underlying Securities") in right to payment to other existing or future
indebtedness of the Underlying Securities Issuer. With respect to Subordinated
Underlying Securities, to the extent of the subordination provisions of such
securities, and after the occurrence of certain events, security holders and
direct creditors whose claims are senior to Subordinated Underlying Securities,
if any, may be entitled to receive payment of the full amount due thereon before
the holders of any subordinated debt securities are entitled to receive payment
on account of the principal (and premium, if any) or any interest on such
securities. Consequently, the Trust as a holder of subordinated debt may suffer
a greater loss than if it held unsubordinated debt of the Underlying Securities
Issuer. There can be no assurance, however, that in the event of a bankruptcy or
similar proceeding the Trust as a holder of Senior Underlying Securities would
receive all payments in respect of such securities even if holders of
subordinated securities receive amounts in respect of such securities. Reference
is made to the Prospectus Supplement used to offer any Series of Certificates
for a description of any subordination provisions with respect to any
Concentrated Underlying
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Securities and the percentage of Senior Underlying Securities and Subordinated
Underlying Securities, if any, in a Trust comprised of a pool of securities.
Secured Obligations. Certain of the Underlying Securities with
respect to any Trust may represent secured obligations of the Underlying
Securities Issuer ("Secured Underlying Securities"). Generally, unless an event
of default shall have occurred and is continuing, or with respect to certain
collateral or as otherwise set forth in the indenture pursuant to which such
securities were offered and sold, an issuer of secured obligations generally has
the right to remain in possession and retain exclusive control of the collateral
securing a security and to collect, invest and dispose of any income related to
the collateral. The indenture pursuant to which any secured indebtedness is
issued may also contain certain provisions for release, substitution or
disposition of collateral under certain circumstances with or without the
consent of the indenture trustee or upon the direction of not less than a
specified percentage of the security holders. The indenture pursuant to which
any secured indebtedness is issued will also provide for the disposition of the
collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal (and
premium, if any) or any interest on such securities pending the sale of any
collateral and prior to or during such period the related collateral may decline
in value. If proceeds of the sale of collateral following an indenture event of
default are insufficient to repay all amounts due in respect of any secured
obligations, the holders of such securities (to the extent not repaid from the
proceeds of the sale of the collateral) would have only an unsecured claim
ranking pari passu with the claims of all other general unsecured creditors.
The Underlying Securities Indenture with respect to any Secured
Underlying Security may include, some, all or none of the foregoing provisions
or variations thereof. The Prospectus Supplement used to offer any Series of
Certificates which includes Concentrated Underlying Securities which are Secured
Underlying Securities, will describe the security provisions of such Underlying
Securities and the related collateral. With respect to any Trust comprised of a
pool of securities, a substantial portion of which are Secured Underlying
Securities, the applicable Prospectus Supplement will disclose certain general
information with respect to such security provisions and the collateral.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable Prospectus Supplement with
respect to each Series of Certificates for a description of the following terms,
as applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the Underlying Securities Issuer; (iii) whether any of the
obligations are secured or unsecured and the nature of any collateral; (iv) the
limit, if any, upon the aggregate principal amount of such debt securities; (v)
the dates on which, or the range of dates within which, the principal of (and
premium, if any, on) such debt securities will be payable; (vi) the rate or
rates or the method of determination thereof, at which such Underlying
Securities will bear interest, if any ("Underlying Securities Rate"); the date
or dates from which such interest will accrue ("Underlying Securities
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Interest Accrual Periods"); and the dates on which such interest will be payable
("Underlying Securities Payment Dates"); (vii) the obligation, if any, of the
Underlying Securities Issuer to redeem the Outstanding Debt Securities pursuant
to any sinking fund or analogous provisions, or at the option of a holder
thereof, and the periods within which or the dates on which, the prices at which
and the terms and conditions upon which such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Underlying Securities Issuer; (ix) whether the
Underlying Securities were issued at a price lower than the principal amount
thereof; (x) if other than United States dollars, the foreign or composite
currency in which such debt securities are denominated, or in which payment of
the principal of (and premium, if any) or any interest on such Underlying
Securities will be made (the "Underlying Securities Currency"), and the
circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such Underlying Securities; (xii) the rating thereof, if any, and (xiii) any
other material terms of such Underlying Securities.
With respect to a Trust comprised of a pool of Underlying
Securities, the related Prospectus Supplement will describe the composition of
the Underlying Securities pool as of the Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (ii), (iii),
(v), (vi), (vii), (viii) and (ix) of the preceding paragraph and any other
material terms regarding such pool of securities.
In addition to the foregoing, with respect to each Concentrated
Underlying Security the applicable Prospectus Supplement will disclose the
identity of the applicable obligor and the Underlying Securities Trustee, and
will describe the existence and type of certain information that is made
publicly available by each obligor regarding such Underlying Security or
Underlying Securities and will disclose where and how prospective purchasers of
the Certificates may obtain such publicly available information with respect to
each such obligor. Such publicly available information will typically consist of
the quarterly and annual reports filed under the Exchange Act by such issuer
with, and which are available from, the Commission.
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, the Depositor, on behalf of the Trust,
will continue to be subject to the reporting requirements of the Exchange Act,
but certain information with respect to such issuer may be unavailable.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, the Depositor may also
deposit into a given Trust, or the Trustee on behalf of the Certificateholders
of a Trust may enter into an agreement constituting or providing for the
purchase of, to the extent described in the related Prospectus Supplement,
certain assets related or incidental to one or more of such Underlying
Securities or to
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some other asset deposited in the Trust, including hedging contracts and other
similar arrangements (such as puts, calls, interest rate swaps, currency swaps,
floors, caps and collars), cash and assets ancillary or incidental to the
foregoing or to the Underlying Securities (including assets obtained through
foreclosure or in settlement of claims with respect thereto) and direct
obligations of the United States (all such assets for any given Series, together
with the related Underlying Securities, the "Deposited Assets"). The applicable
Prospectus Supplement will, to the extent appropriate, contain analogous
disclosure with respect to the foregoing assets as referred to above with
respect to the Underlying Securities.
Unless otherwise specified in the related Prospectus Supplement, the
Deposited Assets for a given Series of Certificates and the related Trust will
not constitute Deposited Assets for any other Series of Certificates and the
related Trust and the Certificates of each Class of a given Series possess an
equal and ratable undivided ownership interest in such Deposited Assets. The
applicable Prospectus Supplement may, however, specify that certain assets
constituting a part of the Deposited Assets relating to any given Series may be
beneficially owned solely by or deposited solely for the benefit of one Class or
a group of Classes within such Series. In such event, the other Classes of such
Series will not possess any beneficial ownership interest in those specified
assets constituting a part of the Deposited Assets.
CREDIT SUPPORT
As specified in the applicable Prospectus Supplement for a given
Series of Certificates, the Trust for any Series of Certificates may include, or
the Certificateholders of such Series (or any Class or group of Classes within
such Series) may have the benefit of, Credit Support for any Class or group of
Classes within such Series. Such Credit Support may be provided by any
combination of the following means described below or any other means described
in the applicable Prospectus Supplement. The applicable Prospectus Supplement
will set forth whether the Trust for any Class or group of Classes of
Certificates contains, or the Certificateholders of such Certificates have the
benefit of, Credit Support and, if so, the amount, type and other relevant terms
of each element of Credit Support with respect to any such Class or Classes and
certain information with respect to the obligors of each such element, including
financial information with respect to any such obligor providing Credit Support
for 20% or more of the aggregate principal amount of such Class or Classes
unless such obligor is subject to the informational requirements of the
Exchange Act.
Subordination. As discussed below under "-- Collections," the rights
of the Certificateholders of any given Class within a Series of Certificates to
receive collections from the Trust for such Series and any Credit Support
obtained for the benefit of the Certificateholders of such Series (or Classes
within such Series) may be subordinated to the rights of the Certificateholders
of one or more other Classes of such Series to the extent described in the
related Prospectus Supplement. Such subordination accordingly provides some
additional credit support to those Certificateholders of those other Classes.
For example, if losses are realized during a given period on the Deposited
Assets relating to a Series of Certificates such that the collections received
thereon are insufficient to make all distributions on the Certificates of such
Series, those realized losses would be allocated to
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the Certificateholders of any Class of any such Series that is subordinated to
another Class, to the extent and in the manner provided in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, certain amounts otherwise payable to Certificateholders of any Class
that is subordinated to another Class may be required to be deposited into a
reserve account. Amounts held in any reserve account may be applied as described
below under "-- Reserve Accounts" and in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit
Support for any Series or Class of Certificates may include, in addition to the
subordination of certain Classes of such Series and the establishment of a
reserve account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
Class will be limited to the extent necessary to make required distributions to
the Certificateholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any Series
(or Class or group of Classes of Certificates within such Series) may, if
specified in the applicable Prospectus Supplement, have the benefit of a letter
or letters of credit (a "Letter of Credit") issued by a bank (a "Letter of
Credit Bank") or a surety bond or bonds (a "Surety Bond") issued by a surety
company (a "Surety"). In either case, the Trustee or such other person specified
in the applicable Prospectus Supplement will use its reasonable efforts to cause
the Letter of Credit or the Surety Bond, as the case may be, to be obtained, to
be kept in full force and effect (unless coverage thereunder has been exhausted
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. The Trustee or such other person
specified in the applicable Prospectus Supplement will make or cause to be made
draws under the Letter of Credit or the Surety Bond, as the case may be, under
the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will provide
the manner, priority and source of funds by which any such draws are to be
repaid.
Unless otherwise specified in the applicable Prospectus Supplement,
in the event that the Letter of Credit Bank or the Surety, as applicable, ceases
to satisfy any credit rating or other applicable requirements specified in the
related Prospectus Supplement, the Trustee or such other person specified in the
applicable Prospectus Supplement will use its reasonable efforts to obtain or
cause to be obtained a substitute Letter of Credit or Surety Bond, as
applicable, or other form of credit enhancement providing similar protection,
that meets such requirements and provides the same coverage to the extent
available for the same cost. There can be no assurance that any Letter of Credit
Bank or any Surety, as applicable, will continue to satisfy such requirements or
that any such substitute Letter of Credit, Surety Bond or similar credit
enhancement will be available providing
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equivalent coverage for the same cost. To the extent not so available, the
credit support otherwise provided by the Letter of Credit or the Surety Bond (or
similar credit enhancement) may be reduced to the level otherwise available for
the same cost as the original Letter of Credit or Surety Bond.
Reserve Accounts. If so provided in the related Prospectus
Supplement, the Trustee or such other person specified in the Prospectus
Supplement will deposit or cause to be deposited into an account maintained with
an eligible institution (which may be the Trustee) (a "Reserve Account") any
combination of cash or permitted investments in specified amounts, which will be
applied and maintained in the manner and under the conditions specified in such
Prospectus Supplement. In the alternative or in addition to such deposit, a
Reserve Account may be funded through application of a portion of collections
received on the Deposited Assets for a given Series of Certificates, in the
manner and priority specified in the applicable Prospectus Supplement. Amounts
deposited in such Reserve Account may be distributed to Certificateholders of
such Class or group of Classes within such Series, or may be used for other
purposes, in the manner and to the extent provided in the related Prospectus
Supplement. Amounts deposited in any Reserve Account will be invested in certain
permitted investments by, or at the direction of, the Trustee, the 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 such collections from time to time prior to
any applicable Distribution Date into a segregated account maintained or
controlled by the applicable Trustee for the benefit of such Series (each a
"Certificate Account"). An Administrative Agent, if any is appointed pursuant to
the applicable Prospectus Supplement, will direct the Trustee, and otherwise the
Trustee will make all determinations, as to the appropriate application of such
collections and other amounts available for distribution to the payment of any
administrative or collection expenses (such as the administrative fee) and
certain Credit Support-related ongoing fees (such as insurance premiums, letter
of credit fees or any required account deposits) and to the payment of amounts
then due and owing on the Certificates of such Series (and Classes within such
Series), all in the manner and priorities described in the related Prospectus
Supplement. The applicable Prospectus Supplement will specify the collection
periods, if applicable, and Distribution Dates for a given Series of
Certificates and the particular requirements relating to the segregation and
investment of collections received on the Deposited Assets during a given
collection period or on or by certain specified dates. There can be no assurance
that amounts received from the Deposited Assets and any Credit Support obtained
for the benefit of Certificateholders for a particular Series or Class of
Certificates over a specified period will be sufficient, after payment of all
prior expenses and fees for such period, to pay amounts then due and owing to
holders of such Certificates. The applicable Prospectus Supplement will also set
forth the manner and priority by which any Realized Losses will be allocated
among the Classes of any Series of Certificates, if applicable.
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The relative priorities of distributions with respect to collections
from the assets of the Trust assigned to Classes of a given Series of
Certificates may permanently or temporarily change over time upon the occurrence
of certain circumstances specified in the applicable Prospectus Supplement.
Moreover, the applicable Prospectus Supplement may specify that the relative
distribution priority assigned to each Class of a given Series for purposes of
payments of certain amounts, such as principal, may be different from the
relative distribution priority assigned to each such Class for payments of other
amounts, such as interest or premium.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of certain provisions of the Trust Agreement
and the Certificates do not purport to be complete and such summary is qualified
in its entirety by reference to the detailed provisions of the form of Trust
Agreement filed as an exhibit to the Registration Statement. Article and section
references in parentheses below are to articles and sections in the Trust
Agreement. Wherever particular sections or defined terms of the Trust Agreement
are referred to, such sections or defined terms are incorporated herein by
reference as part of the statement made, and the statement is qualified in its
entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the 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 2.05). Each Deposited Asset will be identified in a schedule appearing
as an exhibit to the Trust Agreement. Such schedule will include certain
statistical information with respect to each Underlying Security and each other
Deposited Asset as of the Cut-off Date, and in the event any Underlying Security
represents ten percent or more of the total Underlying Securities with respect
to any Series of Certificates ("Concentrated Underlying Securities"), such
schedule will include, to the extent applicable, information regarding the
payment terms thereof, the Retained Interest, if any, with respect thereto, the
maturity or terms thereof, the rating, if any, thereof and certain other
information with respect thereto.
In addition, the 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
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Supplement, and the Trustee (or such custodian) will hold such documents in
trust for the benefit of the Certificateholders (Sections 2.01 and 2.02).
With respect to certain types of Deposited Assets specified in the
applicable Prospectus Supplement if and to the extent provided therein, if any
such document is found to be missing or defective in any material respect, the
Trustee (or such custodian) shall immediately notify the Administrative Agent,
if any, and the Depositor, and the Administrative Agent, if any, and otherwise
the Trustee shall immediately notify the relevant person who sold the applicable
Deposited Asset to the Depositor (a "Deposited Asset Provider"). If and to the
extent specified in the applicable Prospectus Supplement, if the Deposited Asset
Provider cannot cure such omission or defect within 60 days after receipt of
such notice, the Deposited Asset Provider will be obligated, within 90 days of
receipt of such notice, to repurchase the related Deposited Asset from the
Trustee at the Purchase Price (as defined below) or provide a substitute for
such Deposited Asset. There can be no assurance that a Deposited Asset Provider
will fulfill this repurchase or substitution obligation. Although the
Administrative Agent, if any, or otherwise the Trustee is obligated to use its
best efforts to enforce such obligation, neither such Administrative Agent nor
the Depositor will be obligated to repurchase or substitute for such Deposited
Asset if the Deposited Asset Provider defaults on its obligation. Unless
otherwise specified in the related Prospectus Supplement, when applicable, this
repurchase or substitution obligation constitutes the sole remedy available to
the Certificateholders or the Trustee for omission of, or a material defect in,
or failure to provide, a constituent document (Section 3.07).
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 2.04).
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates the Trustee or
such other person specified in the Prospectus Supplement directly or through
sub-administrative agents, will make reasonable efforts to collect all scheduled
payments under the Deposited Assets and will follow or cause to be followed such
collection procedures, if any, as it would follow with respect to comparable
financial assets that it held for its own account, provided that such procedures
are consistent with the Trust Agreement and any related instrument governing any
Credit Support (collectively, the "Credit Support Instruments") and provided
that, except as otherwise expressly set forth in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability.
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Sub-Administration. Any Trustee or Administrative Agent may delegate
its obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent"), but
the Trustee or Administrative Agent will remain obligated with respect to such
obligations under the Trust Agreement. Each Sub- Administrative Agent will be
required to perform the customary functions of an administrator of comparable
financial assets, including, if applicable, collecting payments from obligors
and remitting such collections to the Trustee; maintaining accounting records
relating to the Deposited Assets, attempting to cure defaults and delinquencies;
and enforcing any other remedies with respect thereto all as and to the extent
provided in the applicable Sub-Administration Agreement (as defined below).
The agreement between any Administrative Agent or Trustee and a Sub-
Administrative Agent (a "Sub-Administration Agreement") will be consistent with
the terms of the Trust Agreement and such assignment to the Sub-Administrator by
itself will not result in a withdrawal or downgrading of the rating of any Class
of Certificates issued pursuant to the Trust Agreement. With respect to any
Sub-Administrative Agreement between an Administrative Agent and a
Sub-Administrative Agent, although each such Sub-Administration Agreement will
be a contract solely between such Administrative Agent and the
Sub-Administrative Agent, the Trust Agreement pursuant to which a Series of
Certificates is issued will provide that, if for any reason such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, will be solely
liable for all fees owed by it to any Sub-Administrative Agent, irrespective of
whether the compensation of the Administrative Agent or Trustee, as applicable,
pursuant to the Trust Agreement with respect to the particular Series of
Certificates is sufficient to pay such fees. However, a Sub-Administrative Agent
may be entitled to a Retained Interest in certain Deposited Assets to the extent
provided in the related Prospectus Supplement. Each Sub-Administrative Agent
will be reimbursed by the Administrative Agent, if any, or otherwise the Trustee
for certain expenditures which it makes, generally to the same extent the
Administrative Agent or Trustee, as applicable, would be reimbursed under the
terms of the Trust Agreement relating to such Series. See "--Retained Interest;
Administrative Agent Compensation and Payment of Expenses."
The Administrative Agent or Trustee, as applicable, may require any
Sub- Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub-Administrative Agent.
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Realization upon Defaulted Deposited Assets. Unless otherwise
specified in the applicable Prospectus Supplement, as administrator with respect
to the Deposited Assets, the Trustee, on behalf of the Certificateholders of a
given Series (or any Class or Classes within such Series), will present claims
under each applicable Credit Support Instrument, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Deposited Assets. As set forth above, all collections by or
on behalf of the Trustee or Administrative Agent under any Credit Support
Instrument are to be deposited in the Certificate Account for the related Trust,
subject to withdrawal as described above.
Unless otherwise provided in the applicable Prospectus Supplement,
if recovery on a defaulted Deposited Asset and any related Credit Support
Instrument is not available, the Trustee will be obligated to follow or cause to
be followed such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Deposited Asset (Section 3.07), provided
that, except as otherwise expressly provided in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability. If the proceeds of any liquidation
of the defaulted Deposited Asset are less than the sum of (i) the outstanding
principal balance of the defaulted Deposited Asset, (ii) interest accrued but
unpaid thereon at the applicable interest rate and (iii) the aggregate amount of
expenses incurred by the Administrative Agent and the Trustee, as applicable, in
connection with such proceedings to the extent reimbursable from the assets of
the Trust under the Trust Agreement, the Trust will realize a loss in the amount
of such difference (Section 3.07). Only if and to the extent provided in the
applicable Prospectus Supplement, the Administrative Agent or Trustee, as so
provided, will be entitled to withdraw or cause to be withdrawn from the related
Certificate Account out of the net proceeds recovered on any defaulted Deposited
Asset, prior to the distribution of such proceeds to Certificateholders, amounts
representing its normal administrative compensation on the Deposited Asset,
unreimbursed administrative expenses incurred with respect to the Deposited
Asset and any unreimbursed advances of delinquent payments made with respect to
the Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Deposited Assets, and, if so,
the owner thereof. If so provided, the Retained Interest will be established on
an asset-by-asset basis and will be specified in an exhibit to the applicable
series supplement to the Trust Agreement. A Retained Interest in a Deposited
Asset represents a specified interest therein. Payments in respect of the
Retained Interest will be deducted from payments on the Deposited Assets as
received and, in general, will not be deposited in the applicable Certificate
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, after deduction of all applicable administration fees, will be
allocated between the Retained Interest (if any) and interest distributions to
Certificateholders on a pari passu basis.
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The applicable Prospectus Supplement will specify the Administrative
Agent's, if any, and the Trustee's compensation, and the source, manner and
priority of payment thereof, with respect to a given Series of Certificates.
If and to the extent specified in the applicable Prospectus
Supplement, in addition to amounts payable to any Sub-Administrative Agent, the
Administrative Agent, if any; and otherwise the Trustee will pay from its
compensation certain expenses incurred in connection with its administration of
the Deposited Assets, including, without limitation, payment of the fees and
disbursements of the Trustee, if applicable, and independent accountants,
payment of expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement (Section 3.11).
ADVANCES IN RESPECT OF DELINQUENCIES
Unless otherwise specified in the applicable Prospectus Supplement,
the Administrative Agent, if any, specified therein or the Trustee will have no
obligation to make any advances with respect to collections on the Deposited
Assets or in favor of the Certificateholders of the related Series of
Certificates. However, to the extent provided in the applicable Prospectus
Supplement, any such Administrative Agent or the Trustee will advance on or
before each Distribution Date its own funds or funds held in the Certificate
Account for such Series that are not part of the funds available for
distribution for such Distribution Date, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest (net of related
administration fees and any Retained Interest) with respect to the Deposited
Assets that were due during the related Collection Period (as defined in the
related Prospectus Supplement) and were delinquent on the related Determination
Date, subject to (i) any such Administrative Agent's or Trustee's good faith
determination that such advances will be reimbursable from Related Proceeds (as
defined below) and (ii) such other conditions as may be specified in the
Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the Class or
Classes of Certificates entitled thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's or Trustee's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account for such Series to the extent that such
Administrative Agent or Trustee shall determine, in its sole judgment, that such
advance (a "Nonrecoverable Advance") is not ultimately recoverable from Related
Proceeds. If advances have been made by such Administrative Agent or Trustee
from excess funds in the Certificate Account for any Series, such Administrative
Agent or Trustee will replace such funds in such Certificate Account on any
future Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date (Section 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee to make
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advances may be secured by a cash advance reserve fund or a surety bond. If
applicable, information regarding the characteristics of, and the identity of
any obligor on, any such surety bond, will be set forth in the related
Prospectus Supplement.
CERTAIN MATTERS REGARDING THE ADMINISTRATIVE AGENT AND THE 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, if
any, may resign from its obligations and duties under the Trust Agreement with
respect to any Series of Certificates only if such resignation, and the
appointment of a successor, will not result in a withdrawal or downgrading of
the rating of any Class of Certificates of such Series or upon a determination
that its duties under the Trust Agreement with respect to such Series are no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor has assumed the Administrative
Agent's obligations and duties under the Trust Agreement with respect to such
Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the 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
6.02). The
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applicable Prospectus Supplement will describe how such legal expenses and costs
of such action and any liability resulting therefrom will be allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to which
an Administrative Agent is a part, or any person succeeding to the business of
an Administrative Agent, will be the successor of the Administrative Agent under
the Trust Agreement with respect to the Certificates of any given Series.
ADMINISTRATIVE AGENT TERMINATION EVENTS;
RIGHTS UPON ADMINISTRATIVE AGENT TERMINATION EVENT
Unless otherwise provided in the related Prospectus Supplement,
"Administrative Agent Termination Events," if applicable, under the Trust
Agreement with respect to any given Series of Certificates will consist of the
following: (i) any failure by an Administrative Agent to remit to the Trustee
any funds in respect of collections on the Deposited Assets and Credit Support,
if any, as required under the Trust Agreement, that continues unremedied for
five days after the giving of written notice of such failure to the
Administrative Agent by the Trustee or the Depositor, or to the Administrative
Agent, the Depositor and the Trustee by the holders of such Certificates
evidencing not less than 25% of the Voting Rights (as defined below); (ii) any
failure by an Administrative Agent duly to observe or perform in any material
respect any of its other covenants or obligations under the Trust Agreement with
respect to such Series which continues unremedied for thirty days after the
giving of written notice of such failure to the Administrative Agent by the
Trustee or the Depositor, or to the Administrative Agent, the Depositor and the
Trustee by the holders of such Certificates evidencing not less than 25% of the
Voting Rights; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain actions
by or on behalf of an Administrative Agent indicating its insolvency or
inability to pay its obligations. Any additional Administrative Agent
Termination Events with respect to any given Series of Certificates will be set
forth in the applicable Prospectus Supplement. In addition, the applicable
Prospectus Supplement and the related series supplement to the Trust Agreement
will specify as to each matter requiring the vote of holders of Certificates of
a Class or group of Classes within a given Series, the circumstances and manner
in which the Required Percentage (as defined below) applicable to each such
matter is calculated. "Required Percentage" means with respect to any matter
requiring a vote of holders of Certificates of a given Series, the specified
percentage (computed on the basis of outstanding Certificate Principal Balance
or Notional Amount, as applicable) of Certificates of a designated Class or
group of Classes within such Series (either voting as separate classes or as a
single class) applicable to such matter, all as specified in the applicable
Prospectus Supplement and the related series supplement to the Trust Agreement.
"Voting Rights" evidenced by any Certificate will be the portion of the voting
rights of all the Certificates in the related Series allocated in the manner
described in the related Prospectus Supplement (Article I).
Unless otherwise specified in the applicable Prospectus Supplement,
so long as an Administrative Agent Termination Event, if applicable, under the
Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Depositor or the Trustee may, and at the
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direction of holders of such Certificates evidencing not less than the "Required
Percentage-- Administrative Agent Termination" (as defined in the Prospectus
Supplement, if applicable) of the Voting Rights, the Trustee will, terminate all
the rights and obligations of such Administrative Agent under the Trust
Agreement relating to the applicable Trust and in and to the related Deposited
Assets (other than any Retained Interest of such Administrative Agent),
whereupon the Trustee will succeed to all the responsibilities, duties and
liabilities of such Administrative Agent under the Trust Agreement with respect
to such Series (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent Deposited Assets, then the Trustee
will not be so obligated) and will be entitled to similar compensation
arrangements. In the event that the Trustee is unwilling or unable to act, it
may or, at the written request of the holders of such Certificates evidencing
not less than the "Required Percentage--Administrative Agent Termination" of the
Voting Rights, it will appoint, or petition a court of competent jurisdiction
for the appointment of, an administration agent acceptable to the Rating Agency
with a net worth at the time of such appointment of at least $15,000,000 to act
as successor to such Administrative Agent under the Trust Agreement with respect
to such Series. Pending such appointment, the Trustee is obligated to act in
such capacity (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent Deposited Assets, then the Trustee
will not be so obligated). The Trustee and any such successor may agree upon the
compensation be paid to such successor, which in no event may be greater than
the compensation payable to such Administrative Agent under the Trust Agreement
with respect to such Series.
No Certificateholder will have the right under the Trust Agreement
to institute any proceeding with respect thereto unless such holder previously
has given to the Trustee written notice of breach and unless the holders of
Certificates evidencing not less than the "Required Percentage-- Remedies" (as
defined in the Prospectus Supplement) of the Voting Rights have made written
request upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the Trustee
for fifteen days has neglected or refused to institute any such proceeding
(Section 10.02). The Trustee, however, is under no obligation to exercise any of
the trusts or powers vested in it by the Trust Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by the Trust Agreement,
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby (Section 10.02).
MODIFICATION AND WAIVER
Unless otherwise specified in the applicable Prospectus Supplement,
the Trust Agreement for each Series of Certificates may be amended by the
Depositor and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders, for certain purposes including (i) to cure
any ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or in the Prospectus Supplement,
(iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such
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addition affects any series or class of Certificateholders differently than any
other series or class of Certificateholders, then such addition will not, as
evidenced by an opinion of counsel, have a material adverse effect on the
interests of any affected series or class of Certificateholders), (iv) to add to
the covenants, restrictions or obligations of the 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 qualify, reduce or withdraw the then current rating thereof, or
(vi) to comply with any requirements imposed by the Code. Without limiting the
generality of the foregoing, unless otherwise specified in the applicable
Prospectus Supplement, the Trust Agreement may also be modified or amended from
time to time by the Depositor, and the Trustee, with the consent of the holders
of Certificates evidencing not less than the "Required Percentage--Amendment"
(as defined in the Prospectus Supplement) of the Voting Rights of those
Certificates that are materially adversely affected by such modification or
amendment for the purpose of adding any provision to or changing in any manner
or eliminating any provision of the Trust Agreement or of modifying in any
manner the rights of such Certificateholders; provided, however, that in the
event such modification or amendment would materially adversely affect the
rating of any Series or Class by each Rating Agency, the "Required
Percentage--Amendment" specified in the related series supplement to the Trust
Agreement shall include an additional specified percentage of the Certificates
of such Series or Class.
Except as otherwise set forth in the applicable Prospectus
Supplement, no such modification or amendment may, however, (i) reduce in any
manner the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Unless otherwise specified in the applicable Prospectus Supplement,
holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) of the Voting
Rights of a given Series may, on behalf of all Certificateholders of that
Series, (i) waive, insofar as that Series is concerned, compliance by the
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 5.20).
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REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in the
applicable Prospectus Supplement, with each distribution to Certificateholders
of any Class of Certificates of a given Series, the Administrative Agent or the
Trustee, as provided in the related Prospectus Supplement, will forward or cause
to be forwarded to each such Certificateholder, to the Depositor and to such
other parties as may be specified in the Trust Agreement, a statement setting
forth:
(i) the amount of such distribution to Certificateholders of such
Class allocable to principal of or interest or premium, if any, on the
Certificates of such Class; and the amount of aggregate unpaid interest as
of such Distribution Date;
(ii) in the case of Certificates with a variable Pass-Through Rate,
the Pass- Through Rate applicable to such Distribution Date, as calculated
in accordance with the method specified herein and in the related
Prospectus Supplement;
(iii) the amount of compensation received by the Administrative
Agent, if any, and the Trustee for the period relating to such
Distribution Date, and such other customary information as the
Administrative Agent, if any, or otherwise the Trustee deems necessary or
desirable to enable Certificateholders to prepare their tax returns;
(iv) if the Prospectus Supplement provides for advances, the
aggregate amount of advances included in such distribution, and the
aggregate amount of unreimbursed advances at the close of business on such
Distribution Date;
(v) the aggregate stated principal amount or, if applicable,
notional principal amount of the Deposited Assets and the current interest
rate thereon at the close of business on such Distribution Date;
(vi) the aggregate Certificate Principal Balance or aggregate
Notional Amount, if applicable, of each Class of Certificates (including
any Class of Certificates not offered hereby) at the close of business on
such Distribution Date, separately identifying any reduction in such
aggregate Certificate Principal Balance or aggregate Notional Amount due
to the allocation of any Realized Losses or otherwise; and
(vii) as to any Series (or Class within such Series) for which
Credit Support has been obtained, the amount of coverage of each element
of Credit Support included therein as of the close of business on such
Distribution Date.
In the case of information furnished pursuant to subclauses (i) and
(iii) above, the amounts shall be expressed as a U.S. dollar amount (or
equivalent thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent or
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the Trustee, as provided in the related Prospectus Supplement, shall furnish to
each person who at any time during the calendar year was a Certificateholder a
statement containing the information set forth in subclauses (i) and (iii)
above, aggregated for such calendar year or the applicable portion thereof
during which such person was a Certificateholder. Such obligation of the
Administrative Agent or the Trustee, as applicable, shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Administrative Agent or the Trustee, as applicable, pursuant to
any requirements of the Code as are from time to time in effect (Section 4.03).
Notices. Unless otherwise provided in the applicable Prospectus
Supplement, any notice required to be given to a holder of a Registered
Certificate will be mailed to the last address of such holder set forth in the
applicable Certificate register. Any notice required to be given to a holder of
a Bearer Certificate will be published in a daily morning newspaper of general
circulation in the city or cities specified in the Prospectus Supplement
relating to such Bearer Certificate.
EVIDENCE AS TO COMPLIANCE
If so specified in the applicable Prospectus Supplement, the Trust
Agreement will provide that commencing on a certain date and on or before a
specified date in each year thereafter, a firm of independent public accountants
will furnish a statement to the Trustee to the effect that such firm has
examined certain documents and records relating to the administration of the
Deposited Assets during the related 12-month period (or, in the case of the
first such report, the period ending on or before the date specified in the
Prospectus Supplement, which date shall not be more than one year after the
related Original Issue Date) and that, on the basis of certain agreed upon
procedures considered appropriate under the circumstances, such firm is of the
opinion that such administration was conducted in compliance with the terms of
the Trust Agreement, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions and qualifications as shall be set forth in
such report.
The Trust Agreement may also provide for delivery to the 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.
Copies of the annual accountants' statement, if any, and the
statement of officers of the Trustee may be obtained by Certificateholders
without charge upon written request to either the Administrative Agent or the
Trustee, as applicable, at the address set forth in the related Prospectus
Supplement.
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REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus Supplement,
if a Certificate is mutilated, destroyed, lost or stolen, it may be replaced at
the corporate trust office or agency of the applicable Trustee in the City and
State of New York (in the case of Registered Certificates) or at the principal
London office of the applicable Trustee (in the case of Bearer Certificates), or
such other location as may be specified in the applicable Prospectus Supplement,
upon payment by the holder of such expenses as may be incurred by the applicable
Trustee in connection therewith and the furnishing of such evidence and
indemnity as such Trustee may require. Mutilated Certificates must be
surrendered before new Certificates will be issued (Section 5.05).
TERMINATION
The obligations created by the Trust Agreement for each Series of
Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related Prospectus Supplement. In no event, however, will any trust
created by the Trust Agreement continue beyond the respective date specified in
the related Prospectus Supplement. Written notice of termination of the
obligations with respect to the related Series of Certificates under the Trust
Agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices-- Notices," and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee which will be specified in the notice of termination
(Section 9.01).
Any such purchase of Deposited Assets and property acquired in
respect of Deposited Assets evidenced by a Series of Certificates shall be made
at a price approximately equal to the aggregate fair market value of all the
assets in the Trust (as determined by the Trustee, the Administrative Agent, if
any, and, if different than both such persons, the person entitled to effect
such termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable Prospectus Supplement, a specified
price as determined therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such Series
at the time of purchase being less than the percentage of the aggregate
principal balance of the Deposited Assets at the Cut-off Date for that Series
specified in the related Prospectus Supplement (Section 9.01).
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DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or
sufficiency of the Trust Agreement, the Certificates of any Series or any
Deposited Asset or related document and is not accountable for the use or
application by or on behalf of any Administrative Agent of any funds paid to
such Administrative Agent or its designee in respect of such Certificates or the
Deposited Assets, or deposited into or withdrawn from the related Certificate
Account or any other account by or on behalf of such Administrative Agent
(Section 7.04). If no Administrative Agent Termination Event has occurred and is
continuing with respect to any given Series, the Trustee is required to perform
only those duties specifically required under the Trust Agreement with respect
to such Series. However, upon receipt of the various certificates, reports or
other instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the applicable
requirements of the Trust Agreement (Section 7.01).
THE TRUSTEE
The Trustee for any given Series of Certificates under the Trust
Agreement will be named in the related Prospectus Supplement. The commercial
bank, national banking association or trust company serving as Trustee will be
unaffiliated with, but may have normal banking relationships with, the
Depositor, any Administrative Agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, the Depositor and any underwriter, agent or dealer participating in
the offering of any Bearer Certificate will agree that, in connection with the
original issuance of such Bearer Certificate and during the period ending 40
days after the issue of such Bearer Certificate, they will not offer, sell or
deliver such Bearer Certificate, directly or indirectly, to a U.S. Person (as
defined below) or to any person within the United States, except to the extent
permitted under U.S. Treasury regulations.
Bearer Certificates will bear a legend to the following effect: "Any
United States Person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 165(j) and 1287(a) of the Internal Revenue Code." The sections referred
to in the legend provide that, with certain exceptions, a United States taxpayer
who holds Bearer Certificates will not be allowed to deduct any loss with
respect to, and will not be eligible for capital gain treatment with respect to
any gain realized on a sale, exchange, redemption or other disposition of, such
Bearer Certificates.
As used herein, "United States" means the United States of America
and its possessions, and "U.S. Person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States, or an estate
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or trust the income of which is subject to United States Federal income taxation
regardless of its source.
Pending the availability of a definitive Global Security or
individual Bearer Certificates, as the case may be, Certificates that are
issuable as Bearer Certificates may initially be represented by a single
temporary Global Security, without interest coupons, to be deposited with a
common depositary in London for Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System ("Euroclear"), and Centrale
de Livraison de Valeurs Mobilieres S.A. ("CEDEL") for credit to the accounts
designated by or on behalf of the purchasers thereof. Following the availability
of a definitive Global Security in bearer form, without coupons attached, or
individual Bearer Certificates and subject to any further limitations described
in the applicable Prospectus Supplement, the temporary Global Security will be
exchangeable for interests in such definitive Global Security or for such
individual Bearer Certificates, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership." A "Certificate of Non-U.S.
Beneficial Ownership" is a certificate to the effect that a beneficial interest
in a temporary Global Security is owned by a person that is not a U.S. Person or
is owned by or through a financial institution in compliance with applicable
U.S. Treasury regulations. No Bearer Certificate will be delivered in or to the
United States. If so specified in the applicable Prospectus Supplement, interest
on a temporary Global Security will be distributed to each of Euroclear and
CEDEL with respect to that portion of such temporary Global Security held for
its account, but only upon receipt as of the relevant Distribution Date of a
Certificate of Non-U.S. Beneficial Ownership.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Certificate having a Specified Currency other
than U.S. dollars entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Such risks
include, without limitation, the possibility of significant changes in rates of
exchange between the U.S. dollar and such Specified Currency and the possibility
of the imposition or modification of foreign exchange controls with respect to
such Specified Currency. Such risks generally depend on factors over which the
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
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for making distributions in respect of Certificates denominated in such
currency. At present, the Depositor has identified the following currencies in
which distributions of principal, premium and interest on Certificates may be
made: Australian dollars, Canadian dollars, Danish kroner, Italian lire,
Japanese yen, New Zealand dollars, U.S. dollars and ECU. However, Certificates
distributable with Specified Currencies other than those listed may be issued at
any time. There can be no assurance that exchange controls will not restrict or
prohibit distributions of principal, premium or interest in any Specified
Currency. Even if there are no actual exchange controls, it is possible that, on
a Distribution Date with respect to any particular Certificate, the currency in
which amounts then due to be distributed in respect of such Certificate are
distributable would not be available. In that event, such payments will be made
in the manner set forth above under "Description of Certificates-- General" or
as otherwise specified in the applicable Prospectus Supplement.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED
IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
The information set forth in this Prospectus is directed to
prospective purchasers of Certificates who are United States residents. The
applicable Prospectus Supplement for certain issuances of Certificates may set
forth certain information applicable to prospective purchasers who are residents
of countries other than the United States with respect to matters that may
affect the purchase or holding of, or receipt of distributions of principal,
premium or interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a
Specified Currency other than U.S. dollars will contain information concerning
historical exchange rates for such currency against the U.S. dollar, a
description of such currency, any exchange controls affecting such currency and
any other required information concerning such currency.
PAYMENT CURRENCY
Except as set forth below or unless otherwise provided in the
applicable Prospectus Supplement, if distributions in respect of a Certificate
are required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the Depositor's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all distributions in respect of such Certificate shall be made
in U.S. dollars until such currency is again available or so used. The amounts
so payable on any date in such currency shall be converted into U.S. dollars on
the basis of the most recently available Market Exchange Rate for such currency
or as otherwise indicated in the applicable Prospectus Supplement.
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If distribution in respect of a Certificate is required to be made
in ECU and ECU is no longer used in the European Monetary System, then all
distributions in respect of such Certificate shall be made in U.S. dollars until
ECU is again so used. The amount of each distribution in U.S. dollars shall be
computed on the basis of the equivalent of the ECU in U.S. dollars, determined
as described below, as of the second Business Day prior to the date on which
such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day
of Valuation") shall be determined for the Certificates of any Series and Class
by the applicable Trustee on the following basis. The component currencies of
the ECU for this purpose (the "Components") shall be the currency amounts that
were components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
All determinations referred to above made by the applicable Trustee
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the related Certificateholders of
such Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus Supplement,
the Certificates will be governed by and construed in accordance with the law of
the State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
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PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Series of Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such Certificates and
the proceeds to the Depositor from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers, any
securities exchanges on which such Certificates may be listed, any restrictions
on the sale and delivery of Certificates in bearer form and the place and time
of delivery of the Certificates to be offered thereby.
If underwriters are used in the sale, Certificates will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such
Certificates may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Such managing underwriters or underwriters in the United States will include
Lehman Brothers Inc., an affiliate of the Depositor. Unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase such Certificates will be subject to certain conditions precedent, and
the underwriters will be obligated to purchase all such Certificates if any of
such Certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Certificates may also be sold through agents designated by the
Depositor from time to time. Any agent involved in the offer or sale of
Certificates will be named, and any commissions payable by the Depositor to such
agent will be set forth, in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the
Depositor will authorize agents, underwriters or dealers to solicit offers by
certain specified institutions to purchase Certificates at the public offering
price described in such Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date specified in such
Prospectus Supplement. Such contracts will be subject only to those conditions
set forth in the applicable Prospectus Supplement and such Prospectus Supplement
will set forth the commissions payable for solicitation of such contracts.
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
54
<PAGE>
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 Section 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
affiliate.
As to each Series of Certificates, only those Classes rated in one
of the investment grade rating categories by a Rating Agency will be offered
hereby. Any unrated Classes or Classes rated below investment grade may be
retained by the 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
LLP, New York, New York or other counsel identified in the applicable Prospectus
Supplement.
55
<PAGE>
No dealer, salesman or other person has been authorized to given any
information or to make any representation not contained in the Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or Lehman Brothers Inc. The Prospectus
does not constitute an offer of any securities other than those to which they
relate or an offer to sell, or a solicitation of an offer to buy, to any person
in any jurisdiction where such an offer or solicitation would be unlawful.
Neither the delivery of the Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date of the Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement..................................................3
Available Information..................................................3
Incorporation of Certain Documents by Reference........................4
Reports to Certificateholders..........................................4
Important Currency Information ........................................5
Risk Factors...........................................................5
The Depositor .........................................................8
Use of Proceeds........................................................8
Formation of the Trust.................................................8
Maturity and Yield Considerations......................................9
Description of Certificates...........................................11
Description of Deposited Assets and Credit Support....................30
Description of the Trust Agreement....................................38
Limitations on Issuance of Bearer Certificates........................50
Currency Risks........................................................51
Plan of Distribution..................................................54
Legal Opinions........................................................55
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion Dated December 12, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 12, 1997)
Trust Certificates, Series 1997 - [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 1997-[ ] offered hereby will consist of classes
of Certificates, designated as Class Certificates[,] [and] Class Certificates
[and list others], [all] of which [only the Class Certificates[,] [and] Class
Certificates [and list others]] are being offered hereby (collectively, the
"Certificates") and will represent a fractional undivided beneficial interest in
the Series 1997-[ ] Trust (the "Trust") to be formed pursuant to the Trust
Agreement dated as of [ ], between Lehman ABS Corporation (the "Depositor") and
[ ], as trustee (the "Trustee"), as supplemented by the Series 1997-[ ]
Supplement dated as of [ ] (collectively, the "Trust Agreement"). The property
of the Trust will consist in part of [$][ ] aggregate principal amount of [a [
%] [floating rate] [specify publicly issued debt security] due of [specify
issuer]] [a pool of [ %] [floating rate] publicly issued debt securities having
a term of [not less than years and not more than years] issued by [the United
States of America] [U.S. Government sponsored entity issuers] [Government Trust
Certificates ("GTCs") [provided that such GTCs, together with any AID-Guaranteed
Underlying Securities (as defined below), shall not account for 20% or more of
the aggregate cash flows on the Underlying Securities securing any Series of
Certificates]] [obligations guaranteed by the United States Agency for
International Development ("AID-Guaranteed Underlying Securities") [provided
that such AID-Guaranteed Underlying Securities, together with any GTCs, shall
not account for 20% or more of the aggregate cash flows on the Underlying
Securities securing any Series of Certificates]] [(other than the Retained
Interest referred to herein)] (collectively, the "Underlying Securities"), and
having the characteristics described herein under "Description of the Deposited
Assets." Terms used but not otherwise defined herein are defined in the
Prospectus attached hereto (the "Prospectus").
The Underlying Securities will be acquired by the Depositor and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [ ].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[ ] of each year] [to be conformed to interest payment
dates for Underlying Securities], or, if any such date is not a business day,
then on the immediately following business day (each, a "Distribution Date")
commencing [ ]. The last day on which distributions are scheduled to be made
on the Certificates is [ ] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 7.
------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE DEPOSITOR OR ANY OF ITS RESPECTIVE AFFILIATES.
THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The Underwriter has agreed to purchase the Certificates from the Depositor at
[ ]% of the Certificate Principal Balance thereof ($[ ] aggregate proceeds to
the Depositor, before deducting expenses estimated at $[ ]) plus accrued
interest, if any, at the Pass-Through Rate calculated from [ ], 1997 (the
"Expected Settlement Date"), subject to the terms and conditions set forth in
the Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution."
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
December __, 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class _______Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class ________Certificates [and specify other classes].] As and to the
extent described herein, losses realized on the Deposited Assets will be borne
by the holders of the Class _______Certificates [and specify other classes]
before such losses will be borne by the holders of the other classes of Offered
Certificates [and the Class Certificates [and specify other classes]]. To the
extent described herein, the relative priorities of each class of Certificates
with respect to collections from and losses on the Deposited Assets may each
change over time, either permanently or temporarily, upon the occurrence of
certain circumstances specified herein. [SEE "DESCRIPTION OF THE
CERTIFICATES-ALLOCATION OF LOSSES; SUBORDINATION."]
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" in the Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO ITS
PROSPECTUS DATED [_______ __], 1997, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not purport
to be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the headings "Description of the Certificates", "Description of the Deposited
Assets" and "Description of Credit Support." Certain capitalized terms used
herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
The Trust................... Series 1997-[ ] Trust. The Trust will be formed
pursuant to the Trust Agreement dated as of [ ]
(the "Base Trust Agreement"), between the
Depositor and the Trustee, as supplemented by
the Series 1997-[ ] Supplement dated as of the
Expected Settlement Date (the "Series
Supplement" and, together with the Base Trust
Agreement, the "Trust Agreement").
Securities Offered.......... Trust Certificates, Series 1997-[ ], consisting
of Class [ ] Certificates[,] [and] Class [ ]
Certificates [and specify others] (collectively,
the "Certificates").
[Initial Certificate
Principal Balance]
[Notional Amount]........... Class [ ]: [$][ ].
Class [ ]: [$][ ].
Final Scheduled
Distribution Date........... Class [ ].
Class [ ].
Pass-Through Rates.......... [The Variable Pass-Through Rates applicable to
the calculation of the interest distributable on
any Distribution Date on the Certificates
[(other than the Class [ ] Certificates)] are
equal to [describe method for determining
variable rates]. The initial Variable
Pass-Through Rates for the Class [ ]
Certificates[,] [and] the Class [ ] Certificates
[and specify others] are approximately ___%[,]
[and] ___% [and ___%] per annum, respectively.]
[The Pass-Through Rate applicable to the
calculation of the interest distributable on any
Distribution Date on the [specify classes]
Certificates is fixed at ___% [and ___%,
respectively,] per annum.]
S-3
<PAGE>
Deposited Assets............ The Deposited Assets shall consist of the
Underlying Securities [and describe any assets
which are ancillary or incidental to the
Underlying Securities]. See "-The Underlying
Securities" [, "-Other Deposited Assets"] and
"Description of the Deposited Assets" below.
Original Issue Date......... [ ].
Cut-off Date................ [ ].
Distribution Date........... [ ], commencing [ ].
Record Date................. The [ ] day immediately preceding each
Distribution Date.
Denominations;
Specified Currency.......... The Class [ ] Certificates[,] [and] Class [ ]
Certificates [and specify others] will be
denominated and payable in [U.S. dollars] [ ]
(the "Specified Currency") and will be available
for purchase in minimum denominations of [$][ ]
and [integral multiples thereof] [multiples of
[$][ ] in excess thereof].
Interest Accrual Periods.... [Monthly] [Quarterly] [Semi-annually] (or, in
the case of the first Interest Accrual Period,
from and including the Original Issue Date to
but excluding the first Distribution Date).
Form of Security............ Book-entry Certificates with The Depository
Trust Company ("DTC"), except in certain limited
circumstances. See "Description of the
Certificates-Definitive Certificates."
Distributions thereon will be settled in
[immediately available (same-day)]
[clearinghouse (next-day)] funds.
Trustee..................... [ ], as trustee.
Ratings..................... [ ] by [ ] [and [ ] by [ ]]. [Specify
specific
ratings requirements for particular classes,
including the extent to which the issuance of
the Certificates of a given class is conditioned
upon satisfaction of the ratings of each other
class of Certificates.] See "Ratings."
Collection Period........... With respect to any Distribution Date, the
period beginning on [ ] and ending at the close
of business of [ ].
S-4
<PAGE>
THE UNDERLYING SECURITIES
Underlying Securities....... [A [ ]% [floating rate] [publicly issued
[treasury] [debt] security due [ ] [A pool of
publicly issued [treasury securities] [debt
securities of various United States government
sponsored entities] [Government Trust
Certificates ("GTCs") [provided that such GTCs,
together with any AID-Guaranteed Underlying
Securities (as defined below), shall not account
for 20% or more of the aggregate cash flows on
the Underlying Securities securing any Series of
Certificates]] [obligations guaranteed by the
United States Agency for International
Development ("AID-Guaranteed Underlying
Securities") [provided that such AID-Guaranteed
Underlying Securities, together with any GTCs,
shall not account for 20% or more of the
aggregate cash flows on the Underlying
Securities securing any Series of
Certificates]], exclusive of the Retained
Interest] [in/having] an aggregate principal
amount of [$][ ].
[GSE Issuer]................ [Specify issuer] [Pool of various U.S.
government sponsored entity issuers].
Underlying Security
Original Issue Date......... [ ].
Underlying Securities
Final Payment Date.......... [ ].
Amortization................ [Describe amortization schedule, if any].
Denominations; Underlying
Securities Currency......... The Underlying Securities are denominated and
payable in [U.S. dollars] [ ] (the "Underlying
Securities Currency") and are available in
minimum denominations of [$][ ] and [integral
multiples thereof] [multiples of [$][ ] in
excess thereof].
Underlying Securities
Payment Dates............... [ ], commencing [ ].
Underlying Securities Rate.. [ % per annum.] [A [Weighted Average] rate per
annum equal to [specify interest rate formula
for debt security].]
Underlying Securities Interest
Accrual Periods............. [Monthly] [Quarterly] [Semi-annually].
S-5
<PAGE>
Priority.................... [Describe senior or subordinated status of
Underlying Securities].
Security.................... [Describe existence of any security for
obligations or state that Underlying Securities
are unsecured].
Redemption/Put/
Other Features.............. [Describe existence of any redemption, put or
other material features applicable to the
Underlying Securities].
Form of Security............ Book-entry debt securities with [DTC] [Federal
Reserve Bank] [listed on the [New York]
[American] Stock Exchange [specify other
listing]].
[Fiscal Agent].............. [ ]. [The Underlying Securities have [not] been
issued pursuant to [an indenture and no trustee
is provided for.] [ ] acts as fiscal agent for
the Outstanding Debt Securities pursuant to an
agreement dated as of [ ], 19[ ] (the "Fiscal
Agency Agreement"), between the Fiscal Agent and
the GSE Issuer.
Ratings..................... [ ] by [ ] [and [ ] by [ ]]. [See "Description
of the Underlying Securities-Ratings of
Underlying Securities."]
[Underlying Securities
Trustee].................... [Specify]
OTHER DEPOSITED ASSETS
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is
qualified in its entirety by reference to the detailed information appearing
elsewhere herein and in the Prospectus.
Depositor................... Lehman ABS Corporation (the "Depositor"), an
indirect wholly-owned subsidiary of Lehman
Brothers Inc. See "The Depositor" in the
Prospectus.
Certificates................ The Certificates, each of which represents a
fractional undivided beneficial interest in the
Trust, will be issued pursuant to the Trust
Agreement. The Certificates will consist of [ ]
classes, designated as Class [ ] Certificates
[and] [,] Class [ ] Certificates [and [specify
other classes]], [all] of which [all but the
Class [ ] Certificates] are being offered hereby
(collectively, the "Certificates").
The Certificate Principal Balance of a
Certificate outstanding at any time represents
the maximum amount that the holder thereof is
entitled to receive as distributions allocable
to principal. The Certificate Principal Balance
of a Certificate will decline to the extent
distributions allocable to principal are made to
such holder. [The Notional Amount of the Class [
] Certificates as of any date of determination
is equal to [specify]. Reference to the Notional
Amount of the Class [ ] Certificates is solely
for convenience in determining the basis on
which distributions on the Class [ ]
Certificates are calculated [and determining the
relative voting rights of Certificateholders of
Class [ ] Certificates for purposes of voting on
a class-by-class basis or otherwise]. The
Notional Amount does not represent the right to
receive any distributions allocable to
principal.]
[The Class [ ] Certificates, which are not being
offered hereby, have in the aggregate an initial
Certificate Principal Balance of [$]_____
(approximate) and a [Variable] Pass- Through
Rate [of ___%]. The Class [ ] Certificates
represent the right to receive distributions in
respect of their Certificate Principal Balance
and interest thereon at their applicable Pass-
Through Rate.] Shortfalls in collections with
respect to the Deposited Assets will be
allocated solely to the Class [ ] Certificates
to the extent provided herein and, thereafter,
will be allocated among the Certificates and the
Class [ ] Certificates, as provided herein. [The
Class [ ] Certificates
S-7
<PAGE>
will be transferred by the Depositor to an
affiliate on or about , 1997 (the "Closing
Date"), and may be sold at any time in
accordance with any restrictions in the Trust
Agreement.]
The Underlying Securities... Interest on the Underlying Securities accrues at
the Underlying Securities Rate for each
Underlying Securities Accrual Period and is
payable on each Underlying Securities Payment
Date. The entire principal amount of the
Underlying Securities will be payable on the
Underlying Securities Final Payment Date. [The
Underlying Securities have a remaining term to
maturity of approximately ____ years.] [As of
the Cut-off Date, the pool of Underlying
Securities has a weighted average interest rate
of ___% and a weighted average remaining term to
maturity of approximately ___ years.
Approximately ___% [specify if greater than 10%]
of such Underlying Securities consist of debt
securities of [specify U.S. government sponsored
entity or agency].
[Name such obligor] is a [U.S.
government-sponsored entity] [specify other]
whose principal executive offices are located at
[specify address]. The obligor [makes available
to the public upon request certain annual
financial and other information]. See
"Description of the Deposited Assets."
[Other Deposited Assets
and Credit Support.......... The Deposited Assets will also include [describe
any assets which are ancillary or incidental to
the Underlying Securities, including hedging
contracts such as puts, calls, interest rate
swaps, currency swaps, floors, caps and collars]
(such assets, together with the Underlying
Securities, the "Deposited Assets"). See
"Description of the Deposited Assets."
The Certificateholders of the [specify
particular classes] Certificates will have the
benefit of [describe credit support] to support
or ensure the [servicing and] [timely]
[ultimate] distribution of amounts due with
respect to the Deposited Assets, including
providing certain coverage with respect to
losses thereon.]
Distributions............... Holders of the Certificates will be entitled to
receive on each Distribution Date, to the extent
of available funds on such Distribution Date,
after payment of the expenses of the Trustee and
its respective agents up to the Allowable
Expense Amount, (i) [in the case of each class
of Certificates other than
S-8
<PAGE>
the Class [ ] Certificates,] distributions
allocable to interest at the applicable
Pass-Through Rate on the applicable Certificate
Principal Balance, (ii) [in the case of each
class of Certificates other than the Class [ ]
Certificates,] distributions allocable to
principal and (iii) [in the case of each class
of Certificates other than the Class [ ]
Certificates,] distributions allocable to
premium (if any) in an amount equal to all
payments of premium (if any) received on the
Underlying Securities for the applicable
Collection Period. Distributions will be made to
Certificateholders only if, and to the extent
that, payments are made with respect to the
Deposited Assets or are otherwise covered by any
Credit Support. [The holders of the Class [ ]
Certificates will be entitled to receive on each
Distribution Date distributions allocable to
interest in an amount equal to [describe
Stripped Interest].] [The holders of the Class [
] Certificates will not be entitled to receive
any distributions allocable to principal or
premium (if any).] See "Description of the
Certificates-Distributions."
Special Distribution Dates.. If a payment with respect to the Underlying
Securities is made to the Trustee after the
Underlying Securities Payment Date on which such
payment was due, then the Trustee shall
distribute any such amount received on the next
occurring Business Day (a "Special Distribution
Date") as if such funds had constituted
Available Funds on the Distribution Date
immediately preceding such Special Distribution
Date; provided, however, that the Record Date
for such Special Distribution Date shall be
[five Business Days (as such term is defined in
the Prospectus, "Business Day") prior to the day
on] which the related payment was received from
the Underlying Securities Trustee.
[Subordination.............. As and to the extent described herein, the
rights of the holders of the Class [ ]
Certificates [and specify other classes] to
receive distributions of principal, premium (if
any), and interest with respect to the Deposited
Assets will be subordinated to the rights of the
holders of the other classes of Certificates
with respect to losses attributable to
principal, premium (if any) and interest
realized on a Deposited Asset (such losses,
"Realized Losses"). [See "Description of the
Certificates-Allocation of Losses;
Subordination."]
Optional Termination........ At its option, the [Depositor] may purchase all
the Deposited Assets in the Trust, and thereby
cause the termination of the Trust and early
retirement of the Certificates, on any
S-9
<PAGE>
Distribution Date on which the aggregate
principal amount of the Deposited Assets
remaining in the Trust is less than [10%] of the
aggregate principal amount of the Deposited
Assets as of the Cut-off Date. [Specify any
other purchase or repurchase option of the
Depositor.] See "Description of the Trust
Agreement-Termination" herein and "Description
of Trust Agreement-Termination" in the
Prospectus.
Certain Federal
Income Tax
Consequences................ In the opinion of tax counsel to the Trust, the
Trust will be classified for Federal income tax
purposes [as a grantor trust] [as a partnership]
[as a financial asset securitization investment
trust ("FASIT")] and not as an association
taxable as a corporation. See "Certain Federal
Income Tax Consequences."
Ratings..................... It is a condition to the issuance of the
Certificates that the Certificates have the
ratings specified above under "Summary of
Principal Economic Terms-The
Certificates-Ratings." A security rating is not
a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning rating agency. A
security rating does not address the occurrence
or frequency of redemptions or prepayments on,
or extensions of the maturity of, the Deposited
Assets, the corresponding effect on yield to
investors [or whether investors in the Class [ ]
Certificates may fail to recover fully their
initial investment]. See "Ratings."
ERISA Considerations........ An employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and an individual retirement
account (each, a "Plan") may purchase
Certificates of any class if either (i) the
Depositor is able to confirm the existence of at
least 100 independent purchasers of such class
or (ii) the Plan can represent that its purchase
of the Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
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<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement (including
the Series [ ] Supplement) between the Depositor and the Trustee. Concurrently
with the execution and delivery of the Series [ ] Supplement, the Depositor will
deposit the Underlying Securities in the Trust. The Trustee, on behalf of the
Trust, will accept such Underlying Securities and will deliver the Certificates
to or upon the order of the Depositor.
The Underlying Securities will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor). The
Underlying Securities will not be acquired from any GSE Issuer as part of any
distribution by or pursuant to any agreement with such issuer. [No][The] GSE
Issuer is [not] participating in this offering and [none] will [not] receive any
of the proceeds of the sale of the Underlying Securities to the Depositor or the
issuance of the Certificates. [Neither the Depositor nor any of its affiliates
participated in the initial public offering of the Underlying Securities]
[Lehman Brothers Inc., an affiliate of the Depositor, participated in the
initial public offering of the Underlying Securities as a [co-underwriter]
[underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets (including any
material risks as a result of the inclusion in the Deposited Assets of GTCs or
AID-Guaranteed Underlying Securities) and the terms thereof, as described
elsewhere herein.] See "Risk Factors" and "Maturity and Yield Considerations" in
the Prospectus.
[The Underlying Securities are not guaranteed by the federal
government or any agency or instrumentally thereof, other than the Underlying
Securities Issuer.]
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
This Prospectus Supplement sets forth certain relevant terms with
respect to the Underlying Securities, but does not provide detailed information
with respect to the Underlying Securities. This Prospectus Supplement relates
only to the Certificates offered hereby and does not relate to the Deposited
Assets. All disclosure contained herein with respect to the Underlying
Securities is derived from publicly available documents. [Identify publicly
available documents]. Although the Depositor has no reason to believe the
information concerning the Underlying Securities, or any GSE Issuer in the
Underlying Securities prospectus[es] [and other publicly available information]
is not reliable, neither the Depositor nor any of the Underwriters has
participated in the preparation of such documents, or made any due diligence
inquiry with respect to the information provided therein. There can be no
assurance that events affecting the Underlying Securities or a GSE
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<PAGE>
Issuer have not occurred, which have not yet been publicly disclosed, which
would affect the accuracy or completeness of the publicly available documents
described above.
[Use the following where the Underlying Securities consist of a pool
of obligations of multiple obligors]
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of [treasury securities] [and] [publicly issued
debt securities of U.S. government-sponsored entities] [Government Trust
Certificates ("GTCs") [provided that such GTCs, together with any AID-
Guaranteed Underlying Securities (as defined below), shall not account for 20%
or more of the aggregate cash flows on the Underlying Securities securing any
Series of Certificates]] [obligations guaranteed by the United States Agency for
International Development ("AID-Guaranteed Underlying Securities") [provided
that such AID-Guaranteed Underlying Securities, together with any GTCs, shall
not account for 20% or more of the aggregate cash flows on the Underlying
Securities securing any Series of Certificates]]. The Underlying Securities will
be purchased by the Depositor in the secondary market (either directly or
through an affiliate of the Depositor) and will be deposited in to the Trust.
The Underlying Securities will not be acquired either from the respective
obligors on the Underlying Securities or pursuant to any distribution by or
agreement with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
Composition of the Underlying Securities Pool
as of the Cut-off Date
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
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<PAGE>
Distribution by Ratings of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ ------- -------
------- ------- -------
Total
------- ------- -------
Distribution by Remaining Term to Maturity
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
----------- ------ ------- -------
------- -------- --------
Total
------- -------- --------
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
------------------- ------ ------- -------
% to % [$] %
Greater than % ------ -------- -------
Total [$] 100%
------ -------- -------
The Underlying Securities consist of [treasury securities] [debt
securities of U.S. government-sponsored entities] [GTCs [provided that such
GTCs, together with any AID-Guaranteed Underlying Securities, shall not account
for 20% or more of the aggregate cash flows on the
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<PAGE>
Underlying Securities securing any Series of Certificates]] [AID-Guaranteed
Underlying Securities [provided that such AID-Guaranteed Underlying Securities,
together with any GTCs, shall not account for 20% or more of the aggregate cash
flows on the Underlying Securities securing any Series of Certificates]]. As of
the Cut-off Date, [all of] [approximately ___% of] such Underlying Securities
were rated [investment grade] [specify particular rating] by at least one
nationally recognized rating agency, and, based on publicly available
information, no obligor of any Underlying Security was in default in the payment
of any installments of principal, interest or premium (if any) with respect
thereto. Any such rating of any of the Underlying Securities is not a
recommendation to purchase, hold or sell such Underlying Security or the
Certificates, and there can be no assurance that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a rating agency if in its judgment circumstances in the future so warrant.
See "Ratings" herein and "Risk Factors -- Ratings of the Certificates" in the
accompanying Prospectus regarding certain considerations applicable to the
ratings of the Certificates.]
[The following is a summary of the typical Underlying Security Events
of Default for each series of Outstanding Debt Securities. Any additional
Underlying Security Events of Default unique to a Concentrated Underlying
Security have been described following the summary:
(a) failure to make payments of principal (and premium, if any) and
interest to holders of the Outstanding Debt Securities when the same shall
be due;
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement continuing for a specified period of time after
notice thereof is given to the GSE Issuer by the holders of not less than
a specified percentage of the Outstanding Debt Securities;
(c) certain events of bankruptcy or insolvency relating to the GSE
Issuer[; and
(d) describe any additional common events of default with respect to
the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities]] [and
[all of] [approximately __% of] the Underlying Securities were [describe the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral.]]
The [pool of] Underlying Securities, together with any other assets
described below and any Credit Support described under "Description of Credit
Support", represent the sole assets of the Trust that are available to make
distributions in respect of the Certificates.]
[USE THE FOLLOWING WITH RESPECT TO EACH OBLIGOR THE UNDERLYING SECURITIES OF
WHICH REPRESENT MORE THAN 10% OF THE TOTAL UNDERLYING SECURITIES AVAILABLE TO
MAKE DISTRIBUTIONS IN RESPECT OF
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<PAGE>
THE CERTIFICATES -- ONLY A SINGLE OBLIGOR IS REFERRED TO FOR PURPOSES OF THIS
SECTION OF THE FORM OF PROSPECTUS SUPPLEMENT]
[A significant portion of] [Virtually all of] [All of] the Deposited
Assets of the Trust will consist of the [___%] [floating rate] [specify publicly
issued debt security] due ____ of [specify issuer][, exclusive of the interest
therein retained by [the Depositor] as described below (the "Retained
Interest")], having an aggregate principal amount outstanding as of the Cut-off
Date of approximately [$] [specify currency] ___ (the "Underlying Securities").
The Underlying Securities (other than Underlying Securities which are issued by
the United States of America) will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor) and
will be deposited into the Trust. The Underlying Securities will not be acquired
either from [name such obligor] or pursuant to any distribution by or agreement
with [name such obligor]. [Describe any put, call or other conversion or
redemption options applicable to the Underlying Securities, s well as the nature
of the obligation represented by such Underlying Securities (i.e., senior,
subordinate, secured)]. As of the Cut-off Date, the foregoing debt security
comprising [__%] of the Underlying Securities was rated [specify investment
grade rating] [investment grade] by [specify nationally recognized rating agency
or agencies], and, based on publicly available information, the obligor thereon
was not in default in the payment of any installments of principal, interest or
premium (if any) with respect thereto. Any such rating of such Underlying
Securities is not a recommendation to purchase, hold or sell such Underlying
Securities or the Certificates, and there can be no assurance that a rating will
remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by a rating agency if in its judgment circumstances in the
future so warrant. See "Ratings" herein and "Risk Factors -- Ratings of the
Certificates" in the accompanying Prospectus regarding certain considerations
applicable to the ratings of the Certificates.
[THE FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Federal National Mortgage Association ("Fannie Mae") is a
federally chartered and stockholder-owned corporation organized and existing
under the Federal National Mortgage Association Charter Act, 12 U.S.C. ss. 1716
et seq. It is the largest investor in home mortgage loans in the United States.
Fannie Mae originally was established in 1938, as a United States government
agency to provide supplemental liquidity to the mortgage market and was
transformed into a stockholder-owned and privately managed corporation by
legislation enacted in 1968. Fannie Mae provides funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing their funds for
additional lending. Fannie Mae acquires funds to purchase loans from many
capital market investors that ordinarily may not invest in mortgage loans,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus
to capital-short areas. Fannie Mae also issues mortgaged-backed securities
("MBS"). Fannie Mae receives guaranty fees for its guaranty of timely payment of
principal of and interest on MBS. Fannie Mae issues MBS primarily in exchange
for pools of mortgage loans from lenders. The issuance of MBS enables Fannie Mae
to further its statutory purpose of increasing the liquidity of residential
mortgage loans.
Fannie Mae prepares an Information Statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to
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<PAGE>
time Fannie Mae prepares supplements to its Information Statement which include
certain unaudited financial data and other information concerning the business
and operations of Fannie Mae. These documents can be obtained without charge
from Paul Paquin, Senior Vice President -- Investor Relations, Fannie Mae, 3900
Wisconsin Avenue, N.W., Washington, D.C. 20016 (telephone: (202) 752-7115).
Fannie Mae is not subject to the periodic reporting requirements of the
Securities Exchange Act of 1934.]
[THE FEDERAL HOME LOAN MORTGAGE CORPORATION
The Federal Home Loan Mortgage Corporation ("Freddie Mac") is a
publicly held government-sponsored enterprise created on July 24, 1970 pursuant
to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency
Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory
mission is to provide stability in the secondary market for home mortgages, to
respond appropriately to the private capital market and to provide ongoing
assistance to the secondary market for home mortgages (including mortgages
secured by housing for low-and moderate-income families involving a reasonable
economic return to Freddie Mac) by increasing the liquidity of mortgage
investments and improving the distribution of investment capital available for
home mortgage financing. The principal activity of Freddie Mac consists of the
purchase of first lien, conventional, residential mortgages and participation
interests in such mortgages from mortgage lending institutions and the resale of
the mortgages so purchased in the form of guaranteed mortgage securities.
Freddie Mac generally matches and finances its purchases or mortgages with sales
of guaranteed securities. Mortgages retained by Freddie Mac are financed with
short-and long-term debt, cash temporarily held pending disbursement to security
holders, and equity capital.
Freddie Mac prepares an Information Statement annually which
describes Freddie Mac, its business and operations and contains Freddie Mac's
audited financial statements. From time to time Freddie Mac prepares supplements
to its Information Statement which include certain unaudited financial data and
other information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102
(outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within
Washington, D.C. metropolitan area, telephone (703) 759-8160). Freddie Mac is
not subject to the periodic reporting requirements of the Securities Exchange
Act of 1934.]
[THE STUDENT LOAN MARKETING ASSOCIATION
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan ("FFEL") program and the Health Education
Assistance Loan Program. Under the Higher Education Act, Sallie Mae is
authorized to purchase, warehouse, sell and offer participations or pooled
interests in, or otherwise deal in, student loans, including, but not limited
to, loans insured under the FFEL program, and to make commitments for any of the
foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and
otherwise deal
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<PAGE>
in obligations of eligible lenders, if such obligations are issued by such
eligible lender for the purpose of making or purchasing federally guaranteed
student loans under the Higher Education Act. As a federally chartered
corporation, Sallie Mae's structure and operational authorities are subject to
revision by amendments to the Higher Education Act of other federal enactments.
Sallie Mae prepares an Information Statement annually which describes
Sallie Mae, its business and operations and contains Sallie Mae's audited
financial statements. From time to time Sallie Mae prepares supplements to its
Information Statement which include certain unaudited financial data and other
information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007, telephone (202) 298-3010. Sallie Mae is not
subject to the periodic reporting requirements of the Securities Exchange Act of
1934.]
[THE RESOLUTION FUNDING CORPORATION
The Resolution Funding Corporation ("REFCORP") is a mixed-ownership
government corporation established by Title V of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (the "FIRRE Act"). The sole
purpose of the REFCORP is to provide financing for the Resolution Trust
Corporation (the "RTC"). REFCORP is to be dissolved, as soon as practicable,
after the maturity and full payment of all obligations issued by it. REFCORP is
subject to the general oversight and direction of the Oversight Board, which is
comprised of the Secretary of the Treasury, the Chairman of the Federal Reserve
Board of Governors, the Secretary of Housing and Urban Development and two
independent members from different political parties to be appointed by the
President with the advice and consent of the Senate. The day-to-day operations
of REFRCORP are under the management of a three-member Directorate comprised of
the Director of the Office of Finance of the FHLBs and two members selected by
the Oversight Board from among the presidents of twelve FHLBs.
The RTC was established by the FIRRE Act to manage and resolve cases
involving failed savings and loan institutions pursuant to policies established
by the Oversight Board. The RTC is to manage and resolve cases for which a
receiver or conservator was appointed between January 1, 1989 through August 9,
1992. The RTC is authorized to issue nonvoting capital certificates to REFCORP
in exchange for the funds transferred from REFCORP to the RTC. The RTC will
terminate on or before December 31, 1996. The FIRRE Act limits the aggregate
principal amount of interest bearing obligations which may be issued by REFCORP
to $30 billion, which amount of obligations was issued in 1989. Pursuant to the
FIRRE Act, the net proceeds of these obligations are used to purchase nonvoting
capital certificates issued by the RTC or to retire previously issued REFCORP
obligations.
Information concerning REFCORP may be obtained from the Resolution
Funding Corporation, Suite 850, 655 Fifteenth Street, N.W., Washington, D.C.
20005. REFCORP is not subject to the periodic reporting requirements of the
Securities Exchange Act of 1934.]
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<PAGE>
[THE FEDERAL HOME LOAN BANKS
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations (collectively, the "FHLBs"). The mission of each FHLB is
to enhance the availability of residential mortgage credit by providing a
readily available, low-cost source of funds to its member institutions. A
primary source of funds for the FHLBs is the proceeds from the sale to the
public of debt instruments issued by the Federal Housing Finance Board, which
are the joint and several obligations of all of the FHLBs. The FHLBs are
supervised and regulated by the Federal Housing Finance Board, which is an
independent federal agency in the executive branch of the United States
government, but obligations of the FHLBs are not obligations of the United
States government.
The Federal Home Loan Bank System produces annual and quarterly
financial reports in connection with the original offering and issuance by the
Federal Housing Finance Board of consolidated bonds and consolidated notes of
the FHLBs. Questions regarding the Federal Home Loan Banks Combined Financial
Statement should be directed to the Deputy Director, Financial Reporting and
Operations Divisions, Federal Housing Finance Board, 1777 F Street, N.W.,
Washington, D.C. 20006, (202) 406-2901. Copies of the Financial Reports will be
furnished upon request to the Capital Markets Divisions, Office of Finance.]
[TENNESSEE VALLEY AUTHORITY
TVA is a wholly owned corporate agency and instrumentality of the
United States of America established pursuant to the Tennessee Valley Authority
Act of 1933, as amended (the "TVA Act"). TVA's objective is to develop the
resources of the Tennessee Valley region in order to strengthen the regional and
national economy and the national defense. The programs of TVA consist of power
and nonpower programs. For the fiscal year ending September 30, 1994, TVA
received $140 million in congressional appropriations from the federal
government for the nonpower programs. The power program is required to be
self-supporting from revenues it produces. The TVA Act authorizes TVA to issue
evidences of indebtedness that may only be used to finance its power program.
TVA prepares an Information Statement annually which describes TVA,
its business and operations and contains TVA's audited financial statements.
From time to time TVA prepares supplements to its Information Statement which
include certain unaudited financial data and other information concerning the
business and operations of TVA. These documents can be obtained upon written
request directed to Tennessee Valley Authority, 400 West Summit Hill Drive,
Knoxville, Tennessee 37902, Attention: Vice President and Treasurer, or by
calling (615) 632-3366.]
[FEDERAL FARM CREDIT BANKS
The Farm Credit System is a nationwide system of lending institutions
and affiliated service and other entities (the "System"). Through its Banks
("FCBs") and related associations, the System provides credit and related
services to farmers, ranchers, producers and harvesters of aquatic products,
rural homeowners, certain farm-related businesses, agricultural and aquatic
cooperatives and rural utilities. System institutions are federally chartered
under the Farm Credit Act of 1971, as
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<PAGE>
amended (the "Farm Credit Act"), and are subject to regulation by a Federal
agency, the Farm Credit Administration (the "FCA"). The FCBs and associations
are not commonly owned or controlled. They are cooperatively owned, directly or
indirectly, by their respective borrowers. Unlike commercial banks and other
financial institutions that lead to the agricultural sector in addition to other
sectors of the economy, under the Farm Credit Act the System institutions are
restricted solely to making loans to qualified borrowers in the agricultural
sector and to certain related businesses. Moreover, the System is required to
make credit and other services available in all areas of the nation. In order to
fulfill its broad statutory mandate, the System maintains lending units in all
50 states and the Commonwealth of Puerto Rico.
The System obtains funds for its lending operations primarily from
the sale of debt securities issued under Section 4.2(d) of the Farm Credit Act
("Systemwide Debt Securities"). The FCBs are jointly and severally liable on all
Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs
through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs
(the "Funding Corporation"). Each FCB determines its participation in each issue
of Systemwide Debt Securities based on its funding and operating requirements,
subject to the availability of eligible collateral, to determinations by the
Funding Corporation as to conditions of participation and terms of each
issuance, and to FCA approval.
Important information regarding the FCBs and the Farm Credit System,
including combined financial information, is contained in disclosure information
made available by the Funding Corporation. This information consists of the most
recent Farm Credit System Annual Information Statement and any Quarterly
Information Statements issued subsequent thereto (collectively, "Information
Statements") and certain press releases issued from time to time by the Funding
Corporation. Such information and the Farm Credit System Annual Report to
Investors for the current and two preceding fiscal years are available for
inspection at the Federal Farm Credit Banks Funding Corporation, Investment
Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New
Jersey 07302; Telephone: (201) 200-8000. Upon request, the Funding Corporation
will furnish, without charge, copies of the above information.]
[GOVERNMENT TRUST CERTIFICATES
Government Trust Certificates ("GTCs") consist of certificates evidencing
undivided fractional interests in a trust, the assets of which consist of
promissory notes (the "Notes"), payable in U.S. Dollars, of a certain foreign
government, backed by a full faith and credit guaranty issued by the United
States of America, acting through the Defense Security Assistance Agency of the
Department of Defense (the "DSAA"), of the due and punctual payment of 90% of
all payments of principal and interest due on the Notes and a security interest
in collateral, consisting of non-callable securities issued or guaranteed by the
United States government or agencies thereof, sufficient to pay the remaining
10% of all payments of principal and interest due on the Notes.
Many issuances of GTCs were undertaken pursuant to Title III of the
Foreign Operations, Export Financing and Related Programs Appropriations Acts
(the "Appropriations Acts"), which permit borrowers to prepay certain eligible
high-interest loans made by the Federal Financing Bank (the "FFB") under the
Foreign Military Sales ("FMS") Credit Program. The Appropriations Acts
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<PAGE>
permit prepayment of the FMS loans with the proceeds of new loans and authorize
the issuance of a United States government guaranty covering no more and no less
than ninety percent (90%) of the payments due on each such new loan, in
accordance with the requirements of the Arms Export Control Act, as amended (the
"AECA"). It is a condition to the issuance of Certificates under such program
that the DSAA approve the refinancing of any such FMS loan.
Although 90% of all payments of principal and interest on the Notes are
guaranteed by the United States government or agencies thereof, and 10% of such
payments are secured by securities of the United States government or agencies
thereof, the GTCs themselves are not so guaranteed. In the event of a default on
the Notes, the Trustee of the Trust would be required by the operative documents
to make a claim against the United States government or an agency thereof or
would be required to liquidate the collateral securing the Notes.
Payments Under the Guaranty. If the borrower under the Notes (the
"Borrower") fails to deposit with the related trustee (the "Trustee") all
amounts due on the Notes on any Note payment date (each, a "Note Payment Date"),
the Trustee will first notify the Borrower and, one business day thereafter,
will send a notice to the Director of the DSAA and to the related depositary
(the "Depositary") setting forth the amounts due on the Notes on such Note
Payment Date and the amounts, if any, received from the Borrower. On the [11th
calendar day] following the Note Payment Date, if any amounts due on a Note
remain unpaid, the Trustee will demand payment from DSAA on the applicable
Guaranty in accordance with its terms. On the day the Trustee receives such
payment, it will instruct the Depositary immediately to deliver sufficient funds
to pay the amounts remaining unpaid on the Note.
On the occurrence of an Event of Default (as defined in the related loan
agreement), the Trustee in its discretion may proceed to protect and enforce the
rights of the GTC holders under the Declaration of Trust by a suit, action or
other proceeding. As provided in the loan agreement, the Guaranty and the
Depositary Agreement, the Trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the Note.
The Trustee is required to take all necessary action, as permitted by the
Declaration of Trust and applicable law (i) to enforce payments due from DSAA
under the Guaranty and (ii) to take possession of collateral maturing or paying
interest on or prior to the Note payment date on which default occurred, and to
apply such funds in accordance with the Declaration of Trust for the benefit of
holders of GTCs. The Trustee is required to notify the Borrower upon taking the
foregoing actions. Neither the Trust holding a Note nor DSAA has the right to
accelerate payment of the Note, notwithstanding any failure of the Borrower to
make payment on the Note or other Event of Default with respect to the Note.
[The applicable Prospectus Supplement will specify, to the extent GTCs are
included as Underlying Securities, the waiting period that must elapse before
reimbursement for a default on the Notes, and the delay between payment on the
Notes and payment on the GTCs that is built into the GTCs to protect against a
delay in reimbursement.
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In addition, the related Prospectus Supplement will specify, to the extent
applicable: (i) the aggregate principal amount of such GTCs; (ii) the coupon, if
any, borne by such GTCs; (iii) the stated maturity of each GTC; (iv) the
identity of each underlying obligor; and (v) the conditions under which, and the
terms on which, any underlying obligation may be prepaid or redeemed prior to
the stated maturity of the obligation.]]
[AID-GUARANTEED UNDERLYING SECURITIES
General. AID-Guaranteed Underlying Securities consist of notes, bonds,
credit facilities and other debt instruments which are issued or arranged by
intermediary financial institutions ("IFIs") and guaranteed in whole or in part
by AID. Most AID guarantees are established under the auspices of the Private
Sector Investment Program (the "Investment Program"), created in 1983 under
Section 108 of the Foreign Assistance Act of 1961 and administered by AID. The
Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government.
AID Housing Guaranty Program. The Housing Guaranty Program (the "Housing
Program") is administered by the AID Office of Housing and Urban Programs. The
Housing Program facilitates collaboration between AID and host-country housing
institution borrowers in both the public and private sectors. Under the Housing
Program AID participates in the planning, structuring and execution of a housing
or shelter finance program. Through the conclusion of "implementation
Agreements" the Housing Program aids developing countries in securing favorable
terms in U.S. capital markets for a U.S. government-guaranteed loan.
Payments under the AID Guarantees. Pursuant to the Fiscal Agency
Agreement, if the Borrower does not deposit with the Fiscal Agent thereunder at
or before 12 o'clock noon, New York City time, on any date on which a payment of
principal, interest or maturity amount on the guaranteed AID-Guaranteed
Underlying Securities is due (each, an "AID-Guaranteed Underlying Security
Payment Date"), immediately available funds in an amount sufficient to pay in
full any interest and principal, and any maturity amount, due on such
AID-Guaranteed Underlying Security Payment Date with respect to the guaranteed
AID-Guaranteed Underlying Securities, the Fiscal Agent, acting on behalf of the
holders of the guaranteed AID-Guaranteed Underlying Securities, is obligated to
make a demand upon AID, not later than 2 o'clock p.m., New York City time, on
such AID-Guaranteed Underlying Security Payment Date for payment pursuant to the
guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
Business Days following receipt of such demand, to pay to the demanding
AID-Guaranteed Underlying Securityholders the applicable guaranteed amount.
Upon receipt by the Fiscal Agent of payments from AID pursuant to the
guarantees, the Fiscal Agent will be required, if such payments are received at
or prior to 12 o'clock noon, New York City time, on any Business Date, to remit
such payments to the registered holders of the guaranteed AID-
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Guaranteed Underlying Securities entitled thereto on such Business Day and, if
such payments are received after such time, to remit such payments to such
registered holders on the next such Business Day.
Each AID-Guaranteed Underlying Securityholder is deemed by the acceptance
of a guaranteed AID-Guaranteed Underlying Security to have irrevocably appointed
the Fiscal Agent as its agent for the purpose of making a demand for payment
upon AID pursuant to the guarantees and receiving any payment to an
AID-Guaranteed Underlying Securityholder by AID pursuant to the guarantees. The
Regulations also provide that any AID-Guaranteed Underlying Securityholder may
make demand for payment on AID under a Guarantee on its own behalf immediately
upon the failure of the Borrower to make any payment when due under such
AID-Guaranteed Underlying Securityholder's guaranteed AID-Guaranteed Underlying
Security. All payments made by AID to the Fiscal Agent pursuant to the
guarantees will be held in trust by the Fiscal Agent solely for the benefit of
the registered holders of the guaranteed AID-Guaranteed Underlying Securities
until remitted to such holders. AID will be discharged from its obligations to
make a payment pursuant to the guarantees upon the making of such payment to the
Fiscal Agent on behalf of the AID-Guaranteed Underlying Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
Events of Default. As provided by the terms of each AID-Guaranteed
Underlying Security, an Event of Default will be deemed to have occurred if the
borrower fails to make any payment on such AID-Guaranteed Underlying Security on
the applicable Payment Date. On the occurrence of an Event of Default, the
trustee of such AID-Guaranteed Underlying Security (the "Underlying Trustee") or
the Trustee may make demand on AID under the guarantees. However, none of the
Fiscal Agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Underlying Security, notwithstanding any failure of the borrower to make payment
on the AID-Guaranteed Underlying Securities.
[The related Prospectus Supplement will specify, to the extent applicable:
(i) the aggregate principal or notional principal amount of such AID-Guaranteed
Underlying Securities; (ii) the coupon, if any, borne by such AID-Guaranteed
Underlying Securities; (iii) the stated maturity of each underlying obligation;
(iv) the identity of each underlying obligor; (v) the credit characteristics of
such obligor; (vi) the rating, if any, assigned to each such obligor, whether an
actual or a shadow rating; (vii) the conditions under which, and the terms on
which, any underlying obligation may be prepaid or redeemed prior to the stated
maturity of the obligation; and (viii) the identity of the Fiscal Agent.]
The Federal Credit Reform Act of 1990, Pub. Law 101-508 (the "Credit
Reform Act"), provides that payments in respect of loan guarantee commitments
made on or after October 1, 1991, including the guarantee commitments made by
AID under the guarantees, will be made by the U.S. Treasury from a "financing
account" established under Section 502(7) of the Credit Reform Act. Section
505(c) of the Credit Reform Act authorizes the Secretary of the Treasury to lend
or pay to the financing account such amounts as may be necessary to make any
payments required to discharge loan guarantee obligations and commitments in the
event funds in the financing account are insufficient.]
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The Trust will have no other significant assets [other than any
Credit Support or those assets referred to below] from which to make
distributions of amounts due in respect of the Certificates. Consequently, the
ability of Certificateholders to receive distributions in respect of the
Certificates will depend [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'s
financial condition and its ability to make payments in respect of such
Underlying Securities. This Prospectus Supplement relates only to the
Certificates being offered hereby and does not relate to the Underlying
Securities of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Depositor nor [any
of] the Underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
The Deposited Assets will also include [describe any assets which are
ancillary or incidental to the Underlying Securities, including hedging
contracts such as puts, calls, interest rate swaps, currency swaps, floors, caps
and collars, and any cash or other security pledged to support the Underlying
Securities] (such assets, together with the Underlying Securities, the
"Deposited Assets").
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ] Certificates
[and the Class [ ] Certificates]], Credit Support will be obtained [and will
constitute part of the Trust to the extent provided below] to support or ensure
the [servicing and] [timely] [ultimate] distribution of amounts due with respect
to the Deposited Assets, in the form and amount described below.
[THE LETTER OF CREDIT
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Letter of Credit from [___]
(the "Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely] [ultimate] remittance of amounts due with respect to the Deposited
Assets]. The maximum amount that the Trustee may draw under the Letter of Credit
will initially be equal to ____. The initial amount of the Letter of Credit will
be [$] ____. Thereafter, the amount of the Letter of Credit with respect to any
Distribution Date will equal [the lesser of (i) % of the aggregate Certificate
Principal Balance outstanding on the preceding Distribution Date (after giving
effect to any payment of principal made on such preceding Distribution Date) but
in any event not less than [$]____, and (ii)] the amount of the Letter of Credit
on preceding Distribution Date, plus [(a) reimbursement of certain advances
under the Letter of Credit and (b) recoveries on defaulted Deposited Assets]
[describe other methods]. The Letter of Credit expires on _____, 19__ . The
Trustee will be obligated, in the event of a drawing on the Letter of Credit, to
pursue appropriate remedies against the Deposited Assets and other collateral,
and any realization thereon shall be paid to the Letter of Credit Bank to the
extent of any amounts owing, in the manner and priority specified herein.]
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[Add language regarding the Letter of Credit Bank with respect to its
debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank, if necessary.]]
[THE SURETY BOND
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Surety Bond from [ ] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered] Class [ ]]
Certificates. The Surety Bond expires on ____, 19__. The Trustee will be
obligated,in the event of a drawing on the Surety Bond, to pursue appropriate
remedies against the Deposited Assets and other collateral, and any realization
thereon shall be paid to the Surety to the extent of any amounts owing, in the
manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with respect to
its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Surety. In addition, to the
extent that the Surety Bond will cover payment of 20% or more of the aggregate
principal amount of the Certificates covered thereby, provide information of
financial and other matters with respect to the issuer of the Surety Bond, if
necessary.]]
[RESERVE ACCOUNT
The Depositor will deposit with the Trustee on the Closing Date cash,
letters of credit and short-term investments acceptable to the Rating Agency
initially rating the Certificates in the amount of [$]____. [Collections with
respect to the Deposited Assets not distributed with respect to the Certificates
shall be deposited in the Reserve Account.] Amounts so deposited in such Reserve
Account will be used by the Trustee to make payments of principal of and premium
(if any) and interest on the Certificates to the extent that funds are not
otherwise available. Immediately after any Distribution Date, amounts in the
Reserve Account in excess of [indicate formula] [may be paid to the Depositor.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof
and the manner and priority in which collections thereon are allocated to the
Certificateholders of each class of the Certificates, as described elsewhere
herein.] See "Maturity and Yield Considerations" in the Prospectus.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ] [,] [and] Class [ ] [and Class ____] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]_________ (approximate) and a [ %] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] _____ (approximate) and
a [___%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in the
aggregate an initial [Certificate Principal Balance] [Notional Amount] of [$]
_________ (approximate) and a [ %] [Variable] Pass-Through Rate. [The Class [ ]
Certificates, which are not being offered hereby, will be transferred by the
Depositor to an affiliate on the Closing Date, and may be sold at any time by
the Depositor in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and transferred
on the book-entry records of DTC and its Participants in minimum denominations
of [$__] and [integral multiples thereof] [multiples of [$__] in excess
thereof]. [The Class [ ] Certificates [and specify any others] will be offered
in registered, certificated form, in minimum percentage interests corresponding
to the initial Notional Amounts or Certificate Principal Balances, as
applicable, of [$__] and integral multiples thereof, except that one Certificate
of each such class may be issued with an initial Notional Amount or Certificate
Principal Balance, as applicable, equal to an integral multiple of [$__] plus
the excess of the initial aggregate Notional Amount or Certificate Principal
Balance, as applicable, of such class over the greatest integral multiple of
[$__] that is not more than such initial aggregate Notional Amount or
Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the 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
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Voting Rights. DTC may take conflicting actions with respect to Voting Rights,
to the extent that Participants whose holdings of Certificates evidence such
Voting Rights, authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Certificate Owners or their
nominees, respectively, rather than to DTC or its nominee, only if (i) the
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
each class of Certificates [(other than the Definitive Classes)] and the
Depositor is unable to locate a qualified successor or (ii) the Depositor, at
its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates [(other than the
Definitive Classes of Certificates)] and receipt of instructions for
re-registration, the Trustee will reissue such Certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as Certificateholders under the Trust
Agreement.
DISTRIBUTIONS
Collections on the Deposited Assets that are received by the Trustee
for a given Collection Period pursuant to the collection procedures described
herein and in the Prospectus and deposited from time to time into the
Certificate Account will be applied by the Trustee on each applicable
Distribution Date to the following distributions in the following order of
priority, solely to the extent of Available Funds (as defined below) on such
Distribution Date:
(i) to the Trustee, all unpaid fees and expenses of the Trustee and
its respective agents, up to the Allowable Expense Amount (as defined
below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support
Providers"), any amounts required to be paid or reimbursed to, or
deposited with, any such person (collectively, "Credit Support Payments");
(iii)] to the Certificateholders of each Class of such Series, first,
to the payment of Required Interest [and on a pro rata basis to the Credit
Support Providers for the payment of any Credit Support Payments], second,
to the payment of Required Principal and third, to the payment of Required
Premium, in each case applicable to such Class, commencing with the most
highly ranked Class and, to the extent Available Funds remain available,
to each other Class in accordance with the ranking specified herein under
["-- Allocation of Losses; Subordination"];
[(iii) to the Credit Support Providers, any Credit Support Payments;]
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[(iv)] to the Trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to clause (i)
above;
[(v)] all remaining amounts, if any, to the Depositor].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following meanings:
["Allowable Expense Amount" means, for any given Collection Period,
the sum of (x) [$]__________ and (y) amounts in respect of the Allowable Expense
Amount from the preceding Collection Period that have not been applied on the
Distribution Date for such preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum of (a) all
amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period[,] [and] (b) amounts available as of such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional amount
that the [Depositor] may remit to the Trustee from time to time according to the
terms of the Trust Agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means [a
fixed percentage] [a percentage that varies depending on [describe basis for
variable formula, such as the applicable date or other factors or indices]].
"Eligible Investments" means, with respect to the Certificates, those
investments acceptable to the Rating Agency as being consistent with the rating
of such Certificates, as specified in the Trust Agreement. Generally, Eligible
Investments must be limited to obligations or securities that mature not later
than the business day prior to the next succeeding Distribution Date.
"Required Interest" for the Certificates or any Class thereof on any
given Distribution Date means the accrued and unpaid interest on the outstanding
Certificate Principal Balance [or Notional Amount] of such Certificates,
computed at the applicable Pass-Through Rate.
"Required Premium" for the Certificates or any Class thereof for any
Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
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"Required Principal" for the Certificates or any Class thereof for
any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection Period,
to the extent allocable to such Certificates. The Certificate Principal Balance
of a Certificate outstanding at any time represents the maximum amount that the
holder thereof is entitled to receive as distributions allocable to principal
from the cash flow on the Underlying Securities, the other assets in the Trust
and any Credit Support obtained for the benefit of such holder. The Certificate
Principal Balance of any class of Certificates [(other than the Class [ ]
Certificates)] as of any date of determination is equal to the initial
Certificate Principal Balance thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Certificate and (b) any reductions in the Certificate Principal Balance deemed
to have occurred in connection with allocations of (i) Realized Losses allocable
to principal on the Deposited Assets and (ii) [Extraordinary Trust Expenses], as
described herein. [The Notional Amount of the Class [ ] Certificates as of any
date of determination is equal to [specify amount].] [Holders of the Class [ ]
Certificates are not entitled to receive any distributions allocable to
principal.]
[Notwithstanding the priorities described above, holders of the Class
[ ] Certificates and the Class [ ] Certificates will be entitled to receive on
any Distribution Date 100% of all principal collections received in the related
Collection Period with respect to the Deposited Assets, to be distributed [on a
pro rata basis] in reduction of the Certificate Principal Balance of the Class
[ ] Certificates and the Class [ ] Certificates, if any of the following
conditions shall be satisfied: [describe conditions, if any, by which a certain
class is given 100% of the principal cash flow other than pursuant to
subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be obligated
to advance or cause to be advanced on or before each Distribution Date its own
funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are deemed
by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the
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Trustee out of any funds in the Certificate Account allocable to any of the
Deposited Assets prior to the distributions on the Certificates.
[ALLOCATION OF LOSSES; SUBORDINATION [Specify if necessary]
["Extraordinary Trust Expense" - define if necessary]]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Class [ ]
Certificates and the Class [ ] Certificates to the extent set forth herein, the
Class [ ] Certificates may not be purchased by or transferred to a Plan except
upon the delivery of an opinion of counsel as described herein. See "ERISA
Considerations."]
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DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a
form of which is filed as an exhibit to the Registration Statement. A Current
Report on Form 8-K relating to the Certificates containing a copy of the Trust
Agreement as executed will be filed by the Depositor with the Commission
following the issuance and sale of the Certificates. The Trust created under the
Trust Agreement (including the Series 1997-[ ] Supplement) will consist of (i)
the Deposited Assets (exclusive of any Retained Interest, which is not part of
the Trust), (ii) all payments on or collections in respect of the Deposited
Assets due after the Cut-off Date, together with any proceeds thereof[,] [and]
[(iii) any Credit Support in respect of any class or classes of Certificates]
[and (iv) the rights of the Depositor under the Purchase Agreement between the
Depositor and the Seller]. [In addition, the Certificateholders of the
Certificates may also have the benefit of certain Credit Support discussed
above. See "Description of Credit Support."] Reference is made to the Prospectus
for important information in addition to that set forth herein regarding the
Trust, the terms and conditions of the Trust Agreement and the Certificates. The
following summaries of certain provisions of the Trust Agreement do not purport
to be complete and are subject to the detailed provisions contained in the form
of Trust Agreement, to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein.
THE TRUSTEE
[___], a [___] corporation, will act as trustee for the Certificates
and the Trust pursuant to the Trust Agreement. The Trustee's offices are located
at [___] and its telephone number is [___].
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be indemnified by the Trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of Certificates under
the Trust Agreement (an "Event of Default") will consist of [(i) a default in
the payment of any interest on any Underlying Security after the same becomes
due and payable (subject to any applicable grace period); (ii) a default in the
payment of the principal of or any installment of principal of any Underlying
Security when the same becomes due and payable; and (iii) the occurrence and
continuance of such other events specified in the applicable series supplement.]
[Describe remedies available to Certificateholders upon the occurrence and
continuance of an Event of Default, including, as
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applicable, directing the Trustee to vote the Underlying Securities in favor of
declaring the principal balance of and any accrued interest on the Outstanding
Debt Securities to be immediately due and payable].
The Trust Agreement will provide that, within 30 days after the
occurrence of an Event of Default in respect of the Certificates of any class,
the Trustee will give to the holders of such Certificates notice, transmitted by
mail, of all such uncured or unwaived Events of Default known to it. However,
except in the case of an Event of Default relating to the payment of principal
of or premium, if any, or interest on any of the Underlying Securities, the
Trustee will be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of the Certificates of such class.
No holder of any Certificate will have the right to institute any
proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders have offered the Trustee reasonable indemnity, (iv) the Trustee has
for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to the Trustee during such
15-day period by the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all
Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [ ]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class].
[Specify conditions, if any, under which allocation of Voting Rights
might change from the foregoing percentages]. ["Required Percentage-Amendment"
of Voting Rights necessary to consent to amendment or modification of the Trust
shall be [__%].] ["Required Percentage-Waiver" shall mean [__%].]
VOTING OF UNDERLYING SECURITIES, MODIFICATION OF INDENTURE
The Trustee, as holder of the Underlying Securities, has the right to
vote and give consents and waivers in respect of such Underlying Securities as
permitted by [DTC] [Federal Reserve Bank] and except as otherwise limited by the
Trust Agreement. In the event that the Trustee receives a request from [DTC]
[Federal Reserve Bank], the [Fiscal Agent] or the GSE Issuer for its
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consent to any amendment, modification or waiver of the Underlying Securities or
any other document thereunder or relating thereto, or receives any other
solicitation for any action with respect to the Underlying Securities, the
Trustee shall mail a notice of such proposed amendment, modification, waiver or
solicitation to each Certificateholder of record as of such date. The Trustee
shall request instructions from the Certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative Certificate Principal
Balances and Notional Amounts of the Certificates, as applicable) as the
Certificates of the Trust were actually voted or not voted by the
Certificateholders thereof as of a date determined by the Trustee prior to the
date on which such consent or vote is required; provided, however, that,
notwithstanding anything to the contrary, the Trustee shall at no time vote or
consent to any matter (i) unless such vote or consent would not (based on an
opinion of counsel) alter the status of the Trust as a grantor trust for Federal
income tax purposes, (ii) which would alter the timing or amount of any payment
on the Underlying Securities, including, without limitation, any demand to
accelerate the Underlying Securities, except in the event of an event of default
with respect to the Underlying Securities or an event which with the passage of
time would become an event of default and with the unanimous consent of all
holders of Outstanding Certificates or (iii) which would result in the exchange
or substitution of any of the outstanding Underlying Securities pursuant to a
plan for the refunding or refinancing of such Underlying Securities except in
the event of a default under the Underlying Securities and only with the consent
of Certificateholders representing 100% of the aggregate voting rights of each
outstanding Class of the Certificates. The Trustee shall have no liability for
any failure to act resulting from Certificateholders' late return of, or failure
to return, directions requested by the Trustee from the Certificateholders.
In the event that an offer is made by the GSE Issuer to issue new
obligations in exchange and substitution for any of the Underlying Securities,
pursuant to a plan for the refunding or refinancing of the Outstanding Debt
Securities or any other offer is made for the Underlying Securities, the Trustee
shall notify the Certificateholders of such offer as promptly as practicable.
The Trustee must reject any such offer unless an event of default under the
Underlying Securities has occurred, the Trustee is directed by the affirmative
vote of all of the Certificateholders to accept such offer and the Trustee has
received the tax opinion described above. [Accordingly, a Certificateholder
generally would be required to effect a withdrawal of Requested Underlying
Securities from the Trust in order to accept such offer. See "Description of
Certificates-Optional Exchange" in the Prospectus.]
If an event of default under the Underlying Securities occurs and is
continuing and if directed by all the holders of outstanding Class [ ]
Certificates [and, Class [ ] Certificates,] the Trustee shall vote the
Underlying Securities in favor of directing, or take such other action as may be
appropriate to declare the unpaid principal amount of the Underlying Securities
and any accrued and unpaid interest thereon to be due and payable. In connection
with a vote concerning whether to declare the acceleration of the Underlying
Securities, the Certificateholders' interests of each Class may differ and the
interests of either Class may differ from holders of other Outstanding Debt
Securities.
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TERMINATION
[The circumstances under which the obligations created by the Trust
Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus.] [Describe
additional termination provisions.] The Depositor will have the right to
purchase all remaining Deposited Assets in the Trust and thereby effect early
retirement of the Certificates on any Distribution Date, [(a)] once the
aggregate principal amount of the Deposited Assets at the time of any such
purchase is less than [10%] of the aggregate principal amount of the Deposited
Assets as of the Cut-off Date [and (b) at the option of the Depositor at
[specify when and on what terms any such option may be exercised]; provided,
however, that the right to exercise any such option is contingent on such
exercise being consistent with the Depositor's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations
thereunder. In the event the Depositor exercises any such option, the portion of
the purchase price allocable to the Certificates of each class will be, to the
extent of available funds, [100% of their then aggregate outstanding Certificate
Principal Balance or Notional Amount, as applicable, plus with respect to the
Certificates [one month's] [three month's] [specify other period] interest
thereon at the Fixed Pass-Through Rate or the then applicable Variable
Pass-Through Rate, as the case may be, plus, with respect to each class of
Certificates, any previously accrued but unpaid interest thereon.] [Specify
alternative allocation method if different from above.] In no event will the
Trust created by the Trust Agreement for the Certificates continue beyond the
expiration of 21 years from the death of the survivor of the person or persons
named in the Trust Agreement. See "Description of Trust Agreement-Termination"
in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or
relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal income
tax consequences of the purchase, ownership and disposition of the Certificates
by an initial holder of Certificates. Such consequences will depend on the terms
of the Certificate, whether the Trust is treated as a grantor trust, a
partnership or a FASIT for Federal income tax purposes, and the assets
collateralizing or otherwise supporting such Certificate. The consequences of
owning Certificates which are deemed for Federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions ["Grantor Trust Certificates"],
["Partnership Certificates"] and ["FASIT Certificates"], respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related Certificates.
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This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
Certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. Investors should consult their own tax
advisors to determine the Federal, state, local and other tax consequences of
the purchase, ownership and disposition of the Certificates. [The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto.]
The Trust will be provided with an opinion of Weil, Gotshal & Manges
LLP (a limited liability partnership including professional corporations),
special Federal tax counsel to the Depositor ("Federal Tax Counsel") regarding
certain Federal income tax matters discussed below. An opinion of Federal Tax
Counsel, however, is not binding on the Internal Revenue Service (the "Service")
or the courts. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to any of the Federal income tax
consequences discussed below, and no assurance can be given that the Service
will not take contrary positions.
[TAX STATUS OF TRUST
In the opinion of Federal Tax Counsel, the Trust will be classified
as a grantor trust and not as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes. Accordingly, each
owner of a Certificate (a "Certificate Owner") will be subject to Federal income
taxation as if it owned directly the portion of the Deposited Assets allocable
to such Certificates, and as if it paid directly its share of expenses paid by
the Trust. The following discussion assumes that the Underlying Securities were
not issued with original issue discount ("OID") and, accordingly, the
Certificate Owners will not realize OID except with respect to a "stripped
interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays for
its Certificate among the Underlying Securities and the Deposited Assets in the
Trust other than the Underlying Securities (the "other Deposited Assets")
allocable to such Certificate, in proportion to their relative fair market
values on the date of purchase of the Certificate. A Certificate Owner would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.
The Federal income tax treatment of a holder of a particular class of
Certificates will depend upon whether the interest in the Underlying Securities
represented by such class will be considered, in whole or in part, to be a
"stripped bond" or "stripped coupon" (together, a "stripped interest") within
the meaning of Section 1286 of the Code. A class of Certificates will not be
considered to represent a stripped interest in the underlying Underlying
Securities to the extent the
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Certificate is entitled to receive a proportionate amount of all principal and
interest on the Underlying Securities. A class of Certificates will be
considered in its entirety to represent a stripped interest in the underlying
Underlying Securities if it is entitled to receive interest on the Underlying
Securities which is disproportionately less than the principal which it is
entitled to receive on the Underlying Securities, or if it is entitled to
receive all or part of the interest on the Underlying Securities but no
principal on the Underlying Securities. In addition, if a class of Certificates
is entitled to receive interest and principal on the Underlying Securities, but
the interest it is entitled to receive on the Underlying Securities is
disproportionately more than the principal it is entitled to receive on the
Underlying Securities, it could be argued that the Certificates represents (a)
an interest in the Underlying Securities that is not a stripped interest to the
extent it represents a proportional amount of all the principal and interest on
the Underlying Securities and (b) a stripped interest in the Underlying
Securities to the extent of any additional interest to which it is entitled on
the Underlying Securities. If a Certificate represents in part a stripped
interest and in part not a stripped interest, such interests will be treated as
two separate items for tax purposes and a purchaser of Certificates will be
required to allocate its purchase price among the two items (as well as any
other Deposited Assets) in proportion to their relative fair market values on
the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not Stripped
Interests. To the extent a class of Certificates does not represent a stripped
interest in the Underlying Securities, each Certificate Owner will be required
to report on its Federal income tax return, in a manner consistent with its
method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a Certificate
allocated to a Certificate Owner's undivided interest in a Underlying Security
is greater than or less than the portion of the principal balance of the
Underlying Security allocable to the Certificate, such interest in the
Underlying Security will have been acquired at a premium or discount, as the
case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a separate asset, thus, in each case, reducing the
portion of the purchase price allocable to the Certificate Owner's undivided
interest in the Underlying Securities (the "allocated Purchase Price"). To the
extent that the allocated Purchase Price is less than the principal balance of
an Underlying Security, the Certificate Owner's interest in such Underlying
Security will be treated as purchased at a "market discount." The market
discount on a Underlying Security will, however, be considered to be zero if it
is less than a statutorily defined de minimis amount. Conversely, to the extent
that the allocated Purchase Price exceeds the principal balance of an Underlying
Security, the Certificate Owner's interest therein will be treated as purchased
with "bond premium." See the discussion below under "Bond Premium."
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For example, if the allocated Purchase Price paid by a Certificate
Owner who purchases a Certificate in the initial public offering were equal or
almost equal to the portion of the principal balance of the Underlying Security
that is allocable to the Certificate, there would be no significant amount of
discount or premium with respect to its interest in such Underlying Security.
Moreover, if the total purchase price of a Certificate is equal to the principal
amount of the Underlying Securities allocable to the Certificate, because a
portion of such purchase price will be allocated to the other Deposited Assets
of the Trust, in the aggregate a Certificate Owner's interest in the Underlying
Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of Certificates represents a stripped interest
in the underlying Underlying Securities, each such Certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest (other than qualified
stated interest) over the portion of the purchase price for the Certificate
allocable to the stripped interest.
Under the Treasury regulations issued under Section 1286 of the Code
(the "Regulations"), the interest payable with respect to the stripped interest
will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the Certificate
Owner) is also entitled. If none of the amounts payable to a Certificate Owner
with respect to a stripped interest constitute qualified stated interest, then
the stripped interest will have OID in an amount equal to the excess of all
payments to be received on the stripped interest over the purchase price for the
Certificate allocable to the stripped interest. Moreover, in determining the
amount paid for the stripped interest, a portion of the purchase price for a
Certificate must be allocated to the Certificate Owner's share of other
Deposited Assets and to accrued interest.
The tax treatment of a Certificate Owner will depend upon whether the
amount of OID on the stripped interest represented by the Certificate is less
than a statutorily defined de minimis amount. In general, under the Regulations,
the amount of OID with respect to the stripped interest
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will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the "stated redemption price at maturity" and the number of full
years remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity and
the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than a
payment of qualified stated interest) by a fraction, the numerator of which is
the number of complete years from the purchase date until the payment is made
and the denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified stated
interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each Certificate Owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass- Through Rate on the Certificate by an amount equal to the
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Certificate. Each Certificate Owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the Certificate Owner's
holding period in the Certificate. The Certificate Owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificate Owner from any Credit Support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report its share
of the income of the Trust under its usual method of accounting. Accordingly,
except as described below, interest on an underlying Underlying Security would
be includible in a Certificate Owner's gross income when it accrues on the
Underlying Securities, or, in the case of Certificate Owners who are cash basis
taxpayers, when received by the Administrative Agent, if any, or otherwise the
Trustee on behalf of Certificate Owners. Because the interest collected on the
Underlying Securities generally is paid to Certificate Owners in the following
month, the amount of interest includible in a Certificate Owner's gross income
during any calendar month will not equal the interest distributed in that month.
If the OID with respect to the stripped interest in the Underlying
Securities represented by a Certificate is not treated as being de minimis, a
Certificate Owner will be required to include in income, in addition to any
qualified stated interest on the stripped interest as described above, any OID
on the stripped interest. OID must be included in income as it accrues on a
daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
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In general, if a stripped interest has OID the Certificate Owner will
be required, whether such Certificate Owner uses the cash or the accrual method
of tax accounting, to include in ordinary gross income the sum of the "daily
portions" of OID on the stripped interest for all days during the taxable year
that the Certificate Owner owns the Certificate. The daily portions of OID on a
stripped interest are determined by allocating to each day in any "accrual
period" a ratable portion of the OID allocable to that accrual period. The
amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the stripped interest by a fraction, the numerator of which is the annual yield
to maturity of the stripped interest and the denominator of which is the number
of accrual periods in a year and (ii) subtracting from that product the amount
of qualified stated interest (if any) payable on the stripped interest during
(or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the beginning of
any accrual period is the purchase price for a Certificate allocable to the
stripped interest (including accrued interest, if any) (i) increased by the
amount of OID allocable to all prior accrual periods and (ii) reduced by the
amount of all payments other than qualified stated interest payments (if any) in
all prior accrual periods. In addition, if an interval between payments of
qualified stated interest contains more than one accrual period, the adjusted
issue price at the beginning of each accrual period in the interval is increased
by the amount of qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
Bond Premium. In the event that a Certificate represents either an
unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than qualified
stated interest), such premium will be amortizable by the Certificate Owner as
an offset to interest income (with a corresponding reduction in the Certificate
Owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the Certificate Owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium)
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that accrues on an unstripped or stripped interest using the constant yield
method described above, treating the instrument as having been issued on the
Certificate Owner's acquisition date at an issue price equal to such owner's
adjusted basis with no interest payments being qualified stated interest. Such
an election with respect to a unstripped or stripped interest having amortizable
bond premium or market discount would constitute, respectively, an election to
apply the market discount rules or bond premium rules with respect to all other
debt instruments with market discount or amortizable bond premium, as the case
may be, of such Certificate Owner.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the Underlying
Securities, or a substitution of other assets for the Underlying Securities
following a default on the Underlying Securities, would be a taxable event to
Certificate Owners on which they would recognize gain or loss.
OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate Owner
will be entitled to deduct, consistent with its method of accounting, its share
of reasonable administrative fees, trustee fees and other fees paid or incurred
by the Trust as provided in Section 162 or 212 of the Code and any allowable
amortization deductions with respect to certain other assets of the Trust. If a
Certificate Owner is an individual, estate or trust, the deduction for his share
of fees will be a miscellaneous itemized deduction that may be disallowed in
whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
A Certificate Owner's tax basis in a Certificate generally will equal
the cost of such Certificate, increased by any amounts of undistributed taxable
income (e.g., OID or market discount) and reduced by any amortized premium (each
as described above) and any payments other than payments of qualified stated
interest on an underlying Underlying Security made on such Certificate.
If a Certificate is sold, gain or loss will be recognized equal to
the difference between the proceeds of sale allocable to each of the assets of
the Trust and the Certificate Owner's adjusted basis in each of the foregoing.
Any gain or loss will be a capital gain or loss if the Certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the Certificate Owner's interest in accrued
market discount not previously taken into income on Underlying Securities.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificate Owner fails to
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comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are not
United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." Under
such requirements, the holder must certify, under penalties of perjury, that it
is not a "United States person" and provide its name and address.
[Describe the Federal income tax consequences to Foreign Certificate
Owners of an interest in any other Deposited assets of the Trust.]
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or any political subdivision thereof, or an estate or trust the
income of which is includible in gross income for U.S. Federal income tax
purposes, regardless of its source, or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Depositor and the Administrative Agent, if any, have agreed, and
the Certificate Owners will agree by their purchase of Certificates, to treat
the Trust as a partnership for purposes of Federal, state and local income,
franchise and any other tax measured in whole or in part by income. However, the
proper characterization of the arrangement involving the Trust, the Certificate
Owners, the Depositor and the Administrative Agent, if any, is not entirely
clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership" it
could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust).
A publicly traded partnership is taxed in the same manner as a
corporation unless at least 90% of its gross income consists of specified types
of "qualifying income." Such qualifying income includes, among other things,
interest income not derived in the conduct of a financial or insurance business,
dividend income, and gain from the disposition of assets producing such income.
In the opinion of Federal Tax Counsel, because of the nature of the income of
the Trust, the Trust will not be a publicly traded partnership taxable as a
corporation.
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PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal income
tax, but each Certificate Owner will be required to separately take into account
such holder's allocable share of income, gains, losses, deductions and credits
of the Trust. The Trust's income will consist primarily of [___] and any gain
upon collection or disposition [___]. The Trust's deductions will consist
primarily of [___].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities that corresponds to any excess of the principal amount of such class
of Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [___]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions (which do
not include interest expenses) are subject to limitations and as a result may be
disallowed in whole or in part. Those limitations, which also apply to estates
and trusts, would apply to a Certificate Owner's share of expenses of the Trust
(including fees to the Administrative Agent, if any) and might result in such
holder being taxed on an amount of income that exceeds the amount of cash
actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis in its
Certificate for its allocable share of the Trust's income or loss, respectively.
Any cash distributions by the Trust to a Certificate Owner will constitute (i)
first, a return of capital to the extent of such Certificate Owner's tax basis
in the Certificate (with a corresponding dollar-for-dollar reduction in such tax
basis), and (ii)
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thereafter, to the extent in excess thereof, gain on the sale or exchange of
such Certificate Owner's Certificate. See "Disposition of Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not issued
with original issue discount ("OID") and, therefore, the Trust should not have
OID income. However, the purchase price paid by the Trust for the Underlying
Securities may be greater or less than the remaining principal balance of the
Underlying Securities at the time of purchase. If so, the Underlying Securities
will have been acquired at a premium or discount, as the case may be. (As
indicated above, if the Trust acquires a large number of Underlying Securities
it will make this calculation on an aggregate basis, but might be required to
recompute it on an instrument-by- instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
MODIFICATION OR EXCHANGE OF UNDERLYING SECURITIES
Depending upon the circumstances, it is possible that a modification
of the terms of the Underlying Securities, or a substitution of other assets for
the Underlying Securities following a default on the Underlying Securities,
would be a taxable event to Certificate Owners on which they would recognize
gain or loss.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of the
Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to terminate
for Federal income tax purposes if 50% or more of the capital and profits
interests in the Trust are sold or exchanged within a 12-month period. Were such
a termination to occur, the Trust would be considered to have contributed its
assets to a new partnership and distributed the interests in the new partnership
in liquidation to the Certificate Owner. If any such constructive termination
occurs, the Trust does not intend to comply with certain technical requirements
that might be applicable for various reasons including the likely lack of
relevant data. As a result, the Trust may be subject to certain tax penalties
and may incur additional expenses. Moreover, the Schedule K-1 information
thereafter distributed to the Certificate Owners may be incorrect.
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DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or other
disposition of Certificates in an amount equal to the difference between the
amount realized and the seller's tax basis in the Certificates sold. A
Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to such Certificate. In addition,
both his tax basis in, and the amount realized on a sale of, a Certificate would
include the holder's share of liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Certificate and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such aggregate tax
basis to the Certificates sold (rather than maintaining a separate tax basis in
each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
On the sale of a Certificate, any gain attributable to the holder's
share of any accrued market discount on the Underlying Securities that has not
otherwise been included in the holder's income would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust does not expect to have any other assets that would give
rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust will elect to include market discount in
income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month allocable to a
particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If such a convention is not allowed (or only applies to transfers
of less than all of a partner's interest), taxable income or losses of the Trust
might be reallocated among the Certificate Owners. The Trustee is authorized to
revise the Trust's method of allocation between transferors and transferees to
conform to a method permitted by future regulations.
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates at a
profit (loss), the purchasing Certificate Owner will have a higher (lower) basis
in the Certificates than the selling
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<PAGE>
Certificate Owner had. The tax basis of the Trust's assets will not be adjusted
to reflect that higher (or lower) basis unless the Trust were to file an
election under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records, as
well as potentially onerous information reporting requirements, the Trust will
not make such election. As a result Certificate Owners might be allocated a
greater or lesser amount of Trust income than would be appropriate based on
their own purchase price for Certificates.
ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of the
Trust. Such books will be maintained for financial reporting and tax purposes on
an accrual basis and the fiscal year of the Trust will be the calendar year. The
Trustee will file a partnership information return (Internal Revenue Service
Form 1065) with the Service for each taxable year of the Trust and will report
each Certificate Owner's allocable share of items of Trust income and expense to
holders and the Service on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed by
the Trust or be subject to penalties, unless the holder notifies the Service of
all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Depositor, as the tax matters partner, will be responsible for
representing the Certificate Owners in any dispute with the Service. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment
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<PAGE>
could also result in an audit of a Certificate Owner's returns and adjustments
of items not related to the income (or loss) of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be engaged
in a trade or business in the United States for purposes of Federal withholding
taxes with respect to non-U.S. persons because there is no clear authority
dealing with that issue under facts substantially similar to those described
herein. [Although it is not expected that the Trust would be engaged in a trade
or business in the United States for such purposes, the Trust expects to
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the Service and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to reflect
differences caused by the precise nature of the Deposited Assets relating to a
given Series of Certificates.]
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificate Owner fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing interests in
a FASIT and the promulgation of Treasury regulations relating to the federal
income taxation of FASITs and to the federal income tax consequences of the
ownership of FASIT interests, the Prospectus Supplement
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<PAGE>
relating to such Certificates will describe the requirements for the
classification of the Trust as a FASIT and the consequences to a holder of
owning such Certificates.]
[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given Series of Certificates or the degree of servicing required with respect
to such Deposited Assets.]]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing in a
Certificate, a Plan fiduciary should determine whether such an investment is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its investment policy and the composition of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions involving the
assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering an investment in Certificates should also consider whether such an
investment might constitute or give rise to a non-exempt prohibited transaction
under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan assets which, in turn, might mean that
certain aspects of such investment, including the operation of the Trust, might
be non-exempt prohibited transactions under ERISA and the Code. Neither ERISA
nor the Code defines the term "plan assets." Under Section 2510.3-101 of the
United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include an interest in the underlying assets of an entity
(such as a trust) for certain purposes, including the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an "equity interest" in
such entity. The Regulation states that a beneficial interest in a trust is an
equity interest. Thus, if a Plan acquired a Certificate of a particular class
the Plan might be considered to own its share of the underlying assets of the
Trust unless, among other exceptions set forth in the Regulation, (1) such
Certificate is a "publicly-offered security" or (2) equity participation by
benefit plan investors in each class of equity interests is not "significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, and (3) either is (A) part of a class of securities
S-46
<PAGE>
registered under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the
Plan as a part of an offering of securities to the public pursuant to an
effective registration statement under the Securities Act and the class of
securities of which such security is a part is registered under the Exchange Act
within 120 days (or such later time as may be allowed by the Commission) after
the end of the fiscal year of the issuer during which such public offering
occurred. The Depositor does not anticipate that the Certificates of any class
will be considered publicly-offered securities within the meaning of the
Regulation.
Participation by benefit plan investors in any class of Certificates
would not be significant if, immediately after the most recent acquisition of
any equity interest in the Trust (whether or not from the Depositor or an Agent
or Underwriter), less than 25 percent of the value of each class of equity
interest were held by benefit plan investors, which are defined as Plans and
employee benefit plans not subject to ERISA (for example, governmental plans).
For purposes of such less than 25 percent limit, the value of any equity
interests held by a person (other than a benefit plan investor) who has
discretionary authority or provides investment advice for a fee with respect to
the assets of the entity, or any affiliate thereof, shall be disregarded. There
can be no assurance that less than 25 percent of the value of any given class of
Certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
Certificate, the acquisition of the Certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95- 60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of Certificates. In addition, any Plan acquiring Certificates shall
be deemed to have represented that its acquisition and holding of Certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the Certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a Certificate.
S-47
<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of [____]. 199[_] (the "Underwriting Agreement"), the
Depositor has agreed to sell and [Lehman Brothers Inc. (an affiliate of the
Depositor)] [each of the Underwriters named below, including Lehman Brothers
Inc. (an affiliate of the Depositor)] (the "Underwriter[s]")[,] has [severally]
agreed to purchase, the [Certificates] [the principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
---------- ---------- ----------
Lehman Brothers Inc............$ $ $
---------- ---------- ----------
Total.......................$ $ $
---------- ---------- ----------
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Depositor has been advised by the Underwriter[s] that [it]
[they] propose[s] to offer the Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter[s] may effect such transactions by selling Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] in the
distribution of Certificates may be deemed to be underwriters, and any profit on
the resale of Certificates by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Underwriting Agreement provides that the Depositor will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Depositor, and the
participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
S-48
<PAGE>
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's)] [Moody's Investors
Service, Inc. ("Moody's)] [Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")] (the Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by the
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Deposited Assets and any providers of
Credit Support, as well as on the relative priorities of the Certificateholders
of each class of the Certificates with respect to collections and losses with
respect to the Deposited Assets. The rating on the Certificates does not,
however, constitute a statement regarding the occurrence or frequency of
redemptions or prepayments on, or extensions of the maturity of, the Deposited
Assets, the corresponding effect on yield to investors, or whether investors in
the Class [ ] Certificates [specify class with Notional Amount] may fail to
recover fully their initial investment.
A security rating is not a recommendation to buy sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of any other security rating.
The Depositor has not requested a rating on the Certificates by any
rating agency other than the Rating [Agency] [Agencies]. However, there can be
no assurance as to whether any other rating agency will rate the Certificates,
or, if it does, what rating would be assigned by any such other rating agency. A
rating on the Certificates by another rating agency, if assigned at all, may be
lower than the rating assigned to the Certificates by the Rating [Agency]
[Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed
upon for the Depositor and the Underwriter[s] by [Weil, Gotshal & Manges LLP,
New York, New York].
S-49
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
LEHMAN ABS CORPORATION
DEPOSITOR
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class"), denominated in dollars or in one or more
foreign or composite currencies, including the European Currency Unit ("ECU").
Certificates of each respective Series and Class will be offered on terms to be
determined at the time of sale as described in the related Prospectus Supplement
accompanying the delivery of this Prospectus. Certificates may be sold for
United States dollars or for one or more foreign or composite currencies, and
the principal of, premium on, if any, and any interest to be distributed in
respect of Certificates may be payable in United States dollars or in one or
more foreign or composite currencies. Each Series and Class of Certificates may
be issuable as individual securities in registered form without coupons
("Registered Certificates") or in bearer form with or without coupons attached
("Bearer Certificates") or as one or more global securities in registered or
bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
or a pool of such debt securities (the "Underlying Securities"), together with
certain other assets described herein and in the related Prospectus Supplement
(such assets, together with the Underlying Securities, the "Deposited Assets"),
to be deposited in a trust (the "Trust") for the benefit of holders of
Certificates of such Series ("Certificateholders") by Lehman ABS Corporation
(the "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, letters of credit, reserve accounts and other types of
rights or assets designed to support or ensure the servicing and distribution of
amounts due in respect of the Deposited Assets (collectively, "Credit Support").
See "Description of Certificates" and "Description of Deposited Assets and
Credit Support."
LEHMAN BROTHERS
December 12, 1997
<PAGE>
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series.
Except as otherwise provided herein and in the applicable Prospectus Supplement,
the 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 specified in the applicable Prospectus Supplement, with respect to a
Series of Certificates will be pursuant to its contractual administrative
obligations and, only as and to the extent provided in the related Prospectus
Supplement, its obligation to make certain cash advances in the event of payment
delinquencies on the Deposited Assets. See "Description of the Trust
Agreement--Advances in Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the 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 5.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
2
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates
to be offered thereby and hereby will set forth, among other things, the
following with respect to such Series: (a) the specific designation and
aggregate principal amount or, if applicable, notional amount, (b) the currency
or currencies in which the principal (the "Specified Principal Currency"),
premium, if any (the "Specified Premium Currency"), and any interest (the
"Specified Interest Currency") are distributable (the Specified Principal
Currency, the Specified Premium Currency and the Specified Interest Currency
being collectively referred to as the "Specified Currency"), (c) the number of
Classes of such Series and, with respect to each Class of such Series, its
designation, aggregate principal amount or, if applicable, notional amount and
authorized denominations, (d) certain information concerning the type,
characteristics and specifications of the Deposited Assets and any Credit
Support for such Series or Class, (e) the relative rights and priorities of each
such Class (including the method for allocating collections from the Deposited
Assets to the Certificateholders of each Class and the relative ranking of the
claims of the Certificateholders of each Class to such Deposited Assets), (f)
the name of the Trustee and the Administrative Agent, if any, for such Series,
(g) the Pass Through Rate (as defined below) or the terms relating to the
applicable method of calculation thereof, (h) the time and place of distribution
(each such date, a "Distribution Date") of any interest, premium (if any) and/or
principal (if any), (i) the date of issue, (j) the Final Scheduled Distribution
Date (as defined below), if applicable, (k) the offering price, (l) any
exchange, whether mandatory or optional, the redemption terms and any other
specific terms of Certificates of each such Series or Class. See "Description of
Certificates--General" for a listing of other items that may be specified in the
applicable Prospectus Supplement.
AVAILABLE INFORMATION
Each Trust is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith the Depositor files on behalf of each Trust reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports with respect to each Trust and other information
concerning each Trust can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a site on the World Wide Web
(the "Web") at "http://www.sec.gov" at which users can view and download copies
of reports, proxy, information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The Depositor does not intend to send any financial reports to
Certificateholders.
Reports and other information concerning each Trust can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
3
<PAGE>
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 prior to and subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Certificates shall be deemed to be incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to
whom a copy of this Prospectus is delivered, on the written or oral request of
any such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Secretary of Lehman ABS Corporation, 3
World Financial Center, New York, New York 10285. Telephone requests for such
copies should be directed to the Secretary of Lehman ABS Corporation at (212)
526-5594.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus
Supplement, unless and until Definitive Certificates (as defined below) are
issued, on each Distribution Date unaudited reports containing information
concerning the related Trust will be prepared by the related Trustee and sent on
behalf of each Trust only to Cede & Co. ("Cede"), as nominee of DTC and
registered holder of the Certificates. See "Description of Certificates--Global
Securities" and "Description of the Trust Agreement--Reports to
Certificateholders; Notice." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Depositor, on behalf of each Trust, will cause to be filed with the
Commission such periodic reports as are required under the Exchange Act.
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IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the
Specified Principal Currency for such Certificate. Currently, there are limited
facilities in the United States for conversion of U.S. dollars into foreign
currencies and vice versa, and banks do not currently offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of a Certificate having a Specified
Principal Currency other than U.S. dollars, Lehman Brothers Inc. (the "Offering
Agent") will arrange for the exchange of U.S. dollars into such Specified
Principal Currency to enable the purchaser to pay for such Certificate. Such
request must be made on or before the fifth Business Day (as defined below)
preceding the date of delivery of such Certificate or by such later date as is
determined by the Offering Agent. Each such exchange will be made by the
Offering Agent on such terms and subject to such conditions, limitations and
charges as the Offering Agent may from time to time establish in accordance with
its regular foreign exchange practice. All costs of exchange will be borne by
the purchaser.
References herein to "U.S. dollars," "U.S.$," USD, "dollar" or
"$" are to the lawful currency of the United States.
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or
Class within such Series) of Certificates prior to the issuance thereof, and
there can be no assurance that a secondary market will develop or, if it does
develop, that it will provide Certificateholders with liquidity of investment or
will continue for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement
may set forth certain legal considerations that are applicable to a specific
Series (or Class or Classes within such Series) of Certificates being offered in
connection with that Prospectus Supplement or the assets deposited in or
assigned to the related Trust.
Limited Obligations and Interests. The Certificates will not
represent a recourse obligation of or interest in the 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 Trust 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
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funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, 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 Consequences" in the related Prospectus Supplement.
Ratings of the Certificates. At the time of issue, the
Certificates of any given Series (or each Class of such Series that is offered
hereby) will be rated in one of the investment grade categories recognized by
one or more nationally recognized rating agencies (a "Rating Agency"). Unless
otherwise specified in the applicable Prospectus Supplement, the rating of any
Series or Class of Certificates is based primarily on the related Deposited
Assets and any Credit Support and the relative priorities of the
Certificateholders of such Series or Class to receive collections from, and to
assert claims against, the Trust with respect to such Deposited Assets and any
Credit Support. The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. There can be no assurance that the rating
will remain for any given period of time or that the rating will not be lowered
or withdrawn entirely by the Rating Agency if in its judgment circumstances in
the future so warrant. Any Class or Classes of a given Series of Certificates
may not be offered pursuant to this Prospectus,
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in which case such Class or Classes may or may not be rated in an investment
grade category by a Rating Agency.
Global Securities. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series (or, if more than one
Class exists, each Class of such Series) will initially be represented by one or
more Global Securities deposited with, or on behalf of, a Depositary (as defined
below) and will not be issued as individual Definitive Certificates to the
purchasers of such Certificates. Consequently, unless and until such individual
Definitive Certificates of a particular Series or Class are issued, such
purchasers will not be recognized as Certificateholders under the Trust
Agreement. Hence, until such time, such purchasers will only be able to exercise
the rights of Certificateholders indirectly through the Depositary and its
respective participating organizations and, as a result, the ability of any such
purchaser to pledge that Certificate to persons or entities that do not
participate in the Depositary's system, or to otherwise act with respect to such
Certificate, may be limited. See "Description of Certificates--Global
Securities" and any further description contained in the related Prospectus
Supplement.
Currency Risks. The Certificates of any given Series (or
Class within such Series) may be denominated in a currency other than U.S.
dollars to the extent specified in the applicable Prospectus Supplement. This
Prospectus does not describe all the risks of an investment in such
Certificates, and the 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.
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The Certificate of Incorporation of the Company 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 Company 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.
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
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"Description of the Trust Agreement -- Advances in Respect of Delinquencies,"
and its obligations, if any, to purchase Deposited Assets as to which there has
been a breach of certain representations and warranties or as to which the
documentation is materially defective. The obligations of an Administrative
Agent, if any, named in the applicable Prospectus Supplement to make advances
will be limited to amounts which any such Administrative Agent believes
ultimately would be recoverable under any Credit Support, insurance coverage,
the proceeds of liquidation of the Deposited Assets or from other sources
available for such purposes. See "Description of the Trust Agreement -- Advances
in Respect of Delinquencies."
Unless otherwise provided in the related Prospectus
Supplement, each Trust will consist of (i) such Deposited Assets, or interests
therein, exclusive of any interest in such assets (the "Retained Interest")
retained by the 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.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable,
contain information with respect to the type and maturities of the related
Underlying Securities and the terms, if any, upon which such Underlying
Securities may be subject to early redemption (either by the applicable obligor
or pursuant to a third-party call option), repayment (at the option of the
holders thereof) or extension of maturity. The provisions of the Underlying
Securities with respect to the foregoing will, unless otherwise specified in the
applicable Prospectus Supplement, affect the weighted average life of the
related Series of Certificates.
The effective yield to holders of the Certificates of any
Series (and Class within such Series) may be affected by certain aspects of the
Deposited Assets or any Credit Support or the manner and priorities of
allocations of collections with respect to such Deposited Assets between the
Classes of a given Series. With respect to any Series of Certificates the
Underlying Securities of which consist of one or more redeemable securities,
extendable securities or securities subject to a third-party call option, the
yield to maturity of such Series (or Class within such Series) may be
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affected by any optional or mandatory redemption or repayment or extension of
the related Underlying Securities prior to the stated maturity thereof. A
variety of tax, accounting, economic, and other factors will influence whether
an issuer exercises any right of redemption in respect of its securities. The
rate of redemption may also be influenced by prepayments on the obligations a
GSE Issuer holds for its own account. All else remaining equal, if prevailing
interest rates fall significantly below the interest rates on the related
Underlying Securities, the likelihood of redemption would be expected to
increase. There can be no certainty as to whether any Underlying Security
redeemable at the option of a GSE Issuer will be repaid prior to its stated
maturity.
Unless otherwise specified in the related Prospectus
Supplement, each of the Underlying Securities will be subject to acceleration
upon the occurrence of certain Underlying Security Events of Default (as defined
below). The maturity and yield on the Certificates will be affected by any early
repayment of the Underlying Securities as a result of the acceleration of the
Outstanding Debt Securities by the holders thereof. See "Description of the
Deposited Assets Underlying Securities."
The extent to which the yield to maturity of such Certificates
may vary from the anticipated yield due to the rate and timing of payments on
the Deposited Assets will depend upon the degree to which they are purchased at
a discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates
will also be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that the
Pass-Through Rate (as defined below) for such Series (or Class) is based on
variable or adjustable interest rates. With respect to any Series of
Certificates representing an interest in a pool of government debt securities,
disproportionate principal payments (whether resulting from differences in
amortization schedules, payments due on scheduled maturity or upon early
redemption) on the related Underlying Securities having interest rates higher or
lower than the then applicable Pass-Through Rates applicable to such
Certificates may affect the yield thereon.
The Prospectus Supplement for each Series of Certificates will
set forth additional information regarding yield and maturity considerations
applicable to such Series (and each Class within such Series) and the related
Deposited Assets, including the applicable Underlying Securities.
DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes
within such Series) of Certificates will be issued pursuant to a Trust Agreement
and a separate series supplement thereto among the 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
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Agreement which may be applicable to each Series of Certificates. The applicable
Prospectus Supplement for a Series of Certificates will describe any provision
of the Trust Agreement that materially differs from the description thereof
contained in this Prospectus. The following summaries do not purport to be
complete and are subject to the detailed provisions of the form of Trust
Agreement to which reference is hereby made for a full description of such
provisions, including the definition of certain terms used, and for other
information regarding the Certificates. Article and section references in
parentheses below are to articles and sections in the Trust Agreement. Wherever
particular sections or defined terms of the Trust Agreement are referred to,
such sections or defined terms are incorporated herein by reference as part of
the statement made, and the statement is qualified in its entirety by such
reference. As used herein with respect to any Series, the term "Certificate"
refers to all the Certificates of that Series, whether or not offered hereby and
by the related Prospectus Supplement, unless the context otherwise requires.
A copy of the applicable series supplement to the Trust
Agreement relating to each Series of Certificates issued from time to time will
be filed by the 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
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the Certificates of such Series or each Class within such Series are Fixed Rate
Certificates or Floating Rate Certificates (each as defined below) and the
applicable interest rate (the "Pass-Through Rate") for each such Class including
the applicable rate, if fixed (a "Fixed Pass-Through Rate"), or the terms
relating to the particular method of calculation thereof applicable to such
Series or each Class within such Series, if variable (a "Variable Pass-Through
Rate"); the date or dates from which such interest will accrue; the applicable
Distribution Dates on which interest, principal and premium, in each case as
applicable, on such Series or Class will be distributable and the related Record
Dates (as defined in the related Prospectus Supplement), if any; (viii) the
option, if any, of any Certificateholder of such Series or Class to withdraw a
portion of the assets of the Trust in exchange for surrendering such
Certificateholder's Certificate or of the Depositor or Administrative Agent, if
any, or another third party to purchase or repurchase any Deposited Assets (in
each case to the extent not inconsistent with the Depositor's continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder) and the periods within which or the dates on which,
and the terms and conditions upon which any such option may be exercised, in
whole or in part; (ix) the rating of each Series or each Class within such
Series offered hereby (provided, however, that one or more Classes within such
Series not offered hereunder may be unrated or may be rated below investment
grade); (x) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which such Series or Class within such Series will
be issuable; (xi) whether the Certificates of any Class within a given Series
are to be entitled to (1) principal distributions, with disproportionate,
nominal or no interest distributions, or (2) interest distributions, with
disproportionate, nominal or no principal distributions ("Strip Certificates"),
and the applicable terms thereof; (xii) whether the Certificates of such Series
or of any Class within such Series are to be issued 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
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the applicable Trust; and (xviii) any other terms of such Series or Class within
such Series of Certificates not inconsistent with the provisions of the Trust
Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus
Supplement, Certificates of each Series (including any Class of Certificates not
offered hereby) will be issued only as Registered Certificates in denominations
of $1,000 and any integral multiple thereof and will be payable only in U.S.
dollars (Section 5.01). The authorized denominations of Registered Certificates
of a given Series or Class within such Series having a Specified Currency other
than U.S. dollars will be set forth in the applicable Prospectus Supplement.
The United States Federal income tax consequences and the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the issuance of any Series or Class
within such Series of Certificates on which the principal of and any premium and
interest are distributable in a Specified Currency other than U.S. dollars will
be described in the applicable Prospectus Supplement relating to such Series or
Class. Unless otherwise specified in the applicable Prospectus Supplement, the
U.S. dollar equivalent of the public offering price or purchase price of a
Certificate having a Specified Principal Currency other than U.S. dollars will
be determined on the basis of the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York (the "Market Exchange Rate") for such Specified
Principal Currency on the applicable issue date. As specified in the applicable
Prospectus Supplement, such determination will be made by the Depositor, the
Trustee, the Administrative Agent, if any, or an agent thereof as exchange rate
agent for each Series of Certificates (the "Exchange Rate Agent").
Unless otherwise provided in the applicable Prospectus
Supplement, Registered Certificates may be transferred or exchanged for like
Certificates of the same Series and Class at the corporate trust office or
agency of the applicable Trustee in the City and State of New York, subject to
the limitations provided in the Trust Agreement, without the payment of any
service charge, other than any tax or governmental charge payable in connection
therewith (Section 5.04). 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
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Certificates by or on behalf of the Trustee on each Distribution Date as
specified in the related Prospectus Supplement and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). If
the Specified Currency for a given Series or Class within such Series is other
than U.S. dollars, the Administrative Agent, if any, or otherwise the Trustee
will (unless otherwise specified in the applicable Prospectus Supplement)
arrange to convert all payments in respect of each Certificate of such Series or
Class to U.S. dollars in the manner described in the following paragraph. The
Certificateholder of a Registered Certificate of a given Series or Class within
such Series denominated in a Specified Currency other than U.S. dollars may (if
the applicable Prospectus Supplement and such Certificate so indicate) elect to
receive all distributions in respect of such Certificate in the Specified
Currency by delivery of a written notice to the Trustee and Administrative
Agent, if any, for such Series not later than fifteen calendar days prior to the
applicable Distribution Date, except under the circumstances described under
"Currency Risks -- Payment Currency" below. Such election will remain in effect
until revoked by written notice to such Trustee and Administrative Agent, if
any, received by each of them not later than fifteen calendar days prior to the
applicable Distribution Date.
Unless otherwise specified in the applicable Prospectus
Supplement, in the case of a Registered Certificate of a given Series or Class
within such Series having a Specified Currency other than U.S. dollars, the
amount of any U.S dollar distribution in respect of such Registered Certificate
will be determined by the Exchange Rate Agent based on the highest firm bid
quotation expressed in U.S. dollars received by the Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable Distribution Date (or, if no such rate is quoted on
such date, the last date on which such rate was quoted), from three (or, if
three are not available, then two) recognized foreign exchange dealers in The
City of New York (one of which may be the Offering Agent and another of which
may be the Exchange Rate Agent) selected by the Exchange Rate Agent, for the
purchase by the quoting dealer, for settlement on such Distribution Date, of the
aggregate amount payable in such Specified Currency on such payment date in
respect of all Registered Certificates. All currency exchange costs will be
borne by the Certificateholders of such Registered Certificates by deductions
from such distributions. If no such bid quotations are available, such
distributions will be made in such Specified Currency, unless such Specified
Currency is unavailable due to the imposition of exchange controls or to other
circumstances beyond the Depositor's control, in which case such distributions
will be made as described under "Currency Risks -- Payment Currency" below.
Unless otherwise provided in the applicable Prospectus
Supplement and except as provided in the succeeding paragraph, distributions
with respect to Certificates will be made (in the case of Registered
Certificates) at the corporate trust office or agency of the Trustee specified
in the applicable Prospectus Supplement in The City of New York; provided,
however, that any such amounts distributable on the final Distribution Date of a
Certificate will be distributed only upon surrender of such Certificate at the
applicable location set forth above (Sections 4.01 and 9.01).
Unless otherwise specified in the applicable Prospectus
Supplement, distributions on Registered Certificates in U.S. dollars will be
made, except as provided below, by check mailed to
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the Registered Certificateholders of such Certificates (which, in the case of
Global Securities, will be a nominee of the Depositary); provided, however,
that, in the case of a Series or Class of Registered Certificates issued between
a Record Date and the related Distribution Dates, interest for the period
beginning on the issue date for such Series or Class and ending on the last day
of the interest accrual period ending immediately prior to or coincident with
such Distribution Date will, unless otherwise specified in the applicable
Prospectus Supplement, be distributed on the next succeeding Distribution Date
to the Registered Certificateholders of the Registered Certificates of such
Series or Class on the related Record Date. A Certificateholder of $10,000,000
(or the equivalent thereof in a Specified Principal Currency other than U.S.
dollars) or more in aggregate principal amount of Registered Certificates of a
given Series shall be entitled to receive such U.S. dollar distributions by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the Trustee for such Series not
later than fifteen calendar days prior to the applicable Distribution Date.
Simultaneously with the election by any Certificateholder to receive payments in
a Specified Currency other than U.S. dollars (as provided above), such
Certificateholder shall provide appropriate wire transfer instructions to the
Trustee for such Series, and all such payments will be made by wire transfer of
immediately available funds to an account maintained by the payee with a bank
located outside the United States.
Except as otherwise specified in the applicable Prospectus
Supplement, "Business Day" with respect to any Certificate means any day, other
than a Saturday or Sunday, that is (i) not a day on which banking institutions
are authorized or required by law or regulation to be closed in (a) The City of
New York or (b) if the Specified Currency for such Certificate is other than
U.S. dollars, the financial center of the country issuing such Specified
Currency (which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such Certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Certificate means any day on which
dealings in deposits in the Specified Currency of such Certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
INTEREST ON THE CERTIFICATES
General. Each Class of Certificates (other than certain
Classes of Strip Certificates) of a given Series may have a different
Pass-Through Rate, which may be a Fixed or Variable Pass- Through Rate, as
described below. In the case of Strip Certificates with no or, in certain cases,
a nominal Certificate Principal Balance, such distributions of interest will be
in an amount (as to any Distribution Date, "Stripped Interest") described in the
related Prospectus Supplement. For purposes hereof, "Notional Amount" means the
notional principal amount specified in the applicable Prospectus Supplement on
which interest on Strip Certificates with no or, in certain cases, a nominal
Certificate Principal Balance will be made on each Distribution Date. Reference
to the Notional Amount of a Class of Strip Certificates herein or in a
Prospectus Supplement does not indicate that such Certificates represent the
right to receive any distribution in respect of principal in such amount, but
rather the term "Notional Amount" is used solely as a basis for calculating the
amount of required distributions and determining certain relative voting rights,
all as specified in the related Prospectus Supplement.
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Fixed Rate Certificates. Each Series (or, if more than one
Class exists, each Class within such Series) of Certificates with a Fixed
Pass-Through Rate ("Fixed Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (as defined below) (or Notional
Amount, if applicable), from its Original Issue Date, or from the last date to
which interest has been paid, at the fixed Pass-Through Rate stated on the face
thereof and in the applicable Prospectus Supplement until the principal amount
thereof is distributed or made available for repayment (or in the case of Fixed
Rate Certificates with no or a nominal principal amount, until the Notional
Amount thereof is reduced to zero), except that, if so specified in the
applicable Prospectus Supplement, the Pass-Through Rate for such Series or any
such Class or Classes may be subject to adjustment from time to time in response
to designated changes in the rating assigned to such Certificates by one or more
rating agencies, in accordance with a schedule or otherwise, all as described in
such Prospectus Supplement. Unless otherwise set forth in the applicable
Prospectus Supplement, interest on each Series or Class of Fixed Rate
Certificates will be distributable in arrears on each Distribution Date
specified in such Prospectus Supplement. Each such distribution of interest
shall include interest accrued through the day specified in the applicable
Prospectus Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, interest on Fixed Rate Certificates will be computed on the basis of
a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series (or, if more than one
Class exists, each Class within such Series) of Certificates with a Variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the first Interest Reset Date (as defined below)
for such Series or Class at the initial Pass-Through Rate set forth on the face
thereof and in the applicable Prospectus Supplement ("Initial Pass-Through
Rate"). Thereafter, the Pass-Through Rate on such Series or Class for each
Interest Reset Period (as defined below) will be determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points (one basis point equals one one-hundredth of a percentage point) that may
be specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, and the "Spread Multiplier" is the percentage that may be
specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, except that if so specified in the applicable Prospectus
Supplement, the Spread or Spread Multiplier on such Series or any such Class or
Classes of Floating Rate Certificates may be subject to adjustment from time to
time in response to designated changes in the rating assigned to such
Certificates by one or more rating agencies, in accordance with a schedule or
otherwise, all as described in such Prospectus Supplement. The applicable
Prospectus Supplement, unless otherwise specified therein, will designate one of
the following Base Rates as applicable to a Floating Rate Certificate: (i) LIBOR
(a "LIBOR Certificate"), (ii) the Commercial Paper Rate (a "Commercial Paper
Rate Certificate"), (iii) the Treasury Rate (a "Treasury Rate Certificate"),
(iv) the Federal Funds Rate (a "Federal Funds Rate Certificate"), (v) the CD
Rate (a "CD Rate Certificate") or (vi) such other Base Rate (which may be based
on, among other things, one or more market indices or the interest and/or other
payments (whether scheduled or otherwise) paid, accrued or available with
respect to a designated asset, pool of assets or type of asset) as is set forth
in such Prospectus Supplement and in such Certificate. The "Index Maturity" for
any Series or Class of Floating Rate Certificates is the period of maturity of
the instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication
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entitled "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication, published by the Board of Governors of the Federal
Reserve System. "Composite Quotations" means the daily statistical release
entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities"
published by the Federal Reserve Bank of New York.
As specified in the applicable Prospectus Supplement, Floating
Rate Certificates of a given Series or Class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period specified in the applicable Prospectus
Supplement ("Maximum Pass-Through Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest accrual
period ("Minimum Pass-Through Rate"). In addition to any Maximum Pass-Through
Rate that may be applicable to any Series or Class of Floating Rate
Certificates, the Pass-Through Rate applicable to any Series or Class of
Floating Rate Certificates will in no event be higher than the maximum rate
permitted by applicable law, as the same may be modified by United States law of
general application. The Floating Rate Certificates will be governed by the law
of the State of New York and, under such law as of the date of this Prospectus,
the maximum rate of interest, with certain exceptions, is 25% per annum on a
simple interest basis.
The 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 Final Scheduled Distribution Date (as defined in the Prospectus
Supplement) will be that in effect on the tenth day preceding such Final
Scheduled Distribution Date. If an Interest Reset Date for any Class of Floating
Rate Certificates would otherwise be a day that is not a Business Day, such
Interest Reset Date will occur on a prior or succeeding Business Day, specified
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, interest payable in respect of Floating Rate Certificates shall be
the accrued interest from and including the Original Issue Date of such Series
or Class or the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date.
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With respect to a Floating Rate Certificate, accrued interest
shall be calculated by multiplying the Certificate Principal Balance of such
Certificate (or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the applicable
Prospectus Supplement) by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Prospectus Supplement, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding) for
each such day is computed by dividing the Pass-Through Rate in effect on such
day by 360, in the case of LIBOR Certificates, Commercial Paper Rate
Certificates, Federal Funds Rate Certificates and CD Rate Certificates or by the
actual number of days in the year, in the case of Treasury Rate Certificates.
For purposes of making the foregoing calculation, the variable Pass-Through Rate
in effect on any Interest Reset Date will be the applicable rate as reset on
such date.
Unless otherwise specified in the applicable Prospectus
Supplement, all percentages resulting from any calculation of the Pass-Through
Rate on a Floating Rate Certificate will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of
Floating Rate Certificates will be distributable on the Distribution Dates and
for the interest accrual periods as and to the extent set forth in the
applicable Prospectus Supplement.
Upon the request of the holder of any Floating Rate
Certificate of a given Series or Class, the Calculation Agent for such Series or
Class will provide the Pass-Through Rate then in effect and, if determined, the
Pass-Through Rate that will become effective on the next Interest Reset Date
with respect to such Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any, specified
in such Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "CD Rate" for each Interest Reset Period shall be the rate as of
the second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)." In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
CD Rate Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus Supplement
as published in Composite Quotations under the heading "Certificates of
Deposit." If by 3:00 p.m., New York City time, on such CD Rate Calculation Date
such rate is not yet published in either H.15(519) or Composite
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Quotations, then the "CD Rate" for such Interest Reset Period will be calculated
by the Calculation Agent for such CD Rate Certificate and will be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York City time,
on such CD Rate Determination Date, of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for such CD Rate Certificate for negotiable
certificates of deposit of major United States money center banks of the highest
credit standing (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity designated in the related
Prospectus Supplement in a denomination of $5,000,000; provided, however, that
if the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "CD Rate" for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate).
The "CD Rate Calculation Date" pertaining to any CD Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such CD Rate Determination Date or, if such day is not a Business Day, the
next succeeding Business Day or (b) the second Business Day preceding the date
any distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper
Rate Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Certificate
as of the second Business Day prior to the Interest Reset Date for such Interest
Reset Period (a "Commercial Paper Rate Determination Date") and shall be the
Money Market Yield (as defined below) on such Commercial Paper Rate
Determination Date of the rate for commercial paper having the Index Maturity
specified in the applicable Prospectus Supplement, as such rate shall be
published in H.15(519) under the heading "Commercial Paper." In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Commercial Paper Rate Calculation Date (as defined below) pertaining to such
Commercial Paper Rate Determination Date, then the "Commercial Paper Rate" for
such Interest Reset Period shall be the Money Market Yield on such Commercial
Paper Rate Determination Date of the rate for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 p.m., New York City time, on such Commercial
Paper Rate Calculation Date such rate is not yet published in either H.15(519)
or Composite Quotations, then the "Commercial Paper Rate" for such Interest
Reset Period shall be the Money Market Yield of the arithmetic mean of the
offered rates, as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers of commercial paper in The City
of New York selected by the Calculation Agent for such Commercial Paper Rate
Certificate for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such
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Calculation Agent are not quoting offered rates as mentioned in this sentence,
the "Commercial Paper Rate" for such Interest Reset Period will be the same as
the Commercial Paper Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Commercial Paper Rate Calculation Date" pertaining to any
Commercial Paper Rate Determination Date shall be the first to occur of (a) the
tenth calendar day after such Commercial Paper Rate Determination Date or, if
such day is not a Business Day, the next succeeding Business Day or (b) the
second Business Day preceding the date any distribution of interest is required
to be made following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Federal
Funds Rate Calculation Date (as defined below) pertaining to such Federal Funds
Rate Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date made publicly available by the Federal
Reserve Bank of New York which is equivalent to the rate which appears in
H.15(519) under the heading "Federal Funds (Effective)"; provided, however, that
if such rate is not made publicly available by the Federal Reserve Bank of New
York by 3:00 p.m., New York City time, on such Federal Funds Rate Calculation
Date, the "Federal Funds Rate" for such Interest Reset Period will be the same
as the Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Pass-Through
Rate). Unless otherwise specified in the applicable Prospectus Supplement, in
the case of a Federal Funds Rate
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Certificate that resets daily, the Pass-Through Rate on such Certificate for the
period from and including a Monday to but excluding the succeeding Monday will
be reset by the Calculation Agent for such Certificate on such second Monday
(or, if not a Business Day, on the next succeeding Business Day) to a rate equal
to the average of the Federal Funds Rate in effect with respect to each such day
in such week.
The "Federal Funds Rate Calculation Date" pertaining to any
Federal Funds Rate Determination Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
such Certificate and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S.
dollar deposits, unless otherwise specified in the applicable Prospectus
Supplement, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest
Reset Date for such Interest Reset Period (a "LIBOR Determination
Date"), the Calculation Agent for such LIBOR Certificate will determine
the arithmetic mean of the offered rates for deposits in U.S. dollars
for the period of the Index Maturity specified in the applicable
Prospectus Supplement, commencing on such Interest Reset Date, which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m.,
London time, on such LIBOR Determination Date. "Reuters Screen LIBO
Page" means the display designated as page "LIBOR" on the Reuters
Monitor Money Rates Service (or such other page may replace the LIBO
page on that service for the purpose of displaying London interbank
offered rates of major banks). If at least two such offered rates
appear on the Reuters Screen LIBO Page, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of such offered rates as determined
by the Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters
Screen LIBO Page on such LIBOR Determination Date, the Calculation
Agent for such LIBOR Certificate will request the principal London
offices of each of four major banks in the London interbank market
selected by such Calculation Agent to provide such Calculation Agent
with its offered quotations for deposits in U.S. dollars for the period
of the specified Index Maturity, commencing on such Interest Reset
Date, to prime banks in the London interbank market at approximately
11:00 a.m., London time, on such LIBOR Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. If
at least two such quotations are provided, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such quotations. If fewer
than two such quotations are provided, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of rates quoted by three major banks
in The City of New York selected by the Calculation Agent for such
LIBOR Certificate at approximately 11:00 a.m., New York City time, on
such LIBOR Determination Date for loans in U.S. dollars to leading
European
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banks, for the period of the specified Index Maturity, commencing on
such Interest Reset Date, and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single
transaction in such market at such time; provided, however, that if
fewer than three banks selected as aforesaid by such Calculation Agent
are quoting rates as specified in this sentence, "LIBOR" for such
Interest Reset Period will be the same as LIBOR for the immediately
preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to
the offered rates for deposits in a currency other than U.S. dollars, the
applicable Prospectus Supplement will set forth the method for determining such
rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Treasury Rate" for each Interest Reset Period will be the rate
for the auction held on the Treasury Rate Determination Date (as defined below)
for such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Certificates-Treasury bills-auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Treasury Rate Calculation Date (as defined
below) pertaining to such Treasury Rate Determination Date, the auction average
rate (expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of the Treasury. In
the event that the results of the auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 p.m., New
York City time, on such Treasury Rate Calculation Date, or if no such auction is
held on such Treasury Rate Determination Date, then the "Treasury Rate" for such
Interest Reset Period shall be calculated by the Calculation Agent for such
Treasury Rate Certificate and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Reset
Period will be the day of the week in which the Interest Reset Date for such
Interest Reset Period falls on which
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Treasury bills would normally be auctioned. Treasury bills are normally sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Treasury Rate Determination Date pertaining to the Interest Reset Period
commencing in the next succeeding week. Unless otherwise specified in the
applicable Prospectus Supplement, if an auction date shall fall on any day that
would otherwise be an Interest Reset Date for a Treasury Rate Certificate, then
such Interest Reset Date shall instead be the Business Day immediately following
such auction date.
The "Treasury Rate Calculation Date" pertaining to any
Treasury Rate Determination Date shall be the first to occur of (a) the tenth
calendar day after such Treasury Rate Determination Date or, if such a day is
not a Business Day, the next succeeding Business Day or (b) the second Business
Day preceding the date any distribution of interest is required to be made
following the applicable Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise,
each Certificate (other than certain Classes of Strip Certificates) will have a
"Certificate Principal Balance" which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Unless otherwise specified in the related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Certificate of the Class or Classes entitled thereto (in the manner and
priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable pursuant
to the terms of the related Series, by the amount of any net losses realized on
any Deposited Asset ("Realized Losses") allocated thereto. Unless the related
Prospectus Supplement provides otherwise, the initial aggregate Certificate
Principal Balance of all Classes of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a Series and each Class thereof will be specified in the related Prospectus
Supplement. Distributions of principal of any Class of Certificates will be made
on a pro rata basis among all the Certificates of such Class. Strip Certificates
with no Certificate Principal Balance will not receive distributions of
principal.
FOREIGN CURRENCY CERTIFICATES
If the specified currency of any Certificate is not U.S.
dollars (a "Foreign Currency Certificate"), certain provisions with respect
thereto will be set forth in the related Prospectus Supplement which will
specify the denominations, the currency or currencies in which the principal and
interest with respect to such Certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise applicable
to the Certificates.
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INDEXED CERTIFICATES
From time to time, the Trust may offer a Series of
Certificates ("Indexed Certificates"), the principal amount payable at the
stated maturity date of which (the "Indexed Principal Amount") and/or interest
with respect to which is determined by reference to (i) the rate of exchange
between the specified currency for such Certificate and the other currency or
composite currency (the "Indexed Currency") specified therein; (ii) the
difference in the price of a specified commodity (the "Indexed Commodity") on
specified dates; (iii) the difference in the level of a specified stock index
(the "Stock Index"), which may be based on U.S. or foreign stocks, on specified
dates; or (iv) such other objective price or economic measure as are described
in the related Prospectus Supplement. The manner of determining the Indexed
Principal Amount of an Indexed Certificate, and historical and other information
concerning the Indexed Currency, Indexed Commodity, Stock Index or other price
or economic measure used in such determination, will be set forth in the related
Prospectus Supplement, together with any information concerning tax consequences
to the Holders of such Indexed Certificates.
Except as otherwise specified in the related Prospectus
Supplement, interest on an Indexed Certificate will be payable based on the
amount designated in the related Prospectus Supplement as the "Face Amount" of
such Indexed Certificate. The related Prospectus Supplement will describe
whether the principal amount of the related Indexed Certificate that would be
payable upon redemption or repayment prior to the stated maturity date will be
the Face Amount of such Indexed Certificate, the Indexed Principal Amount of
such Indexed Certificate at the time of redemption or repayment, or another
amount described in such Prospectus Supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates
("Dual Currency Certificates"), in which case payments of principal and/or
interest in respect of Dual Currency Certificates will be made in such
currencies, and rates of exchange will be calculated upon such bases, as
indicated in the Certificates and described in the related Prospectus
Supplement. Other material terms and conditions relating to Dual Currency
Certificates will be set forth in the Certificates and the related Prospectus
Supplement.
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OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for
a pro rata portion of the Deposited Assets, an "Exchangeable Series," the terms
upon which a holder may exchange Certificates of any Exchangeable Series for a
pro rata portion of the Deposited Assets of the related Trust will be specified
in the related Prospectus Supplement and/or the related Trust Agreement;
provided that any right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the Depositor's and such Trust's
continued satisfaction of the applicable requirements for exemption under Rule
3a-7 under the Investment Company Act of 1940 and all applicable rules,
regulations and interpretations thereunder. Such terms may relate to, but are
not limited to, the following:
(a) a requirement that the exchanging holder tender to the
Trustee Certificates of each Class within such Exchangeable Series;
(b) a minimum Certificate Principal Balance or Notional
Amount, as applicable, with respect to each Certificate being tendered
for exchange;
(c) a requirement that the Certificate Principal Balance or
Notional Amount, as applicable, of each Certificate tendered for
exchange be an integral multiple of an amount specified in the
Prospectus Supplement;
(d) specified dates during which a holder may effect such an
exchange (each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to
receive any benefit upon exchange from any Credit Support or other
non-Underlying Securities deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange
based upon the required prepayment of future expense allocations and
the establishment of a reserve for any anticipated Extraordinary Trust
Expenses as set forth in the applicable Prospectus Supplement, if
applicable.
Unless otherwise specified in the related Prospectus
Supplement, in order for a Certificate of a given Exchangeable Series (or Class
within such Exchangeable Series) to be exchanged by the applicable
Certificateholder, the Trustee for such Certificate must receive, at least 30
(or such shorter period acceptable to the Trustee) but not more than 45 days
prior to an Optional Exchange Date (i) such Certificate with the form entitled
"Option to Elect Exchange" on the reverse thereof duly completed, or (ii) in the
case of Registered Certificates, a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc., the Depositary (in accordance with its
normal procedures) or a commercial bank or trust company in the United States
setting forth the name of the holder of such Registered Certificate, the
Certificate Principal Balance or Notional Amount of such Registered Certificate
to be exchanged,
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the certificate number or a description of the tenor and terms of such
Registration Certificate, a statement that the option to elect exchange is being
exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by such Trustee not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Certificate and form duly
completed must be received by such Trustee by such fifth Business Day. Any
tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of such Certificate provided that the
Certificate Principal Balance or Notional Amount, as applicable, of such
Certificate remaining outstanding after redemption is an authorized denomination
and all other exchange requirements set forth in the related Prospectus
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for the remaining Certificate
Principal Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged Certificate).
Unless otherwise specified in the applicable Prospectus
Supplement, because initially and until Definitive Certificates are issued each
Certificate will be represented by a Global Security, the Depositary's nominee
will be the Certificateholder of such Certificate and therefore will be the only
entity that can exercise a right of exchange. In order to ensure that the
Depositary's nominee will timely exercise a right of exchange with respect to a
particular Certificate, the beneficial owner of such Certificate must instruct
the broker or other direct or indirect participant through which it holds an
interest in such Certificate to notify the Depositary of its desire to exercise
a right of exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Certificate in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus
Supplement, upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Deposited Assets, as described in such
Prospectus Supplement, the applicable Certificateholder will be entitled to
receive a distribution of a pro rata share of the Deposited Assets related to
the Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described in such
Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
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GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus
Supplement, all Certificates of a given Series (or, if more than one Class
exists, any given Class within that Series) will, upon issuance, be represented
by one or more Global Securities that will be deposited with, or on behalf of,
The Depository Trust Company, New York, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. Global Securities may be issued in either
temporary or definitive form. Unless and until it is exchanged in whole or in
part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Depositor as
follows: The Depository Trust Company is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depository Trust Company was
created to hold securities of its participating organizations and to facilitate
the clearance and settlement of securities transactions among the institutions
that have accounts with such Depositary ("participants") in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. Such
Depositary's participants include securities brokers and dealers (including the
Offering Agent), banks, trust companies, clearing corporations, and certain
other organizations, some of whom (and/or their representatives) own such
Depositary. Access to such Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The Depository Trust Company has confirmed to the 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 or notional amounts, if applicable, of
the individual Certificates represented by such Global Security to the accounts
of its participants. The accounts to be accredited shall be designated by the
underwriters of such Certificates, or, if such Certificates are offered and sold
directly through one or more agents, by the 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.
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So long as the Depositary for a Global Security, or its
nominee, is the owner of such Global Security, such Depositary or such nominee,
as the case may be, will be considered the sole Certificateholder of the
individual Certificates represented by such Global Security for all purposes
under the Trust Agreement governing such Certificates. Except as set forth
below, owners of beneficial interests in a Global Security will not be entitled
to have any of the individual Certificates represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Certificates and will not be considered the
Certificateholder thereof under the Trust Agreement governing such Certificates.
Because the Depositary can only act on behalf of its participants, the ability
of a holder of any Certificate to pledge that Certificate to persons or entities
that do not participate in the Depositary's system, or to otherwise act with
respect to such Certificate, may be limited due to the lack of a physical
certificate for such Certificate.
Distributions of principal of (and premium, if any) and any
interest on individual Certificates represented by a Global Security will be
made to the Depositary or its nominee, as the case may be, as the
Certificateholder of such Global Security. None of the Depositor, the
Administrative Agent, if any, the Trustee for such Certificates, any paying
agent or the Certificate registrar for such Certificates will have
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Depositor expects that the 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 or notional amount, if applicable, to such
beneficial interest and to have such Definitive Certificates registered in its
name (if the
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Certificates of such Class are issuable as Registered Certificates). Individual
Definitive Certificates of such Class so issued will be issued as Registered
Certificates in denominations, unless otherwise specified by the 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.
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
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offered (an "Underlying Security Prospectus"), the applicable Prospectus
Supplement will set forth certain information with respect to the public
availability of information with respect to any GSE Issuer the debt securities
of which constitute more than ten percent of the Underlying Securities for any
Series of Certificates as of the date of such Prospectus Supplement. The
specific terms and conditions of the Underlying Securities will be set forth in
the related Prospectus Supplement.
This Prospectus relates only to the Certificates offered
hereby and does not relate to the Underlying Securities. The following
description of the Underlying Securities is intended only to summarize certain
characteristics of the Underlying Securities the 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
States and do not constitute a debt or obligation of the United States or of any
agency or instrumentality thereof other than the related GSE.
Contractual and Statutory Restrictions. A GSE Issuer and the
related Underlying Securities may be subject to certain contractual and
statutory restrictions which may provide some protection to securityholders
against the occurrence or effects of certain specified events. Unless otherwise
specified in the related Prospectus Supplement, each GSE is limited to such
activities as will promote its statutory purposes as set forth in the publicly
available information with respect to such issuer. See "Description of the
Deposited Assets--Publicly Available Information" in the related Prospectus
Supplement. A GSE's promotion of its statutory purposes, as well as its
statutory, structural and regulatory relationships with the federal government
may cause or require such GSE to conduct its business in a manner that differs
from that an enterprise which is not a GSE might employ.
Neither the United States nor any agency thereof is obligated
to finance any GSE Issuer's operations or to assist a GSE Issuer in any manner.
Prospective purchasers should consult the publicly available information with
respect to each GSE Issuer for a more detailed description of the regulatory and
statutory restrictions on the related GSE's activities.
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Events of Default. Underlying Securities issued by a GSE
Issuer may provide that any one of a number of specified events will constitute
an event of default with respect thereto. Such events of default typically
include the following or variations thereof: (i) failure by the issuer to pay an
installment of interest or principal on the securities at the time required
(subject to any specified grace period) or to redeem any of the securities when
required (subject to any specified grace period); (ii) failure by the issuer to
observe or perform any covenant, agreement or condition contained in the
securities or authorizing legislation or regulation, as the case may be, which
failure is materially adverse to securityholders and continues for a specified
period after notice thereof; and (iii) certain events of insolvency or
bankruptcy with respect to the GSE Issuer. The Underlying Securities will
generally provide that, upon the occurrence of an event of default, the holders
of not less than a specified percentage of the outstanding securities may
declare all or a portion of the principal and accrued interest on the
outstanding securities immediately due and payable, subject to the issuer's
right to cure, if applicable.
Each Underlying Security may include some, all or none of the
foregoing provisions or variations thereof or additional events of default not
discussed herein. The Prospectus Supplement with respect to any Series of
Certificates will describe the events of default under the Underlying Securities
with respect to any Concentrated Underlying Security (as defined below)
("Underlying Security Events of Default") and applicable remedies with respect
thereto. With respect to any Trust comprised of a pool of securities, the
applicable Prospectus Supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no assurance
that any such provision will protect the Trust, as a holder of the Underlying
Securities, against losses. If an Underlying Security Event of Default occurs
and the Trustee as a holder of the Underlying Securities is entitled to vote or
take such other action to declare the principal amount of an Underlying Security
and any accrued and unpaid interest thereon to be due and payable, the
Certificateholders' objectives may differ from those of holders of other
securities of the same series and class as any Underlying Security ("Outstanding
Debt Securities") in determining whether to declare the acceleration of the
Underlying Securities.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable Prospectus Supplement with
respect to each Series of Certificates for a description of the following terms,
as applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the Underlying Securities issuer; (iii) whether any of the
obligations are secured or unsecured and the nature of any collateral; (iv) the
limit, if any, upon the aggregate principal amount of such debt securities; (v)
the dates on which, or the range of dates within which, the principal of (and
premium, if any, on) such debt securities will be payable; (vi) the rate or
rates or the method of determination thereof, at which such Underlying
Securities will bear interest, if any ("Underlying Securities Rate"); the date
or dates from which such interest will accrue ("Underlying Securities Interest
Accrual Periods"); and the dates on which such interest will be payable
("Underlying Securities Payment Dates"); (vii) the obligation, if any, of the
Underlying Securities issuer to redeem the securities pursuant to any sinking
fund or analogous provisions, or at the option of a holder
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thereof, and the periods within which or the dates on which, the prices at which
and the terms and conditions upon which such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Underlying Securities issuer; (ix) whether the
Underlying Securities were issued at a price lower than the principal amount
thereof; (x) if other than United States dollars, the foreign or composite
currency in which such debt securities are denominated, or in which payment of
the principal of (and premium, if any) or any interest on such Underlying
Securities will be made (the "Underlying Securities Currency"), and the
circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such Underlying Securities; (xii) the rating thereof, if any; and (xiii) any
other material terms of such Underlying Securities.
With respect to a Trust comprised of a pool of Underlying
Securities, the related Prospectus Supplement will describe the composition of
the Underlying Securities pool as of the Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (ii), (iii),
(v), (vi), (vii), (viii) and (ix) of the preceding paragraph and any other
material terms regarding such pool of securities.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, with respect to each
Concentrated Underlying Security issued by a GSE Issuer the applicable
Prospectus Supplement will disclose the identity of the applicable obligor, and
will describe the existence and type of certain information that is made
publicly available by each obligor regarding such Underlying Security or
Underlying Securities and will disclose where and how prospective purchasers of
the Certificates may obtain such publicly available information with respect to
each such obligor. Such information will typically consist of such obligor's
annual report, which contains financial statements or similar financial
information, and can be obtained from the Commission, if so specified in the
applicable Prospectus Supplement, or from the office of such obligor identified
in the related Prospectus Supplement. However, the precise nature of such
publicly available information and where and how it may be obtained with respect
to any given GSE Issuer will vary, and, as described above, will be set forth in
the applicable Prospectus Supplement with respect to any such obligor.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, the 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
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through foreclosure or in settlement of claims with respect thereto) (all such
assets for any given Series, together with the related Underlying Securities,
the "Deposited Assets"). The applicable Prospectus Supplement will, to the
extent appropriate, contain analogous disclosure with respect to the foregoing
assets as referred to above with respect to the Underlying Securities.
Unless otherwise specified in the related Prospectus
Supplement, the Deposited Assets for a given Series of Certificates and the
related Trust will not constitute Deposited Assets for any other Series of
Certificates and the related Trust and the Certificates of each Class of a given
Series possess an equal and ratable undivided ownership interest in such
Deposited Assets. The applicable Prospectus Supplement may, however, specify
that certain assets constituting a part of the Deposited Assets relating to any
given Series may be beneficially owned solely by or deposited solely for the
benefit of one Class or a group of Classes within such Series. In such event,
the other Classes of such Series will not possess any beneficial ownership
interest in those specified assets constituting a part of the Deposited Assets.
CREDIT SUPPORT
As specified in the applicable Prospectus Supplement for a
given Series of Certificates, the Trust for any Series of Certificates may
include, or the Certificateholders of such Series (or any Class or group of
Classes within such Series) may have the benefit of, Credit Support for any
Class or group of Classes within such Series. Such Credit Support may be
provided by any combination of the following means described below or any other
means described in the applicable Prospectus Supplement. The applicable
Prospectus Supplement will set forth whether the Trust for any Class or group of
Classes of Certificates contains, or the Certificateholders of such Certificates
have the benefit of, Credit Support and, if so, the amount, type and other
relevant terms of each element of Credit Support with respect to any such Class
or Classes and certain information with respect to the obligors of each such
element, including financial information with respect to any such obligor
providing Credit Support for 20% or more of the aggregate principal amount of
such Class or Classes unless such obligor is subject to the informational
requirements of the Exchange Act.
Subordination. As discussed below under "-- Collections," the
rights of the Certificateholders of any given Class within a Series of
Certificates to receive collections from the Trust for such Series and any
Credit Support obtained for the benefit of the Certificateholders of such Series
(or Classes within such Series) may be subordinated to the rights of the
Certificateholders of one or more other Classes of such Series to the extent
described in the related Prospectus Supplement. Such subordination accordingly
provides some additional credit support to those Certificateholders of those
other Classes. For example, if losses are realized during a given period on the
Deposited Assets relating to a Series of Certificates such that the collections
received thereon are insufficient to make all distributions on the Certificates
of such Series, those realized losses would be allocated to the
Certificateholders of any Class of such Series that is subordinated to another
Class, to the extent and in the manner provided in the related Prospectus
Supplement. In addition, if so provided in the applicable Prospectus Supplement,
certain amounts otherwise payable to Certificateholders of any Class that is
subordinated to another Class may be required to be deposited into a reserve
account.
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Amounts held in any reserve account may be applied as described below under "--
Reserve Accounts" and in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the
Credit Support for any Series or Class of Certificates may include, in addition
to the subordination of certain Classes of such Series and the establishment of
a reserve account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
Class will be limited to the extent necessary to make required distributions to
the Certificateholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any
Series (or Class or group of Classes of Certificates within such Series) may, if
specified in the applicable Prospectus Supplement, have the benefit of a letter
or letters of credit (a "Letter of Credit") issued by a bank (a "Letter of
Credit Bank") or a surety bond or bonds (a "Surety Bond") issued by a surety
company (a "Surety"). In either case, the Trustee or such other person specified
in the applicable Prospectus Supplement will use its reasonable efforts to cause
the Letter of Credit or the Surety Bond, as the case may be, to be obtained, to
be kept in full force and effect (unless coverage thereunder has been exhausted
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. The Trustee or such other person
specified in the applicable Prospectus Supplement will make or cause to be made
draws under the Letter of Credit or the Surety Bond, as the case may be, under
the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will provide
the manner, priority and source of funds by which any such draws are to be
repaid.
Unless otherwise specified in the applicable Prospectus
Supplement, in the event that the Letter of Credit Bank or the Surety, as
applicable, ceases to satisfy any credit rating or other applicable requirements
specified in the related Prospectus Supplement, the Trustee or such other person
specified in the applicable Prospectus Supplement will use its reasonable
efforts to obtain or cause to be obtained a substitute Letter of Credit or
Surety Bond, as applicable, or other form of credit enhancement providing
similar protection, that meets such requirements and provides the same coverage
to the extent available for the same cost. There can be no assurance that any
Letter of Credit Bank or any Surety, as applicable, will continue to satisfy
such requirements or that any such substitute Letter of Credit, Surety Bond or
similar credit enhancement will be available providing equivalent coverage for
the same cost. To the extent not so available, the credit support otherwise
provided by the Letter of Credit or the Surety Bond (or similar credit
enhancement) may be reduced to the level otherwise available for the same cost
as the original Letter of Credit or Surety Bond.
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Reserve Accounts. If so provided in the related Prospectus
Supplement, the Trustee or such other person specified in the Prospectus
Supplement will deposit or cause to be deposited into an account maintained with
an eligible institution (which may be the Trustee) (a "Reserve Account") any
combination of cash or permitted investments in specified amounts, which will be
applied and maintained in the manner and under the conditions specified in such
Prospectus Supplement. In the alternative or in addition to such deposit, a
Reserve Account may be funded through application of a portion of collections
received on the Deposited Assets for a given Series of Certificates, in the
manner and priority specified in the applicable Prospectus Supplement. Amounts
deposited in such Reserve Account may be distributed to Certificateholders of
such Class or group of Classes within such Series, or may be used for other
purposes, in the manner and to the extent provided in the related Prospectus
Supplement. Amounts deposited in any Reserve Account will be invested in certain
permitted investments by, or at the direction of, the Trustee, the 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 such collections from time
to time prior to any applicable Distribution Date into a segregated account
maintained or controlled by the applicable Trustee for the benefit of such
Series (each a "Certificate Account"). An Administrative Agent, if any is
appointed pursuant to the applicable Prospectus Supplement, will direct the
Trustee, and otherwise the Trustee will make all determinations, as to the
appropriate application of such collections and other amounts available for
distribution to the payment of any administrative or collection expenses (such
as the administrative fee) and certain Credit Support-related ongoing fees (such
as insurance premiums, letter of credit fees or any required account deposits)
and to the payment of amounts then due and owing on the Certificates of such
Series (and Classes within such Series), all in the manner and priorities
described in the related Prospectus Supplement. The applicable Prospectus
Supplement will specify the collection periods, if applicable, and Distribution
Dates for a given Series of Certificates and the particular requirements
relating to the segregation and investment of collections received on the
Deposited Assets during a given collection period or on or by certain specified
dates. There can be no assurance that amounts received from the Deposited Assets
and any Credit Support obtained for the benefit of Certificateholders for a
particular Series or Class of Certificates over a specified period will be
sufficient, after payment of all prior expenses and fees for such period, to pay
amounts then due and owing to holders of such Certificates. The applicable
Prospectus Supplement will also set forth the manner and priority by which any
Realized Losses will be allocated among the Classes of any Series of
Certificates, if applicable.
The relative priorities of distributions with respect to
collections from the assets of the Trust assigned to Classes of a given Series
of Certificates may permanently or temporarily change over time upon the
occurrence of certain circumstances specified in the applicable Prospectus
Supplement. Moreover, the applicable Prospectus Supplement may specify that the
relative distribution priority assigned to each Class of a given Series for
purposes of payments of certain
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amounts, such as principal, may be different from the relative distribution
priority assigned to each such Class for payments of other amounts, such as
interest or premium.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of certain provisions of the Trust
Agreement and the Certificates do not purport to be complete and such summary is
qualified in its entirety by reference to the detailed provisions of the form of
Trust Agreement filed as an exhibit to the Registration Statement. Article and
section references in parentheses below are to articles and sections in the
Trust Agreement. Wherever particular sections or defined terms of the Trust
Agreement are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the
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 2.05). Each Deposited Asset will be identified in a schedule
appearing as an exhibit to the Trust Agreement. Such schedule will include
certain statistical information with respect to each Underlying Security and
each other Deposited Asset as of the Cut-off Date, and in the event any
Underlying Security represents ten percent or more of the total Underlying
Securities with respect to any Series of Certificates ("Concentrated Underlying
Securities"), such schedule will include, to the extent applicable, information
regarding the payment terms thereof, the Retained Interest, if any, with respect
thereto, the maturity or terms thereof, the rating, if any, thereof and certain
other information with respect thereto.
In addition, the 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
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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 2.04).
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates the
Trustee or such other person specified in the Prospectus Supplement directly or
through sub-administrative agents, will make reasonable efforts to collect all
scheduled payments under the Deposited Assets and will follow or cause to be
followed such collection procedures, if any, as it would follow with respect to
comparable financial assets that it held for its own account, provided that such
procedures are consistent with the Trust Agreement and any related instrument
governing any Credit Support (collectively, the "Credit Support Instruments")
and provided that, except as otherwise expressly set forth in the applicable
Prospectus Supplement, it shall not be required to expend or risk its own funds
or otherwise incur personal financial liability.
Sub-Administration. Any Trustee or Administrative Agent may
delegate its obligations in respect of the Deposited Assets to third parties
they deem qualified to perform such obligations (each, a "Sub-Administrative
Agent"), but the Trustee or Administrative Agent will remain obligated with
respect to such obligations under the Trust Agreement. Each Sub- Administrative
Agent will be required to perform the customary functions of an administrator of
comparable financial assets, including, if applicable, collecting payments from
obligors and remitting such collections to the Trustee; maintaining accounting
records relating to the Deposited Assets, attempting to cure defaults and
delinquencies; and enforcing any other remedies with respect thereto all as and
to the extent provided in the applicable Sub-Administration Agreement (as
defined below).
The agreement between any Administrative Agent or Trustee and
a Sub- Administrative Agent (a "Sub-Administration Agreement") will be
consistent with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust Agreement.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, although each such Sub-Administration Agreement
will be a contract solely between such Administrative Agent and the
Sub-Administrative Agent, the Trust Agreement pursuant to which a Series of
Certificates is issued will provide that, if for any reason such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, will be
solely liable for all fees owed by it to any Sub-Administrative Agent,
irrespective of whether the compensation of the Administrative Agent or Trustee,
as applicable, pursuant to the Trust Agreement with respect to the particular
Series of Certificates is sufficient to pay such fees. However, a
Sub-Administrative Agent may be entitled to a Retained Interest in certain
Deposited Assets to the extent provided in the related
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Prospectus Supplement. Each Sub-Administrative Agent will be reimbursed by the
Administrative Agent, if any, or otherwise the Trustee for certain expenditures
which it makes, generally to the same extent the Administrative Agent or
Trustee, as applicable, would be reimbursed under the terms of the Trust
Agreement relating to such Series. See "-- Retained Interest; Administrative
Agent Compensation and Payment of Expenses."
The Administrative Agent or Trustee, as applicable, may
require any Sub- Administrative Agent to agree to indemnify the Administrative
Agent or Trustee, as applicable, for any liability or obligation sustained by
the Administrative Agent or Trustee, as applicable, in connection with any act
or failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. Unless otherwise
specified in the applicable Prospectus Supplement, as administrator with respect
to the Deposited Assets, the Trustee, on behalf of the Certificateholders of a
given Series (or any Class or Classes within such Series), will present claims
under each applicable Credit Support Instrument, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Deposited Assets. As set forth above, all collections by or
on behalf of the Trustee or Administrative Agent under any Credit Support
Instrument are to be deposited in the Certificate Account for the related Trust,
subject to withdrawal as described above.
Unless otherwise provided in the applicable Prospectus
Supplement, if recovery on a defaulted Deposited Asset and any related Credit
Support Instrument is not available, the Trustee will be obligated to follow or
cause to be followed such normal practices and procedures as it deems necessary
or advisable to realize upon the defaulted Deposited Asset (Section 3.07),
provided that, except as otherwise expressly provided in the applicable
Prospectus Supplement, it shall not be required to expend or risk its own funds
or otherwise incur personal financial liability. If the proceeds of any
liquidation of the defaulted Deposited Asset are less than the sum of (i) the
outstanding principal balance of the defaulted Deposited Asset, (ii) interest
accrued but unpaid thereon at the applicable interest rate and (iii) the
aggregate amount of expenses incurred by the Administrative Agent and the
Trustee, as applicable, in connection with such proceedings to the extent
reimbursable from the assets of the Trust under the Trust Agreement, the Trust
will realize a loss in the amount of such difference (Section 3.07). Only if and
to the extent provided in the applicable Prospectus Supplement, the
Administrative Agent or Trustee, as so provided, will be entitled to withdraw or
cause to be withdrawn from the related Certificate Account out of the net
proceeds recovered on any defaulted Deposited Asset, prior to the distribution
of such proceeds to Certificateholders, amounts representing its normal
administrative compensation on the Deposited Asset, unreimbursed administrative
expenses incurred with respect to the Deposited Asset and any unreimbursed
advances of delinquent payments made with respect to the Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will
specify whether there will be any Retained Interest in the Deposited Assets,
and, if so, the owner thereof. If so provided, the Retained Interest will be
established on an asset-by-asset basis and will be specified in an exhibit to
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the applicable series supplement to the Trust Agreement. A Retained Interest in
a Deposited Asset represents a specified interest therein. Payments in respect
of the Retained Interest will be deducted from payments on the Deposited Assets
as received and, in general, will not be deposited in the applicable Certificate
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, after deduction of all applicable administration fees, will be
allocated between the Retained Interest (if any) and interest distributions to
Certificateholders on a pari passu basis.
The applicable Prospectus Supplement will specify the
Administrative Agent's, if any, and the Trustee's compensation, and the source,
manner and priority of payment thereof, with respect to a given Series of
Certificates.
If and to the extent specified in the applicable Prospectus
Supplement, in addition to amounts payable to any Sub-Administrative Agent, the
Administrative Agent, if any, and otherwise the Trustee will pay from its
compensation certain expenses incurred in connection with its administration of
the Deposited Assets, including, without limitation, payment of the fees and
disbursements of the Trustee, if applicable, and independent accountants,
payment of expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement (Section 3.11).
ADVANCES IN RESPECT OF DELINQUENCIES
Unless otherwise specified in the applicable Prospectus
Supplement, the Administrative Agent, if any, specified therein or the Trustee
will have no obligation to make any advances with respect to collections on the
Deposited Assets or in favor of the Certificateholders of the related Series of
Certificates. However, to the extent provided in the applicable Prospectus
Supplement, any such Administrative Agent or the Trustee will advance on or
before each Distribution Date its own funds or funds held in the Certificate
Account for such Series that are not part of the funds available for
distribution for such Distribution Date, in an amount equal to the aggregate of
payments of principal, premium (if any) and interest (net of related
administration fees and any Retained Interest) with respect to the Deposited
Assets that were due during the related Collection Period (as defined in the
Prospectus Supplement) and were delinquent on the related Determination Date,
subject to (i) any such Administrative Agent's or the Trustee's good faith
determination that such advances will be reimbursable from Related Proceeds (as
defined below) and (ii) such other conditions as may be specified in the
Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the Class or
Classes of Certificates entitled thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's or Trustee's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account for such Series to the extent that such
Administrative Agent or
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Trustee shall determine, in its sole judgment, that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by such Administrative Agent or Trustee from excess
funds in the Certificate Account for any Series, such Administrative Agent or
Trustee will replace such funds in such Certificate Account on any future
Distribution Date to the extent that funds in such Certificate Account on such
Distribution Date are less than payments required to be made to
Certificateholders on such date (Section 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee to make advances may be secured by a cash advance reserve fund or a
surety bond. If applicable, information regarding the characteristics of, and
the identity of any obligor on, any such surety bond, will be set forth in the
related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE ADMINISTRATIVE AGENT AND THE 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,
if any, may resign from its obligations and duties under the Trust Agreement
with respect to any Series of Certificates only if such resignation, and the
appointment of a successor, will not result in a withdrawal or downgrading of
the rating of any Class of Certificates of such Series or upon a determination
that its duties under the Trust Agreement with respect to such Series are no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor has assumed the Administrative
Agent's obligations and duties under the Trust Agreement with respect to such
Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the 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,
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prosecute or defend any legal action which is not incidental to their respective
responsibilities under the Trust Agreement or which in its opinion may involve
it in any expense or liability. Each of such Administrative Agent or the
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 6.02). The applicable Prospectus Supplement will describe
how such legal expenses and costs of such action and any liability resulting
therefrom will be allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to which
an Administrative Agent is a part, or any person succeeding to the business of
an Administrative Agent, will be the successor of the Administrative Agent under
the Trust Agreement with respect to the Certificates of any given Series.
ADMINISTRATIVE AGENT TERMINATION EVENTS;
RIGHTS UPON ADMINISTRATIVE AGENT TERMINATION EVENT
Unless otherwise provided in the related Prospectus
Supplement, "Administrative Agent Termination Events," if applicable, under the
Trust Agreement with respect to any given Series of Certificates will consist of
the following: (i) any failure by an Administrative Agent to remit to the
Trustee any funds in respect of collections on the Deposited Assets and Credit
Support, if any, as required under the Trust Agreement, that continues
unremedied for five days after the giving of written notice of such failure to
the Administrative Agent by the Trustee or the Depositor, or to the
Administrative Agent, the Depositor and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights (as defined
below); (ii) any failure by an Administrative Agent duly to observe or perform
in any material respect any of its other covenants or obligations under the
Trust Agreement with respect to such Series which continues unremedied for
thirty days after the giving of written notice of such failure to the
Administrative Agent by the Trustee or the Depositor, or to the Administrative
Agent, the Depositor and the Trustee by the holders of such Certificates
evidencing not less than 25% of the Voting Rights; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by or on behalf of an Administrative
Agent indicating its insolvency or inability to pay its obligations. Any
additional Administrative Agent Termination Events with respect to any given
Series of Certificates will be set forth in the applicable Prospectus
Supplement. In addition, the applicable Prospectus Supplement and the related
series supplement to the Trust Agreement will specify as to each matter
requiring the vote of holders of Certificates of a Class or group of Classes
within a given Series, the circumstances and manner in which the Required
Percentage (as defined below) applicable to each such matter is calculated.
"Required Percentage" means, with respect to any matter requiring a vote of
holders of Certificates of a given Series, the specified percentage (computed on
the basis of outstanding Certificate Principal Balance or Notional Amount, as
applicable) of Certificates of a designated Class or group of Classes within
such Series (either voting as separate classes or as a single class) applicable
to such matter, all as specified in the applicable Prospectus Supplement and the
related series supplement to the Trust Agreement. "Voting Rights" evidenced by
any Certificate will be the portion of the voting rights of all the Certificates
in the related Series allocated in the manner described in the related
Prospectus Supplement (Article I).
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Unless otherwise specified in the applicable Prospectus
Supplement, so long as an Administrative Agent Termination Event, if applicable,
under the Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Depositor or the Trustee may, and at the direction of holders of
such Certificates evidencing not less than the "Required Percentage--
Administrative Agent Termination" (as defined in the Prospectus Supplement, if
applicable) of the Voting Rights, the Trustee will, terminate all the rights and
obligations of such Administrative Agent under the Trust Agreement relating to
the applicable Trust and in and to the related Deposited Assets (other than any
Retained Interest of such Administrative Agent), whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of such
Administrative Agent under the Trust Agreement with respect to such Series
(except that if the Trustee is prohibited by law from obligating itself to make
advances regarding delinquent Deposited Assets, then the Trustee will not be so
obligated) and will be entitled to similar compensation arrangements. In the
event that the Trustee is unwilling or unable to act, it may or, at the written
request of the holders of such Certificates evidencing not less than the
"Required Percentage--Administrative Agent Termination" of the Voting Rights, it
will appoint, or petition a court of competent jurisdiction for the appointment
of, an administration agent acceptable to the Rating Agency with a net worth at
the time of such appointment of at least $15,000,000 to act as successor to such
Administrative Agent under the Trust Agreement with respect to such Series.
Pending such appointment, the Trustee is obligated to act in such capacity
(except that if the Trustee is prohibited by law from obligating itself to make
advances regarding delinquent Deposited Assets, then the Trustee will not be so
obligated). The Trustee and any such successor may agree upon the compensation
be paid to such successor, which in no event may be greater than the
compensation payable to such Administrative Agent under the Trust Agreement with
respect to such Series.
No Certificateholder will have the right under the Trust
Agreement to institute any proceeding with respect thereto unless such holder
previously has given to the Trustee written notice of breach and unless the
holders of Certificates evidencing not less than the "Required Percentage--
Remedies" (as defined in the Prospectus Supplement) of the Voting Rights have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for fifteen days has neglected or refused to institute any such
proceeding (Section 10.02). The Trustee, however, is under no obligation to
exercise any of the trusts or powers vested in it by the Trust Agreement or to
make any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by the Trust Agreement,
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby (Section 10.02).
MODIFICATION AND WAIVER
Unless otherwise specified in the applicable Prospectus
Supplement, the Trust Agreement for each Series of Certificates may be amended
by the 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
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inconsistent with any other provision therein or in the Prospectus Supplement,
(iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such addition affects any series or
class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion of
counsel, have a material adverse effect on the interests of any affected series
or class of Certificateholders), (iv) to add to the covenants, restrictions or
obligations of the 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" (as defined in the
Prospectus Supplement) of the Voting Rights of those Certificates that are
materially adversely affected by such modification or amendment for the purpose
of adding any provision to or changing in any manner or eliminating any
provision of the Trust Agreement or of modifying in any manner the rights of
such Certificateholders; provided, however, that in the event such modification
or amendment would materially adversely affect the rating of any Series or Class
by each Rating Agency, the "Required Percentage--Amendment" specified in the
related series supplement to the Trust Agreement shall include an additional
specified percentage of the Certificates of such Series or Class.
Except as otherwise set forth in the applicable Prospectus
Supplement, no such modification or amendment may, however, (i) reduce in any
manner the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) of the Voting
Rights of a given Series may, on behalf of all Certificateholders of that
Series, (i) waive, insofar as that Series is concerned, compliance by the
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 5.20).
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REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in
the applicable Prospectus Supplement, with each distribution to
Certificateholders of any Class of Certificates of a given Series, the
Administrative Agent or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such
Certificateholder, to the Depositor and to such other parties as may be
specified in the Trust Agreement, a statement setting forth:
(i) the amount of such distribution to Certificateholders of
such Class allocable to principal of or interest or premium, if any, on
the Certificates of such Class; and the amount of aggregate unpaid
interest as of such Distribution Date;
(ii) in the case of Certificates with a variable Pass-Through
Rate, the Pass- Through Rate applicable to such Distribution Date, as
calculated in accordance with the method specified herein and in the
related Prospectus Supplement;
(iii) the amount of compensation received by the
Administrative Agent, if any, and the Trustee for the period relating
to such Distribution Date, and such other customary information as the
Administrative Agent, if any, or otherwise the Trustee deems necessary
or desirable to enable Certificateholders to prepare their tax returns;
(iv) if the Prospectus Supplement provides for advances, the
aggregate amount of advances included in such distribution, and the
aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(v) the aggregate stated principal amount or, if applicable,
notional principal amount of the Deposited Assets and the current
interest rate thereon at the close of business on such Distribution
Date;
(vi) the aggregate Certificate Principal Balance or aggregate
Notional Amount, if applicable, of each Class of Certificates
(including any Class of Certificates not offered hereby) at the close
of business on such Distribution Date, separately identifying any
reduction in such aggregate Certificate Principal Balance or aggregate
Notional Amount due to the allocation of any Realized Losses or
otherwise; and
(vii) as to any Series (or Class within such Series) for which
Credit Support has been obtained, the amount of coverage of each
element of Credit Support included therein as of the close of business
on such Distribution Date.
In the case of information furnished pursuant to subclauses
(i) and (iii) above, the amounts shall be expressed as a U.S. dollar amount (or
equivalent thereof in any other Specified Currency) per minimum denomination of
Certificates or for such other specified portion thereof. Within a reasonable
period of time after the end of each calendar year, the Administrative Agent or
the Trustee, as provided in the related Prospectus Supplement, shall furnish to
each person who at
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any time during the calendar year was a Certificateholder a statement containing
the information set forth in subclauses (i) and (iii) above, aggregated for such
calendar year or the applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Administrative Agent or the Trustee,
as applicable, shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Administrative
Agent or the Trustee, as applicable, pursuant to any requirements of the Code as
are from time to time in effect (Section 4.03).
Notices. Unless otherwise provided in the applicable
Prospectus Supplement, any notice required to be given to a holder of a
Registered Certificate will be mailed to the last address of such holder set
forth in the applicable Certificate register.
EVIDENCE AS TO COMPLIANCE
If so specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that commencing on a certain date and on or before
a specified date in each year thereafter, a firm of independent public
accountants will furnish a statement to the Trustee to the effect that such firm
has examined certain documents and records relating to the administration of the
Deposited Assets during the related 12-month period (or, in the case of the
first such report, the period ending on or before the date specified in the
Prospectus Supplement, which date shall not be more than one year after the
related Original Issue Date) and that, on the basis of certain agreed upon
procedures considered appropriate under the circumstances, such firm is of the
opinion that such administration was conducted in compliance with the terms of
the Trust Agreement, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions and qualifications as shall be set forth in
such report.
The Trust Agreement may also provide for delivery to the
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.
Copies of the annual accountants' statement, if any, and the
statement of officers of the Trustee may be obtained by Certificateholders
without charge upon written request to either the Administrative Agent or the
Trustee, as applicable, at the address set forth in the related Prospectus
Supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus
Supplement, if a Certificate is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the applicable Trustee in
the City and State of New York, or such other location as may be specified in
the applicable Prospectus Supplement, upon payment by the holder of such
expenses as may be incurred by the applicable Trustee in connection therewith
and the furnishing of such evidence and
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<PAGE>
indemnity as such Trustee may require. Mutilated Certificates must be
surrendered before new Certificates will be issued (Section 5.05).
TERMINATION
The obligations created by the Trust Agreement for each Series
of Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related Prospectus Supplement. In no event, however, will any trust
created by the Trust Agreement continue beyond the respective date specified in
the related Prospectus Supplement. Written notice of termination of the
obligations with respect to the related Series of Certificates under the Trust
Agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices-- Notices," and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee which will be specified in the notice of termination
(Section 9.01).
Any such purchase of Deposited Assets and property acquired in
respect of Deposited Assets evidenced by a Series of Certificates shall be made
at a price approximately equal to the aggregate fair market value of all the
assets in the Trust (as determined by the Trustee, the Administrative Agent, if
any, and, if different than both such persons, the person entitled to effect
such termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable Prospectus Supplement, a specified
price as determined therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such Series
at the time of purchase being less than the percentage of the aggregate
principal balance of the Deposited Assets at the Cut-off Date for that Series
specified in the related Prospectus Supplement (Section 9.01).
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or
sufficiency of the Trust Agreement, the Certificates of any Series or any
Deposited Asset or related document and is not accountable for the use or
application by or on behalf of any Administrative Agent of any funds paid to
such Administrative Agent or its designee in respect of such Certificates or the
Deposited Assets, or deposited into or withdrawn from the related Certificate
Account or any other account by or on behalf of such Administrative Agent
(Section 7.04). If no Administrative Agent Termination Event has occurred and is
continuing with respect to any given Series, the Trustee is required to perform
only those duties specifically required under the Trust Agreement with respect
to such Series. However, upon receipt of the various certificates, reports or
other instruments required to be
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<PAGE>
furnished to it, the Trustee is required to examine such documents and to
determine whether they conform to the applicable requirements of the Trust
Agreement (Section 7.01).
THE TRUSTEE
The Trustee for any given Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The
commercial bank, national banking association or trust company serving as
Trustee will be unaffiliated with, but may have normal banking relationships
with, the 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.
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<PAGE>
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES
DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN
APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus is directed to
prospective purchasers of Certificates who are United States residents. The
applicable Prospectus Supplement for certain issuances of Certificates may set
forth certain information applicable to prospective purchasers who are residents
of countries other than the United States with respect to matters that may
affect the purchase or holding of, or receipt of distributions of principal,
premium or interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a
Specified Currency other than U.S. dollars will contain information concerning
historical exchange rates for such currency against the U.S. dollar, a
description of such currency, any exchange controls affecting such currency and
any other required information concerning such currency.
PAYMENT CURRENCY
Except as set forth below or unless otherwise provided in the
applicable Prospectus Supplement, if distributions in respect of a Certificate
are required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the 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
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<PAGE>
of each of the Components shall be determined by such Trustee on the basis of
the most recently available Market Exchange Rates for such Components or as
otherwise indicated in the applicable Prospectus Supplement.
If the official unit of any component currency is altered by
way of combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or more
component currencies are consolidated into a single currency, the amounts of
those currencies as Components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a Component
shall be replaced by amounts of such two or more currencies, each of which shall
be equal to the amount of the former component currency divided by the number of
currencies into which that currency was divided.
All determinations referred to above made by the applicable
Trustee shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on the related
Certificateholders of such Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus
Supplement, the Certificates will be governed by and construed in accordance
with the law of the State of New York. Courts in the United States customarily
have not rendered judgments for money damages denominated in any currency other
than the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New
York provides, however, that an action based upon an obligation denominated in a
currency other than U.S. dollars will be rendered in the foreign currency of the
underlying obligation and converted into U.S. dollars at the rate of exchange
prevailing on the date of the entry of the judgment or decree.
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Series of Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such Certificates and
the proceeds to the Depositor from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers, any
securities exchanges on which such Certificates may be listed and the place and
time of delivery of the Certificates to be offered thereby.
If underwriters are used in the sale, Certificates will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Such Certificates may be offered to the public either through underwriting
syndicates
49
<PAGE>
represented by managing underwriters or by underwriters without a syndicate.
Such managing underwriters or underwriters in the United States will include
Lehman Brothers Inc., an affiliate of the 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 Section 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
affiliate.
As to each Series of Certificates, only those Classes rated in
one of the investment grade rating categories by a Rating Agency will be offered
hereby. Any unrated Classes or Classes rated below investment grade may be
retained by the 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
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<PAGE>
with the underwriters described, in the related Prospectus Supplement. Also,
affiliates of the Underwriters may act as principals or agents in connection
with market-making transactions relating to the Certificates.
LEGAL OPINIONS
Certain legal matters with respect to the Certificates will be
passed upon for the Depositor and the underwriters by Weil, Gotshal & Manges
LLP, New York, New York or other counsel identified in the applicable Prospectus
Supplement.
51
<PAGE>
No dealer, salesman or other person has been authorized to
given any information or to make any representation not contained in the
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or Lehman Brothers Inc. The
Prospectus does not constitute an offer of any securities other than those to
which they relate or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of the Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date of the
Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement........................................................3
Available Information........................................................3
Incorporation of Certain Documents by Reference..............................4
Reports to Certificateholders................................................4
Important Currency Information ..............................................5
Risk Factors.................................................................5
The Depositor................................................................7
Use of Proceeds..............................................................8
Formation of the Trust.......................................................8
Maturity and Yield Considerations............................................9
Description of Certificates.................................................10
Description of Deposited Assets and Credit Support..........................29
Description of the Trust Agreement..........................................36
Currency Risks..............................................................47
Plan of Distribution........................................................49
Legal Opinions..............................................................51
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion Dated December 12, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 12, 1997)
TRUST CERTIFICATES, SERIES 1997 - [ ]
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
$ [PRINCIPAL OR NOTIONAL AMOUNT] [(APPROXIMATE)], CLASS CERTIFICATES,
[ %] [VARIABLE] PASS THROUGH RATE
LEHMAN ABS CORPORATION
DEPOSITOR
Each Trust Certificate Series 1995-[ ] offered hereby will consist of [___]
classes of Certificates, designated as Class [__] Certificates[,] [and] Class
[__] Certificates [and list others], [all] of which [only the Class [__]
Certificates[,] [and] Class [__] Certificates [and list others]] are being
offered hereby (collectively, the "Certificates") and will represent a
fractional undivided beneficial interest in the Series 1997-[ ] Trust (the
"Trust") to be formed pursuant to the Trust Agreement dated as of [________],
between Lehman ABS Corporation (the "Depositor") and [ ], as trustee (the
"Trustee"), as supplemented by the Series 1997-[ ] Supplement dated as of [ ]
(collectively, the "Trust Agreement"). The property of the Trust will consist in
part of [$][___] aggregate principal amount of [a [__%] [floating rate] [specify
publicly issued debt security] due [___] of [specify issuer]] [a pool of [__%]
[floating rate] publicly issued debt securities having a term of [not less than
years and not more than years] issued by one or more [foreign governments,
foreign political subdivisions or agencies and instrumentalities thereof]
[(other than the Retained Interest referred to herein)] (collectively, the
"Underlying Securities"), and having the characteristics described herein under
"Description of the Deposited Assets." Terms used but not otherwise defined
herein are defined in the Prospectus attached hereto (the "Prospectus").
The Underlying Securities will be acquired by the Depositor and, pursuant to the
Trust Agreement, deposited into the Trust for the benefit of Certificateholders.
[The Underlying Securities were issued and sold as part of an underwritten
public offering in [____].] The Underlying Securities are obligations of the
Underlying Securities Issuer and [explain whether senior or subordinate, whether
secured or unsecured and whether subject to any redemption or put rights].
[Describe any required principal payments of Underlying Securities.]
Distributions on the Certificates will be made [monthly] [quarterly]
[semi-annually] on [[____] of each year] [to be conformed to interest payment
dates for Underlying Securities], or, if any such date is not a business day,
then on the immediately following business day (each, a "Distribution Date")
commencing [___]. The last day on which distributions are scheduled to be made
on the Certificates is [___] (the "Final Distribution Date"), by which date the
holders of the Certificates will receive a distribution of all amounts allocable
to principal on such Certificates or, to the extent specified herein, a pro rata
share of any remaining Underlying Securities.
SEE "RISK FACTORS" HEREIN ON PAGES [__] TO [__] AND IN THE PROSPECTUS ON PAGES 5
TO 8.
(cover continued on next page)
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE DEPOSITOR OR ANY OF ITS RESPECTIVE AFFILIATES.
THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Underwriter has agreed to purchase the Certificates from the Depositor at
[__]% of the Certificate Principal Balance thereof ($[__] aggregate proceeds to
the Depositor, before deducting expenses estimated at $[__]) plus accrued
interest, if any, at the Pass-Through Rate calculated from [___], 1997 (the
"Expected Settlement Date"), subject to the terms and conditions set forth in
the Underwriting Agreement referred to herein under "Method of Distribution."
The Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution."
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the [specify applicable classes] Certificates will
be made in book-entry form through the facilities of The Depository Trust
Company on or about the Expected Settlement Date.
LEHMAN BROTHERS
December __, 1997
<PAGE>
(cover page continued)
As and to the extent described herein, collections received by the Trustee with
respect to the Deposited Assets will be distributed to Certificateholders [of
each class] in the manner and priority described herein. [The rights of the
holders of the Class [__] Certificates [and specify other classes] to receive
distributions of such collections are subordinated to the rights of the holders
of the Class [__] Certificates [and specify other classes].] As and to the
extent described herein, losses realized on the Deposited Assets will be borne
by the holders of the Class [__] Certificates [and specify other classes] before
such losses will be borne by the holders of the other classes of Offered
Certificates [and the Class [__] Certificates [and specify other classes]]. To
the extent described herein, the relative priorities of each class of
Certificates with respect to collections from and losses on the Deposited Assets
may each change over time, either permanently or temporarily, upon the
occurrence of certain circumstances specified herein. See "Description of the
Certificates-Allocation of Losses; Subordination."
The Underlying Securities Issuer is not participating in, and will not receive
any proceeds in connection with, this offering.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Risk Factors" in the Prospectus.
The [specify applicable classes] Certificates initially will be represented by
certificates registered in the name of CEDE & Co., as nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of such Certificates
will be represented by book entries on the records of participating members of
DTC. Definitive certificates will be available for such Certificates only under
the limited circumstances described herein. See "Description of the
Certificates-Definitive Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO ITS
PROSPECTUS DATED _______, 1997, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS AND IN THIS PROSPECTUS
SUPPLEMENT.
UNTIL _______, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
The following summary of principal economic terms does not
purport to be complete and is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus, including
under the headings "Description of the Certificates", "Description of the
Deposited Assets" and "Description of Credit Support." Certain capitalized terms
used herein are defined elsewhere in this Prospectus Supplement on the pages
indicated in the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
THE CERTIFICATES
- ----------------
The Trust............................... Series 1997-[ ] Trust. The Trust
will be formed pursuant to the Trust
Agreement dated as of [___] (the
"Base Trust Agreement"), between the
Depositor and the Trustee, as
supplemented by the Series 1997-[ ]
Supplement dated as of the Expected
Settlement Date (the "Series
Supplement" and, together with the
Base Trust Agreement, the "Trust
Agreement").
Securities Offered...................... Trust Certificates, Series 1997-[ ],
consisting of Class [__]
Certificates[,] [and] Class [__]
Certificates [and specify others]
(collectively, the "Certificates").
[Initial Certificate
Principal Balance]
[Notional Amount]....................... Class [ ]: [$][ ].
Class [ ]: [$][ ].
Final Scheduled
Distribution Date....................... Class [ ].
Class [ ].
Pass-Through Rates...................... [The Variable Pass-Through Rates
applicable to the calculation of the
interest distributable on any
Distribution Date on the
Certificates [(other than the Class
[ ] Certificates)] are equal to
[describe method for determining
variable rates]. The initial
Variable Pass-Through Rates for the
Class [ ] Certificates[,] [and] the
Class [ ] Certificates [and specify
others] are approximately ___%[,]
[and] ___% [and ___%] per annum,
respectively.] [The Pass-Through
Rate applicable to the calculation
of the interest distributable on any
S-3
<PAGE>
Distribution Date on the [specify
classes] Certificates is fixed at
___% [and ___%, respectively,] per
annum.]
Deposited Assets........................ The Deposited Assets shall consist
of the Underlying Securities [and
describe any assets which are
ancillary or incidental to the
Underlying Securities]. See "-The
Underlying Securities" [, "-Other
Deposited Assets"] and "Description
of the Deposited Assets" below.
Original Issue Date..................... [ ].
Cut-off Date............................ [ ].
Distribution Date....................... [ ], commencing [ ].
Record Date............................. The [ ] day immediately preceding
each Distribution Date.
Denominations;
Specified Currency...................... The Class [ ] Certificates[,] [and]
Class [ ] Certificates [and specify
others] will be denominated and
payable in [U.S. dollars] [__] (the
"Specified Currency") and will be
available for purchase in minimum
denominations of [$][__] and
[integral multiples thereof]
[multiples of [$][__] in excess
thereof].
Interest Accrual Periods................ [Monthly] [Quarterly]
[Semi-annually] (or, in the case of
the first Interest Accrual Period,
from and including the Original
Issue Date to but excluding the
first Distribution Date).
Form of Security........................ Book-entry Certificates with The
Depository Trust Company ("DTC"),
except in certain limited
circumstances. See "Description of
the Certificates-Definitive
Certificates." Distributions thereon
will be settled in [immediately
available (same-day)] [clearinghouse
(next-day)] funds.
Trustee................................. [ ], as trustee.
Ratings................................. [___] by [___] [and [___] by [___]].
[Specify specific ratings
requirements for particular classes,
including the extent to which the
issuance of the Certificates of a
given class is conditioned upon
satisfaction of the ratings of each
other class of Certificates.] See
"Ratings."
S-4
<PAGE>
Collection Period....................... With respect to any Distribution
Date, the period beginning on [___]
and ending at the close of business
on [___].
THE UNDERLYING SECURITIES
Underlying Securities................... [A [__]% [floating rate] [publicly
issued debt security due [___] [A
pool of publicly issued debt
securities of various issuers,
exclusive of the Retained Interest]
[in/having] an aggregate principal
amount of [$][__].
Underlying Securities Issuer............ [Specify issuer] [Pool of various
Foreign Government Issuers].
[Foreign Government
Guarantor].............................. [Specify guarantor, if any.]
Underlying Securities
Original Issue Date..................... [ ].
Underlying Securities Final
Payment Date............................ [ ].
Amortization............................ [Describe amortization schedule,
if any].
Denominations; Underlying
Securities Currency..................... The Underlying Securities are
denominated and payable in [U.S.
dollars] [___] (the "Underlying
Securities Currency") and are
available in minimum denominations
of [$][___] and [integral multiples
thereof] [multiples of [$][___] in
excess thereof].
Underlying Securities
Payment Dates........................... [ ], commencing [ ].
Underlying Securities Rate.............. [ % per annum.] [A [Weighted
Average] rate per annum equal to
[specify interest rate formula for
debt security].]
Underlying Securities
Interest Accrual Periods................ [Monthly] [Quarterly]
[Semi-annually].
Priority................................ [Describe senior or subordinated
status of Underlying Securities].
S-5
<PAGE>
Security................................ [Describe existence of any security
for obligations or state that
Underlying Securities are
unsecured].
Redemption/Put/
Other Features.......................... [Describe existence of any
redemption, put or other material
features applicable to the
Underlying Securities].
Form of Security........................ Book-entry debt securities with DTC
[listed on the [New York] [American]
Stock Exchange [specify other
listing]].
Underlying Securities
Trustee [Fiscal
and Paying Agent]....................... [____]. [The Underlying Securities
have [not] been issued pursuant to
[an indenture dated as of [___],
19[__] (the "Indenture"), between
the Underlying Securities Trustee
and the Underlying Securities
Issuer] [a fiscal and paying agency
agreement dated as of [___], 19[__]
(the "Fiscal and Paying Agency
Agreement"), between the Fiscal and
Paying Agent and the Underlying
Securities Issuer] [specify other
agreement].
Ratings................................. [____] by [___] [and [___] by
[___]]. [See "Description of the
Underlying Securities-Ratings of
Underlying Securities."]
[Underlying Securities
Trustee]................................ [Specify].
OTHER DEPOSITED ASSETS
- ----------------------
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset]
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary does not purport to be complete and is
qualified in its entirety by reference to the detailed information appearing
elsewhere herein and in the Prospectus.
Depositor............................... Lehman ABS Corporation (the
"Depositor"), an indirect
wholly-owned subsidiary of Lehman
Brothers Inc. See "The Depositor" in
the Prospectus.
Certificates............................ The Certificates, each of which
represents a fractional undivided
beneficial interest in the Trust,
will be issued pursuant to the Trust
Agreement. The Certificates will
consist of [ ] classes, designated
as Class [ ] Certificates [and] [,]
Class [ ] Certificates [and [specify
other classes]], [all] of which [all
but the Class [ ] Certificates] are
being offered hereby (collectively,
the "Certificates").
The Certificate Principal Balance of
a Certificate outstanding at any
time represents the maximum amount
that the holder thereof is entitled
to receive as distributions
allocable to principal. The
Certificate Principal Balance of a
Certificate will decline to the
extent distributions allocable to
principal are made to such holder.
[The Notional Amount of the Class [
] Certificates as of any date of
determination is equal to [specify].
Reference to the Notional Amount of
the Class [ ] Certificates is solely
for convenience in determining the
basis on which distributions on the
Class [ ] Certificates are
calculated [and determining the
relative voting rights of
Certificateholders of Class [ ]
Certificates for purposes of voting
on a class-by-class basis or
otherwise]. The Notional Amount does
not represent the right to receive
any distributions allocable to
principal.]
[The Class [ ] Certificates, which
are not being offered hereby, have
in the aggregate an initial
Certificate Principal Balance of
[$]_____ (approximate) and a
[Variable] Pass- Through Rate [of
___%]. The Class [ ] Certificates
represent the right to receive
distributions in respect of their
Certificate Principal Balance and
interest thereon at their applicable
Pass- Through Rate.] Shortfalls in
collections with respect to the
Deposited Assets will be allocated
solely to the Class [ ] Certificates
to the extent provided herein and,
thereafter, will be allocated among
the Certificates and the Class [ ]
S-7
<PAGE>
Certificates, as provided herein.
[The Class [ ] Certificates will be
transferred by the Depositor to an
affiliate on or about ___, 1997 (the
"Closing Date"), and may be sold at
any time in accordance with any
restrictions in the Trust
Agreement.]
The Underlying Securities............... Interest on the Underlying
Securities accrues at the Underlying
Securities Rate for each Underlying
Securities Accrual Period and is
payable on each Underlying
Securities Payment Date. The entire
principal amount of the Underlying
Securities will be payable on the
Underlying Securities Final Payment
Date. [The Underlying Securities
have a remaining term to maturity of
approximately ___ years.] [As of the
Cut-off Date, the pool of Underlying
Securities has a weighted average
interest rate of __% and a weighted
average remaining term to maturity
of approximately years.
Approximately __% [specify if
greater than 10%] of such Underlying
Securities consist of debt
securities of [specify foreign
governments or their political
subdivisions or agencies and
instrumentalities.]
[Name such obligor] is a [identify
nature of foreign government] whose
principal executive offices are
located at [specify address]. The
obligor [is subject to the
informational requirements of the
Exchange Act and in accordance
therewith files reports and other
information (including financial
information) with the Commission]
[makes available to the public upon
request certain annual financial and
other information]. See "Description
of the Deposited Assets."
[Other Deposited Assets
and Credit Support...................... The Deposited Assets will also
include [direct obligations of the
United States of America] [describe
any assets which are ancillary or
incidental to the Underlying
Securities, including hedging
contracts such as puts, calls,
interest rate swaps, currency swaps,
floors, caps and collars] (such
assets, together with the Underlying
Securities, the "Deposited Assets").
See "Description of the Underlying
Securities."
The Certificateholders of the
[specify particular classes]
Certificates will have the benefit
of [describe credit support] to
support or ensure the [servicing
and] [timely] [ultimate]
distribution of amounts due with
respect to the Deposited Assets,
including providing certain coverage
with respect to losses thereon.]
S-8
<PAGE>
Distributions........................... Holders of the Certificates will be
entitled to receive on each
Distribution Date, to the extent of
available funds on such Distribution
Date, after payment of the expenses
of the Trustee and its respective
agents up to the Allowable Expense
Amount, (i) [in the case of each
class of Certificates other than the
Class [ ] Certificates,]
distributions allocable to interest
at the applicable Pass-Through Rate
on the applicable Certificate
Principal Balance, (ii) [in the case
of each class of Certificates other
than the Class [ ] Certificates,]
distributions allocable to principal
and (iii) [in the case of each class
of Certificates other than the Class
[ ] Certificates,] distributions
allocable to premium (if any) in an
amount equal to all payments of
premium (if any) received on the
Underlying Securities for the
applicable Collection Period.
Distributions will be made to
Certificateholders only if, and to
the extent that, payments are made
with respect to the Deposited Assets
or are otherwise covered by any
Credit Support. [The holders of the
Class [ ] Certificates will be
entitled to receive on each
Distribution Date distributions
allocable to interest in an amount
equal to [describe Stripped
Interest].] [The holders of the
Class [ ] Certificates will not be
entitled to receive any
distributions allocable to principal
or premium (if any).] See
"Description of the
Certificates-Distributions."
Special Distribution Dates.............. If a payment with respect to the
Underlying Securities is made to the
Trustee after the Underlying
Securities Payment Date on which
such payment was due, then the
Trustee shall distribute any such
amount received on the next
occurring Business Day (a "Special
Distribution Date") as if such funds
had constituted Available Funds on
the Distribution Date immediately
preceding such Special Distribution
Date; provided, however, that the
Record Date for such Special
Distribution Date shall be [five
Business Days (as such term is
defined in the Prospectus, "Business
Day") prior to the day on] which the
related payment was received from
the Underlying Securities Trustee.
[Subordination.......................... As and to the extent described
herein, the rights of the holders of
the Class [ ] Certificates [and
specify other classes] to receive
distributions of principal, premium
(if any), and interest with respect
to the Deposited Assets will be
subordinated to the rights of the
holders of the other classes of
Certificates with respect to losses
attributable to principal, premium
(if any) and interest realized on a
Deposited Asset
S-9
<PAGE>
(such losses, "Realized Losses").
See "Description of the
Certificates-Allocation of Losses;
Subordination."
Optional Termination.................... At its option, the [Depositor] may
purchase all the Deposited Assets in
the Trust, and thereby cause the
termination of the Trust and early
retirement of the Certificates, on
any Distribution Date on which the
aggregate principal amount of the
Deposited Assets remaining in the
Trust is less than [10%] of the
aggregate principal amount of the
Deposited Assets as of the Cut-off
Date. [Specify any other purchase or
repurchase option of the Depositor.]
See "Description of the Trust
Agreement-Termination" herein and
"Description of Trust
Agreement-Termination" in the
Prospectus.
Certain Federal
Income Tax
Consequences............................ In the opinion of tax counsel to the
Trust, the Trust will be classified
for Federal income tax purposes [as
a grantor trust] [as a partnership]
[as a financial asset securitization
investment trust ("FASIT")] and not
as an association taxable as a
corporation. See "Certain Federal
Income Tax Consequences."
Ratings................................. It is a condition to the issuance of
the Certificates that the
Certificates have the ratings
specified above under "Summary of
Principal Economic Terms-The
Certificates-Ratings." A security
rating is not a recommendation to
buy, sell or hold securities and may
be subject to revision or withdrawal
at any time by the assigning rating
agency. A security rating does not
address the occurrence or frequency
of redemptions or prepayments on, or
extensions of the maturity of, the
Deposited Assets, the corresponding
effect on yield to investors [or
whether investors in the Class [ ]
Certificates may fail to recover
fully their initial investment]. See
"Ratings."
ERISA Considerations.................... An employee benefit plan subject to
the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), and an individual
retirement account (each, a "Plan")
may purchase Certificates of any
class if either (i) the Depositor is
able to confirm the existence of at
least 100 independent purchasers of
such class or (ii) the Plan can
represent that its purchase of the
Certificates would not be prohibited
under ERISA or the Code. See "ERISA
Considerations."
S-10
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust Agreement
(including the Series [ ] Supplement) between the Depositor and the Trustee.
Concurrently with the execution and delivery of the Series [ ] Supplement, the
Depositor will deposit the Underlying Securities in the Trust. The Trustee, on
behalf of the Trust, will accept such Underlying Securities and will deliver the
Certificates to or upon the order of the Depositor.
The Underlying Securities will be purchased by the Depositor
in the secondary market (either directly or through an affiliate of the
Depositor). The Underlying Securities will not be acquired from the Underlying
Securities Issuer as part of any distribution by or pursuant to any agreement
with the Underlying Securities Issuer. The Underlying Securities Issuer is not
participating in this offering and will not receive any of the proceeds of the
sale of the Underlying Securities to the Depositor or the issuance of the
Certificates. [Neither the Depositor nor any of its affiliates participated in
the initial public offering of the Underlying Securities] [Lehman Brothers Inc.,
an affiliate of the Depositor, participated in the initial public offering of
the Underlying Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and the particular structure of the
Certificates being offered, including factors relating to the yield on the
Certificates and risks associated with the Deposited Assets and the terms
thereof, as described elsewhere herein.] See "Risk Factors" and "Maturity and
Yield Considerations" in the Prospectus.
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
This Prospectus Supplement sets forth certain relevant terms
with respect to the Underlying Securities, but does not provide detailed
information with respect to the Underlying Securities. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Deposited Assets. All disclosure contained herein with respect to the
Underlying Securities is derived from publicly available documents. [Describe
publicly available documents and whether the Underlying Securities Issuer is
subject to the informational reporting requirements of the Exchange Act.]
Although the Depositor has no reason to believe the information concerning the
Underlying Securities or the Underlying Securities Issuer in the Underlying
Securities prospectus related to the Underlying Securities is not reliable,
neither the Depositor nor any of the Underwriters has participated in the
preparation of such documents, or made any due diligence inquiry with respect to
the information provided therein. There can be no assurance that events
affecting the Underlying Securities or the Underlying Securities Issuer have not
occurred, which have not yet been publicly
S-11
<PAGE>
disclosed, which would affect the accuracy or completeness of the publicly
available documents described above.
[Use the following where the Underlying Securities consist of a pool
of obligations of multiple obligors].
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of publicly issued debt securities of [foreign
governments, foreign political subdivisions or agencies and instrumentalities
thereof]. The Underlying Securities will be purchased by the Depositor in the
secondary market (either directly or through an affiliate of the Depositor) and
will be deposited in to the Trust. The Underlying Securities will not be
acquired either from the respective obligors on the Underlying Securities or
pursuant to any distribution by or agreement with such obligors.
The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
Composition of the Underlying Securities Pool
as of the Cut-off Date
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
Distribution by Ratings of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ --------- -------
Total
====== ========== =======
S-12
<PAGE>
Distribution by Remaining Term to Maturity
of the Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
to Maturity Number Balance Balance
-------------- ------ ---------- -----------
Total ====== ========== ===========
Distribution by Interest Rate of the
Underlying Securities Pool as of the Cut-off Date
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
------------------- ------ ---------- -----------
% to % [$] %
Greater than % _______ ________ ________
Total [$] 100%
=========== =========== =========
The Underlying Securities consist of debt securities [issued or
guaranteed by foreign governments, foreign political subdivisions or agencies
and instrumentalities thereof]. As of the Cutoff Date, [all of] [approximately %
of] such Underlying Securities were rated [investment grade] [specify particular
rating] by at least one nationally recognized rating agency, and, based on
publicly available information, no obligor of any Underlying Security was in
default in the payment of any installments of principal, interest or premium (if
any) with respect thereto. Any such rating of any of the Underlying Securities
is not a recommendation to purchase, hold or sell such Underlying Security or
the Certificates, and there can be no assurance that a rating will remain for
any given period of time or that a rating will not be lowered or withdrawn
entirely by a rating agency if in its judgment circumstances in the future so
warrant. See "Ratings" herein and "Risk Factors -- Ratings of the Certificates"
in the accompanying Prospectus regarding certain considerations applicable to
the ratings of the Certificates.]
[UNDERLYING SECURITIES INDENTURE]
S-13
<PAGE>
[The Underlying Securities have been issued pursuant to
agreements (each an ["Indenture"] ["Fiscal Agency Agreement"] [specify other])
between the [various] Underlying Securities Issuers and Underlying Securities
Trustees [Agents]. The following summary describes certain general terms of such
[Indenture[s]] [Fiscal Agency Agreement[s]], but investors should refer to the
[Indenture[s]] [Fiscal Agency Agreement[s]] [itself] [themselves] for all the
terms governing the Underlying Securities.]
Each of the Indenture[s] [Fiscal Agency Agreement[s]] limits the
[respective] Underlying Securities Issuer's ability to engage in certain
activities and transactions and requires that the Underlying Securities Issuer
perform certain obligations with respect to the Underlying Securities. [Describe
common restrictive, financial and other covenants on the Underlying Securities
contained in the Underlying Securities Indenture[s] [Fiscal Agency
Agreement[s]].]
[The following is a summary of the typical Underlying Security
Events of Default for each series of Outstanding Debt Securities. [Any
additional Underlying Security Events of Default unique to a Concentrated
Underlying Security have been described following the summary]:
(a) failure to make payments of principal (and premium, if any)
and interest to holders of the Outstanding Debt Securities in the time
periods given in the Indenture[s] [Fiscal Agency Agreement[s]];
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material respect any
covenant or agreement under an Indenture continuing for a specified
period of time after notice thereof is given to the Underlying
Securities Issuer by the Underlying Securities Trustee or the holders of
not less than a specified percentage of the Outstanding Debt Securities;
(c) failure by the Underlying Securities Issuer to make any
required payment of principal (and premium, if any) or interest with
respect to certain of the other outstanding debt obligations of the
Underlying Securities Issuer or the acceleration by or on behalf of the
holders thereof of such securities; [and]
(d) certain events of bankruptcy or insolvency relating to the
Underlying Securities Issuer[s][; and
[(e) describe any additional common events of default with
respect to the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities]] [and
[all of] [approximately __% of] the Underlying Securities were [describe the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral.]]
S-14
<PAGE>
The [pool of] Underlying Securities, together with any other
assets described below and any Credit Support described under "Description of
Credit Support", represent the sole assets of the Trust that are available to
make distributions in respect of the Certificates.]
[USE THE FOLLOWING WITH RESPECT TO EACH OBLIGOR THE UNDERLYING SECURITIES OF
WHICH REPRESENT MORE THAN 10% OF THE TOTAL UNDERLYING SECURITIES AVAILABLE TO
MAKE DISTRIBUTIONS IN RESPECT OF THE CERTIFICATES -- ONLY A SINGLE OBLIGOR IS
REFERRED TO FOR PURPOSES OF THIS SECTION OF THE FORM OF PROSPECTUS SUPPLEMENT]
[A significant portion of] [Virtually all of] [All of] the
Deposited Assets of the Trust will consist of the [___%] [floating rate]
[specify publicly issued debt security] due ___ of [specify issuer][, exclusive
of the interest therein retained by [the Depositor] as described below (the
"Retained Interest")], having an aggregate principal amount outstanding as of
the Cut-off Date of approximately [$] [specify currency] ____ (the "Underlying
Securities"). The Underlying Securities will be purchased by the Depositor in
the secondary market (either directly or through an affiliate of the Depositor)
and will be deposited into the Trust. The Underlying Securities will not be
acquired either from [name such obligor] or pursuant to any distribution by or
agreement with [name such obligor]. [Describe any put, call or other conversion
or redemption options applicable to the Underlying Securities, as well as the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured)]. As of the Cut-off Date, the foregoing debt
security comprising [__%] of the Underlying Securities was rated [specify
investment grade rating] [investment grade] by [specify nationally recognized
rating agency or agencies], and, based on publicly available information, the
obligor thereon was not in default in the payment of any installments of
principal, interest or premium (if any) with respect thereto. Any such rating of
such Underlying Securities is not a recommendation to purchase, hold or sell
such Underlying Securities or the Certificates, and there can be no assurance
that a rating will remain for any given period of time or that a rating will not
be lowered or withdrawn entirely by a rating agency if in its judgment
circumstances in the future so warrant. See "Ratings" herein and "Risk Factors
- -- Ratings of the Certificates" in the accompanying Prospectus regarding certain
considerations applicable to the ratings of the Certificates.
The Trust will have no other significant assets [other than any
Credit Support or those assets referred to below] from which to make
distributions of amounts due in respect of the Certificates. Consequently, the
ability of Certificateholders to receive distributions in respect of the
Certificates will depend [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the Certificates should consider carefully [name such obligor]'s
financial condition and its ability to make payments in respect of such
Underlying Securities. This Prospectus Supplement relates only to the
Certificates being offered hereby and does not relate to the Underlying
Securities of [name such obligor]. All information contained in this Prospectus
Supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither the Depositor nor [any
of] the Underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.]
S-15
<PAGE>
[The Deposited Assets will also include [direct obligations of
the United States of America] [describe any assets which are ancillary or
incidental to the Underlying Securities, including hedging contracts such as
puts, calls, interest rate swaps, currency swaps, floors, caps and collars, and
any cash or other security pledged to support the Underlying Securities] (such
assets, together with the Underlying Securities, the "Deposited Assets").]
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [Class [ ]
Certificates [and the Class [ ] Certificates]], Credit Support will be obtained
[and will constitute part of the Trust to the extent provided below] to support
or ensure the [servicing and] [timely] [ultimate] distribution of amounts due
with respect to the Deposited Assets, in the form and amount described below.
[THE LETTER OF CREDIT
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Letter of Credit from [____]
(the "Letter of Credit Bank") in favor of the Trustee on behalf of the
Certificateholders. The Letter of Credit will be irrevocable and will [support
the [timely] [ultimate] remittance of amounts due with respect to the Deposited
Assets]. The maximum amount that the Trustee may draw under the Letter of Credit
will initially be equal to [____]. The initial amount of the Letter of Credit
will be [$] ___. Thereafter, the amount of the Letter of Credit with respect to
any Distribution Date will equal [the lesser of (i) ___% of the aggregate
Certificate Principal Balance outstanding on the preceding Distribution Date
(after giving effect to any payment of principal made on such preceding
Distribution Date) but in any event not less than [$] ___, and (ii)] the amount
of the Letter of Credit on preceding Distribution Date, plus [(a) reimbursement
of certain advances under the Letter of Credit and (b) recoveries on defaulted
Deposited Assets] [describe other methods]. The Letter of Credit expires on
_____, 19__. The Trustee will be obligated, in the event of a drawing on the
Letter of Credit, to pursue appropriate remedies against the Deposited Assets
and other collateral, and any realization thereon shall be paid to the Letter of
Credit Bank to the extent of any amounts owing, in the manner and priority
specified herein.]
[Add language regarding the Letter of Credit Bank with respect
to its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the Letter of Credit Bank. In
addition, to the extent that the Letter of Credit will cover payment of 20% or
more of the aggregate principal amount of the Certificates covered thereby,
provide information of financial and other matters with respect to the Letter of
Credit Bank, if necessary.]]
S-16
<PAGE>
[THE SURETY BOND
Simultaneously with the Depositor's assignment of the Deposited
Assets to the Trust, the Depositor will obtain the Surety Bond from [____] (the
"Surety") in favor of the Trustee on behalf of the Certificateholders. The
Surety Bond will guaranty [timely] [ultimate] distributions of the principal of
and premium (if any) and interest with respect to the [Offered] Class [ ]]
Certificates. The Surety Bond expires on ____, 19__. The Trustee will be
obligated,in the event of a drawing on the Surety Bond, to pursue appropriate
remedies against the Deposited Assets and other collateral, and any realization
thereon shall be paid to the Surety to the extent of any amounts owing, in the
manner and priority specified herein.
[Add language regarding the issuer of the Surety Bond with
respect to its debt ratings, activities it engages in, regulatory authorities
having jurisdiction over it and the nature of such regulation, a narrative
description of its assets, liabilities (including deposits) and equity, and
include an address for further information concerning the Surety. In addition,
to the extent that the Surety Bond will cover payment of 20% or more of the
aggregate principal amount of the Certificates covered thereby, provide
information of financial and other matters with respect to the issuer of the
Surety Bond, if necessary.]]
[RESERVE ACCOUNT
The Depositor will deposit with the Trustee on the Closing Date
cash, letters of credit and short-term investments acceptable to the Rating
Agency initially rating the Certificates in the amount of [$] ____. [Collections
with respect to the Deposited Assets not distributed with respect to the
Certificates shall be deposited in the Reserve Account.] Amounts so deposited in
such Reserve Account will be used by the Trustee to make payments of principal
of and premium (if any) and interest on the Certificates to the extent that
funds are not otherwise available. Immediately after any Distribution Date,
amounts in the Reserve Account in excess of [indicate formula] [may be paid to
the Depositor.]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms
thereof and the manner and priority in which collections thereon are allocated
to the Certificateholders of each class of the Certificates, as described
elsewhere herein.] See "Maturity and Yield Considerations" in the Prospectus.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will consist of [ ] classes of Certificates,
designated as Class [ ] [,] [and] Class [ ] [and Class ] Certificates. The
Certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The Certificates represent in the aggregate
the entire beneficial ownership interest in the related Trust. The Class [ ]
Certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]_________ (approximate) and a [__%] [Variable]
Pass-Through Rate. The Class [ ] Certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$] _____ (approximate) and
a [__%] [Variable] Pass-Through Rate. [The Class [ ] Certificates have in the
aggregate an initial [Certificate Principal Balance] [Notional Amount] of [$]
_________ (approximate) and a [ %] [Variable] Pass-Through Rate. [The Class [ ]
Certificates, which are not being offered hereby, will be transferred by the
Depositor to an affiliate on the Closing Date, and may be sold at any time by
the Depositor in accordance with the terms of the Trust Agreement.]
The Certificates [(other than the Class [ ] Certificates [and
specify others] (the "Definitive Classes"))] will be issued, maintained and
transferred on the book-entry records of DTC and its Participants in minimum
denominations of [$__] and [integral multiples thereof] [multiples of [$__] in
excess thereof]. [The Class [ ] Certificates [and specify any others] will be
offered in registered, certificated form, in minimum percentage interests
corresponding to the initial Notional Amounts or Certificate Principal Balances,
as applicable, of [$__] and integral multiples thereof, except that one
Certificate of each such class may be issued with an initial Notional Amount or
Certificate Principal Balance, as applicable, equal to an integral multiple of
[$__] plus the excess of the initial aggregate Notional Amount or Certificate
Principal Balance, as applicable, of such class over the greatest integral
multiple of [$__] that is not more than such initial aggregate Notional Amount
or Certificate Principal Balance, as applicable.]
The Certificates [(other than the Definitive Classes of
Certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by the 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
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the direction and on behalf of Participants whose holdings of such Certificates
evidence such specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose holdings of
Certificates evidence such Voting Rights, authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to [Certificate Owners]
or their nominees, respectively, rather than to DTC or its nominee, only if (i)
the 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 each class of Certificates [(other than the Definitive Classes)] and the
Depositor is unable to locate a qualified successor or (ii) the Depositor, at
its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates [(other than the
Definitive Classes of Certificates)] and receipt of instructions for
re-registration, the Trustee will reissue such Certificates as Definitive
Certificates issued in the respective principal amounts owned by the individual
owners of such Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as Certificateholders under the Trust
Agreement.
DISTRIBUTIONS
Collections on the Deposited Assets that are received by the
Trustee for a given Collection Period pursuant to the collection procedures
described herein and in the Prospectus and deposited from time to time into the
Certificate Account will be applied by the Trustee on each applicable
Distribution Date to the following distributions in the following order of
priority, solely to the extent of Available Funds (as defined below) on such
Distribution Date:
(i) to the Trustee, all unpaid fees and expenses of the Trustee
and its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
(ii) [to the providers of Credit Support ("Credit Support
Providers"), any amounts required to be paid or reimbursed to, or
deposited with, any such person (collectively, "Credit Support
Payments");
(iii)] to the Certificateholders of each Class of such Series,
first, to the payment of Required Interest [and on a pro rata basis to
the Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and third, to
the payment of Required Premium, in each case applicable to such Class,
commencing with the most highly ranked Class and, to the extent
Available Funds remain available, to each other Class in accordance with
the ranking specified herein under "-- Allocation of Losses;
Subordination";
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[(iii) to the Credit Support Providers, any Credit Support
Payments;]
[(iv)] to the Trustee, all its remaining unpaid fees and
expenses and those of its respective agents not otherwise paid pursuant
to clause (i) above;
[(v) all remaining amounts, if any, to the Depositor].
There can be no assurance that collections received from the
Deposited Assets and any applicable Credit Support relating to the Certificates
over a specified period will be sufficient, after payment of all Allowable
Expense Amounts [and payment of all amounts required to be paid to the Credit
Support Providers] for such period, to make all required distributions to the
Certificateholders of the Certificates. To the extent Available Funds are
insufficient to make any such distributions due to any such Series or Class, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of the Allowable
Expense Amount from the preceding Collection Period that have not been applied
on the Distribution Date for such preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum of (a)
all amounts received on or with respect to the Deposited Assets (including
investment income on Eligible Investments) received during the preceding
Collection Period[,] [and] (b) amounts available as of such Distribution Date
pursuant to the Credit Support described herein [and (c) any additional amount
that the [Depositor] may remit to the Trustee from time to time according to the
terms of the Trust Agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date means
[a fixed percentage] [a percentage that varies depending on [describe basis for
variable formula, such as the applicable date or other factors or indices]].
"Eligible Investments" means, with respect to the Certificates,
those investments acceptable to the Rating Agency as being consistent with the
rating of such Certificates, as specified in the Trust Agreement. Generally,
Eligible Investments must be limited to obligations or securities that mature
not later than the business day prior to the next succeeding Distribution Date.
"Required Interest" for the Certificates or any Class thereof on
any given Distribution Date means the accrued and unpaid interest on the
outstanding Certificate Principal Balance [or Notional Amount] of such
Certificates, computed at the applicable Pass-Through Rate.
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"Required Premium" for the Certificates or any Class thereof for
any Distribution Date means an amount equal to the product of (a) the Required
Principal for such Certificates on such Distribution Date and (b) the Call
Premium Percentage for such Distribution Date.
"Required Principal" for the Certificates or any Class thereof
for any Distribution Date means the amount received on the Deposited Assets
attributable to principal payments thereon during the related Collection Period,
to the extent allocable to such Certificates. The Certificate Principal Balance
of a Certificate outstanding at any time represents the maximum amount that the
holder thereof is entitled to receive as distributions allocable to principal
from the cash flow on the Underlying Securities, the other assets in the Trust
and any Credit Support obtained for the benefit of such holder. The Certificate
Principal Balance of any class of Certificates [(other than Class [ ]
Certificates)] as of any date of determination is equal to the initial
Certificate Principal Balance thereof, reduced by the aggregate of (a) all
amounts allocable to principal previously distributed with respect to such
Certificate and (b) any reductions in the Certificate Principal Balance deemed
to have occurred in connection with allocations of (i) Realized Losses allocable
to principal on the Deposited Assets and (ii) Extraordinary Trust Expenses, as
described herein. [The Notional Amount of the Class [ ] Certificates as of any
date of determination is equal to [specify amount].] [Holders of the Class [ ]
Certificates are not entitled to receive any distributions allocable to
principal.]
[Notwithstanding the priorities described above, holders of the
Class [ ] Certificates and the Class [ ] Certificates will be entitled to
receive on any Distribution Date 100% of all principal collections received in
the related Collection Period with respect to the Deposited Assets, to be
distributed [on a pro rata basis] in reduction of the Certificate Principal
Balance of the Class [ ] Certificates and the Class [ ] Certificates, if any of
the following conditions shall be satisfied: [describe conditions, if any, by
which a certain class is given 100% of the principal cash flow other than
pursuant to subordination that is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be
obligated to advance or cause to be advanced on or before each Distribution Date
its own funds, or funds in the Certificate Account that are not included in the
Available Funds for such Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are
deemed by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
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All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the Certificates.
ALLOCATION OF LOSSES; SUBORDINATION
The subordination described herein provided by the Class [ ]
Certificates [and the Class [ ] Certificates] is designed to protect holders of
the remaining classes of Certificates from certain losses and other shortfalls
with respect to the Deposited Assets. As a result, losses and other shortfalls
with respect to the Deposited Assets will be borne by the remaining classes of
Certificates, to the extent described below, only if such losses and other
shortfalls are not so covered, or the coverage in respect thereof has been
exhausted.
[Realized Losses and Extraordinary Trust Expenses will be
allocated on any Distribution Date as follows: [describe allocation among the
various classes].]
[An "Extraordinary Trust Expense" is an expense of a given Trust
in excess of the Allowable Expense Amount, including certain reimbursements to
the Depositor described in the Prospectus under "Description of Certificates --
[Certain Matters Regarding the Administrative Agent and the Depositor]" and
certain reimbursements to the Trustee described under "Description of the Trust
Agreement -- The Trustee" herein.]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the Class [ ] Certificates are subordinate to the Class
[ ] Certificates and the Class [ ] Certificates to the extent set forth herein,
the Class [ ] Certificates may not be purchased by or transferred to a Plan
except upon the delivery of an opinion of counsel as described herein. See
"ERISA Considerations."]
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DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement,
a form of which is filed as an exhibit to the Registration Statement. A Current
Report on Form 8-K relating to the Certificates containing a copy of the Trust
Agreement as executed will be filed by the Depositor with the Commission
following the issuance and sale of the Certificates. The Trust created under the
Trust Agreement (including the Series 1997-[ ] Supplement) will consist of (i)
the Deposited Assets (exclusive of any Retained Interest, which is not part of
the Trust), (ii) all payments on or collections in respect of the Deposited
Assets due after the Cut-off Date, together with any proceeds thereof[,] [and]
[(iii) any Credit Support in respect of any class or classes of Certificates]
[and (iv) the rights of the Depositor under the Purchase Agreement between the
Depositor and the Seller]. [In addition, the Certificateholders of the
Certificates may also have the benefit of certain Credit Support discussed
above. See "Description of Credit Support."] Reference is made to the Prospectus
for important information in addition to that set forth herein regarding the
Trust, the terms and conditions of the Trust Agreement and the Certificates. The
following summaries of certain provisions of the Trust Agreement do not purport
to be complete and are subject to the detailed provisions contained in the form
of Trust Agreement, to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein.
THE TRUSTEE
[____], a [___] corporation, will act as trustee for the
Certificates and the Trust pursuant to the Trust Agreement. The Trustee's
offices are located at [____] and its telephone number is [___].
The Trust Agreement will provide that the Trustee and any
director, officer, employee or agent of the Trustee will be indemnified by the
Trust and will be held harmless against any loss, liability or expense incurred
in connection with any legal action relating to the Trust Agreement or the
Certificates or the performance of the Trustee's duties under the Trust
Agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust Agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust Agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to any class of Certificates
under the Trust Agreement (an "Event of Default") will consist of [(i) a default
in the payment of any interest on any Underlying Security after the same becomes
due and payable (subject to any applicable grace period); (ii) a default in the
payment of the principal of or any installment of principal of any Underlying
Security when the same becomes due and payable; and (iii) the occurrence and
continuance of such other events specified in the applicable series supplement.]
[Describe remedies available to
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Certificateholders upon the occurrence and continuance of an Event of Default,
including, as applicable, directing the Trustee to vote the Underlying
Securities in favor of declaring the principal balance of and any accrued
interest on the Outstanding Debt Securities to be immediately due and payable].
The Trust Agreement will provide that, within 30 days after the
occurrence of an Event of Default in respect of the Certificates of any class,
the Trustee will give to the holders of such Certificates notice, transmitted by
mail, of all such uncured or unwaived Events of Default known to it. However,
except in the case of an Event of Default relating to the payment of principal
of or premium, if any, or interest on any of the Underlying Securities, the
Trustee will be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of the Certificates of such class.
No holder of any Certificate will have the right to institute
any proceeding with respect to the Trust Agreement, unless (i) such holder
previously has given to the Trustee written notice of a continuing breach, (ii)
the holders of Certificates of such Series evidencing not less than the
"Required Percentage-Remedies" specified in the applicable series supplement of
the aggregate Voting Rights of such Series have requested in writing that the
Trustee institute such proceeding in its own name as Trustee, (iii) such holder
or holders have offered the Trustee reasonable indemnity, (iv) the Trustee has
for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to the Trustee during such
15-day period by the holders of Certificates of such Series evidencing not less
than the Required Percentage-Remedies of the aggregate Voting Rights of such
Series. ["Required Percentage-Remedies" shall mean [ %] of the Voting Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [__]% of
all Voting Rights will be allocated among all holders of the Class [ ]
Certificates[,] [and] the Class [ ] Certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective Certificates and [__]% of all Voting Rights will be
allocated among all holders of the Class [ ] Certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective Certificates. [Specify whether and under what circumstances voting
will be class-by-class].
[Specify conditions, if any, under which allocation of Voting
Rights might change from the foregoing percentages]. ["Required
Percentage-Amendment" of Voting Rights necessary to consent to amendment or
modification of the Trust shall be [__%].] ["Required Percentage-Waiver" shall
mean [__%].]
VOTING OF UNDERLYING SECURITIES, MODIFICATION OF INDENTURE
The Trustee, as holder of the Underlying Securities, has the
right to vote and give consents and waivers in respect of such Underlying
Securities as permitted by DTC and except as
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otherwise limited by the Trust Agreement. In the event that the Trustee receives
a request from DTC, the Underlying Securities Trustee or the Underlying
Securities Issuer for its consent to any amendment, modification or waiver of
the Underlying Securities, [the Indenture] or any other document thereunder or
relating thereto, or receives any other solicitation for any action with respect
to the Underlying Securities, the Trustee shall mail a notice of such proposed
amendment, modification, waiver or solicitation to each Certificateholder of
record as of such date. The Trustee shall request instructions from the
Certificateholders as to whether or not to consent to or vote to accept such
amendment, modification, waiver or solicitation. The Trustee shall consent or
vote, or refrain from consenting or voting, in the same proportion (based on the
relative Certificate Principal Balances and Notional Amounts of the
Certificates, as applicable) as the Certificates of the Trust were actually
voted or not voted by the Certificateholders thereof as of a date determined by
the Trustee prior to the date on which such consent or vote is required;
provided, however, that, notwithstanding anything to the contrary, the Trustee
shall at no time vote or consent to any matter (i) unless such vote or consent
would not (based on an opinion of counsel) alter the status of the Trust as a
grantor trust for Federal income tax purposes, (ii) which would alter the timing
or amount of any payment on the Underlying Securities, including, without
limitation, any demand to accelerate the Underlying Securities, except in the
event of a Underlying Securities Event of Default or an event which with the
passage of time would become a Underlying Securities Event of Default and with
the unanimous consent of holders of all Outstanding Certificates or (iii) which
would result in the exchange or substitution of any of the outstanding
Underlying Securities pursuant to a plan for the refunding or refinancing of
such Underlying Securities except in the event of a default under the Underlying
Securities and only with the consent of Certificateholders representing 100% of
the aggregate voting rights of each outstanding Class of the Certificates. The
Trustee shall have no liability for any failure to act resulting from
Certificateholders' late return of, or failure to return, directions requested
by the Trustee from the Certificateholders.
In the event that an offer is made by the Underlying Securities
Issuer to issue new obligations in exchange and substitution for any of the
Underlying Securities, pursuant to a plan for the refunding or refinancing of
the Outstanding Debt Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders of such offer as
promptly as practicable. The Trustee must reject any such offer unless a
Underlying Securities Event of Default under the Indenture has occurred, the
Trustee is directed by the affirmative vote of all of the Certificateholders to
accept such offer and the Trustee has received the tax opinion described above.
[Accordingly, a Certificateholder generally would be required to effect a
withdrawal of Requested Underlying Securities from the Trust in order to accept
such offer. See "Description of Certificates-Optional Exchange" in the
Prospectus.]
If an event of default under the [Indenture] [Underlying
Securities] occurs and is continuing and if directed by all the holders of
outstanding Class [ ] Certificates and, unless the Class [ ] Certificates are no
longer outstanding, by the holders of all outstanding Class [ ] Certificates,]
the Trustee shall vote the Underlying Securities in favor of directing, or take
such other action as may be appropriate [to direct the Underlying Securities
Trustee] to declare the unpaid principal amount of the Underlying Securities and
any accrued and unpaid interest thereon to be due and payable. In connection
with a vote concerning whether to declare the acceleration of the Underlying
Securities,
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the Certificateholders' interests of each Class may differ and the interests of
either Class may differ from holders of other Outstanding Debt Securities.
TERMINATION
[The circumstances under which the obligations created by the
Trust Agreement will terminate in respect of the Certificates are described in
"Description of Certificates-Termination" in the Prospectus.] [Describe
additional termination provisions.] The Depositor will have the right to
purchase all remaining Deposited Assets in the Trust and thereby effect early
retirement of the Certificates on any Distribution Date, [(a)] once the
aggregate principal amount of the Deposited Assets at the time of any such
purchase is less than [10%] of the aggregate principal amount of the Deposited
Assets as of the Cut-off Date [and (b) at the option of the Depositor at
[specify when and on what terms any such option may be exercised]; provided,
however, that the right to exercise any such option is contingent on such
exercise being consistent with the Depositor's continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and interpretations
thereunder. In the event the Depositor exercises any such option, the portion of
the purchase price allocable to the Certificates of each class will be, to the
extent of available funds, [100% of their then aggregate outstanding Certificate
Principal Balance or Notional Amount, as applicable, plus with respect to the
Certificates [one month's] [three month's] [specify other period] interest
thereon at the Fixed Pass-Through Rate or the then applicable Variable
Pass-Through Rate, as the case may be, plus, with respect to each class of
Certificates, any previously accrued but unpaid interest thereon.] [Specify
alternative allocation method if different from above.] In no event will the
Trust created by the Trust Agreement for the Certificates continue beyond the
expiration of 21 years from the death of the survivor of the person or persons
named in the Trust Agreement. See "Description of Trust Agreement-Termination"
in the Prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets
or relating to the enforceability by the Certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates. Such consequences will depend
on the terms of the Certificate, whether the Trust is treated as a grantor
trust, as a partnership or a FASIT for Federal income tax purposes, and the
assets collateralizing or otherwise supporting such Certificate. The
consequences of owning Certificates which are deemed for Federal income tax
purposes to be interests in a grantor trust, in a partnership or in a FASIT are
discussed separately below under the captions ["Grantor Trust Certificates"],
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["Partnership Certificates"], and ["FASIT Certificates"], respectively. The
applicable Trust Agreement would include provisions appropriate to the
particulars of the transaction and to the relevant Federal income tax status of
the Trust and related Certificates.
This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
Certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. Investors should consult their own tax
advisors to determine the Federal, state, local and other tax consequences of
the purchase, ownership and disposition of the Certificates. [The Prospectus
Supplement for each series of Certificates will describe the consequences that
relate to the specific Certificates issued pursuant thereto.] Accordingly, this
discussion should only be read in conjunction with the discussion under "Certain
Federal Income Tax Consequences" in the Prospectus Supplement.
The Trust will be provided with an opinion of Weil, Gotshal &
Manges LLP (a limited liability partnership including professional
corporations), special Federal tax counsel to the Depositor ("Federal Tax
Counsel") regarding certain Federal income tax matters discussed below. An
opinion of Federal Tax Counsel, however, is not binding on the Internal Revenue
Service (the "Service") or the courts. Prospective investors should note that no
rulings have been or will be sought from the Service with respect to any of the
Federal income tax consequences discussed below, and no assurance can be given
that the Service will not take contrary positions.
TAX STATUS OF TRUST
In the opinion of Federal Tax Counsel, the Trust will be
classified as a grantor trust and not as an association (or publicly traded
partnership) taxable as a corporation for Federal income tax purposes.
Accordingly, each owner of a Certificate (a "Certificate Owner") will be subject
to Federal income taxation as if it owned directly the portion of the Deposited
Assets allocable to such Certificates, and as if it paid directly its share of
expenses paid by the Trust. The following discussion assumes that the Underlying
Securities were not issued with original issue discount ("OID") and,
accordingly, the Certificate Owners will not realize OID except with respect to
a "stripped interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A Certificate Owner will allocate the amount it pays
for its Certificate among the Underlying Securities and the Deposited Assets in
the Trust other than the Underlying Securities (the "other Deposited Assets")
allocable to such Certificate, in proportion to their relative
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fair market values on the date of purchase of the Certificate. A Certificate
Owner would calculate separately its income, gain, loss or deduction realized
with respect to each such asset.
The Federal income tax treatment of a holder of a particular
class of Certificates will depend upon whether the interest in the Underlying
Securities represented by such class will be considered, in whole or in part, to
be a "stripped bond" or "stripped coupon" (together, a "stripped interest")
within the meaning of Section 1286 of the Code. A class of Certificates will not
be considered to represent a stripped interest in the underlying Underlying
Securities to the extent the Certificate is entitled to receive a proportionate
amount of all principal and interest on the Underlying Securities. A class of
Certificates will be considered in its entirety to represent a stripped interest
in the underlying Underlying Securities if it is entitled to receive interest on
the Underlying Securities which is disproportionately less than the principal
which it is entitled to receive on the Underlying Securities, or if it is
entitled to receive all or part of the interest on the Underlying Securities but
no principal on the Underlying Securities. In addition, if a class of
Certificates is entitled to receive interest and principal on the Underlying
Securities, but the interest it is entitled to receive on the Underlying
Securities is disproportionately more than the principal it is entitled to
receive on the Underlying Securities, it could be argued that the Certificates
represents (a) an interest in the Underlying Securities that is not a stripped
interest to the extent it represents a proportional amount of all the principal
and interest on the Underlying Securities and (b) a stripped interest in the
Underlying Securities to the extent of any additional interest to which it is
entitled on the Underlying Securities. If a Certificate represents in part a
stripped interest and in part not a stripped interest, such interests will be
treated as two separate items for tax purposes and a purchaser of Certificates
will be required to allocate its purchase price among the two items (as well as
any other Deposited Assets) in proportion to their relative fair market values
on the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not
Stripped Interests. To the extent a class of Certificates does not represent a
stripped interest in the Underlying Securities, each Certificate Owner will be
required to report on its Federal income tax return, in a manner consistent with
its method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a Certificate Owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such Certificate Owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a
Certificate allocated to a Certificate Owner's undivided interest in a
Underlying Security is greater than or less than the portion of the principal
balance of the Underlying Security allocable to the Certificate, such interest
in the Underlying Security will have been acquired at a premium or discount, as
the case may be. In determining whether a Certificate Owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a Certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a
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separate asset, thus, in each case, reducing the portion of the purchase price
allocable to the Certificate Owner's undivided interest in the Underlying
Securities (the "allocated Purchase Price"). To the extent that the allocated
Purchase Price is less than the principal balance of an Underlying Security, the
Certificate Owner's interest in such Underlying Security will be treated as
purchased at a "market discount." The market discount on a Underlying Security
will, however, be considered to be zero if it is less than a statutorily defined
de minimis amount. Conversely, to the extent that the allocated Purchase Price
exceeds the principal balance of an Underlying Security, the Certificate Owner's
interest therein will be treated as purchased with "bond premium." See the
discussion below under "Bond Premium."
For example, if the allocated Purchase Price paid by a
Certificate Owner who purchases a Certificate in the initial public offering
were equal or almost equal to the portion of the principal balance of the
Underlying Security that is allocable to the Certificate, there would be no
significant amount of discount or premium with respect to its interest in such
Underlying Security. Moreover, if the total purchase price of a Certificate is
equal to the principal amount of the Underlying Securities allocable to the
Certificate, because a portion of such purchase price will be allocated to the
other Deposited Assets of the Trust, in the aggregate a Certificate Owner's
interest in the Underlying Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a Certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a Certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a Certificate Owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
Certificate. Any such election will also apply to all debt instruments held by
the Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of Certificates represents a stripped interest
in the underlying Underlying Securities, each such Certificate will be subject
to the OID rules. The amount of OID on a stripped interest is equal to the
excess of all amounts payable on the stripped interest (other than qualified
stated interest) over the portion of the purchase price for the Certificate
allocable to the stripped interest.
Under the Treasury regulations issued under Section 1286 of the
Code (the "Regulations"), the interest payable with respect to the stripped
interest will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on
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principal on the Underlying Securities to which the stripped interest (i.e., the
Certificate Owner) is also entitled. If none of the amounts payable to a
Certificate Owner with respect to a stripped interest constitute qualified
stated interest, then the stripped interest will have OID in an amount equal to
the excess of all payments to be received on the stripped interest over the
purchase price for the Certificate allocable to the stripped interest. Moreover,
in determining the amount paid for the stripped interest, a portion of the
purchase price for a Certificate must be allocated to the Certificate Owner's
share of other Deposited Assets and to accrued interest.
The tax treatment of a Certificate Owner will depend upon
whether the amount of OID on the stripped interest represented by the
Certificate is less than a statutorily defined de minimis amount. In general,
under the Regulations, the amount of OID with respect to the stripped interest
will be de minimis if it is less than 1/4 of one percent multiplied by the
product of the "stated redemption price at maturity" and the number of full
years remaining after the purchase date until the maturity of such stripped
interest. However, if the stripped interest provides for amortization of
principal, the amount of OID will be de minimis if it is less than 1/4 of one
percent multiplied by the product of the stated redemption price at maturity and
the weighted average maturity (i.e., the sum of the amounts obtained by
multiplying the amount of each payment under the stripped interest (other than a
payment of qualified stated interest) by a fraction, the numerator of which is
the number of complete years from the purchase date until the payment is made
and the denominator of which is the stated redemption price at maturity) of the
stripped interest. In general, "stated redemption price at maturity" means the
sum of all amounts payable on the stripped interest other than qualified stated
interest.
If the amount of OID on the stripped interest represented by the
Certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each Certificate Owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass- Through Rate on the Certificate by an amount equal to the
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Certificate. Each Certificate Owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the Certificate Owner's
holding period in the Certificate. The Certificate Owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
amounts received by a Certificate Owner from any Credit Support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a Certificate Owner would report its
share of the income of the Trust under its usual method of accounting.
Accordingly, except as described below, interest on an underlying Underlying
Security would be includible in a Certificate Owner's gross income when it
accrues on the Underlying Securities, or, in the case of Certificate Owners who
are cash basis taxpayers, when received by the Administrative Agent, if any, or
otherwise the Trustee on behalf of Certificate Owners. Because the interest
collected on the Underlying Securities generally is paid to
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Certificate Owners in the following month, the amount of interest includible in
a Certificate Owner's gross income during any calendar month will not equal the
interest distributed in that month.
If the OID with respect to the stripped interest in the
Underlying Securities represented by a Certificate is not treated as being de
minimis, a Certificate Owner will be required to include in income, in addition
to any qualified stated interest on the stripped interest as described above,
any OID on the stripped interest. OID must be included in income as it accrues
on a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such Certificate Owner prior to the receipt of cash by
such Certificate Owner. Under the rules described below, the amounts includible
in income by a Certificate Owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
In general, if a stripped interest has OID the Certificate Owner
will be required, whether such Certificate Owner uses the cash or the accrual
method of tax accounting, to include in ordinary gross income the sum of the
"daily portions" of OID on the stripped interest for all days during the taxable
year that the Certificate Owner owns the Certificate. The daily portions of OID
on a stripped interest are determined by allocating to each day in any "accrual
period" a ratable portion of the OID allocable to that accrual period. The
amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the stripped interest by a fraction, the numerator of which is the annual yield
to maturity of the stripped interest and the denominator of which is the number
of accrual periods in a year and (ii) subtracting from that product the amount
of qualified stated interest (if any) payable on the stripped interest during
(or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a Certificate Owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the
beginning of any accrual period is the purchase price for a Certificate
allocable to the stripped interest (including accrued interest, if any) (i)
increased by the amount of OID allocable to all prior accrual periods and (ii)
reduced by the amount of all payments other than qualified stated interest
payments (if any) in all prior accrual periods. In addition, if an interval
between payments of qualified stated interest contains more than one accrual
period, the adjusted issue price at the beginning of each accrual period in the
interval is increased by the amount of qualified stated interest that has
accrued prior to the first day of the accrual period but that is not payable
until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
Certificate Owners by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
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Bond Premium. In the event that a Certificate represents either
an unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
Certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the Certificateholder other than qualified
stated interest), such premium will be amortizable by the Certificate Owner as
an offset to interest income (with a corresponding reduction in the Certificate
Owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the Certificate Owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
Certificate Owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest using the constant yield method described
above, treating the instrument as having been issued on the Certificate Owner's
acquisition date at an issue price equal to such owner's adjusted basis with no
interest payments being qualified stated interest. Such an election with respect
to a unstripped or stripped interest having amortizable bond premium or market
discount would constitute, respectively, an election to apply the market
discount rules or bond premium rules with respect to all other debt instruments
with market discount or amortizable bond premium, as the case may be, of such
Certificate Owner.
Modification or Exchange of Underlying Securities. Depending
upon the circumstances, it is possible that a modification of the terms of the
Underlying Securities, or a substitution of other assets for the Underlying
Securities following a default on the Underlying Securities, would be a taxable
event to Certificate Owners on which they would recognize gain or loss.
Foreign Tax Credits. Any foreign income taxes withheld from
payments to the Trust will be includible in the income of Certificate Owners and
will likewise be deductible to Certificate Owners, or, alternatively,
Certificate Owners may be eligible for a U.S. foreign tax credit subject to
various limitations.
OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate
Owner will be entitled to deduct, consistent with its method of accounting, its
share of reasonable administrative fees, trustee fees and other fees paid or
incurred by the Trust as provided in Section 162 or 212 of the Code and any
allowable amortization deductions with respect to certain other assets of the
Trust. If a
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Certificate Owner is an individual, estate or trust, the deduction for his share
of fees will be a miscellaneous itemized deduction that may be disallowed in
whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
A Certificate Owner's tax basis in a Certificate generally will
equal the cost of such Certificate, increased by any amounts of undistributed
taxable income (e.g., OID or market discount) and reduced by any amortized
premium (each as described above) and any payments other than payments of
qualified stated interest on an underlying Underlying Security made on such
Certificate.
If a Certificate is sold, gain or loss will be recognized equal
to the difference between the proceeds of sale allocable to each of the assets
of the Trust and the Certificate Owner's adjusted basis in each of the
foregoing. Any gain or loss will be a capital gain or loss if the Certificate
was held as a capital asset, except that gain will be treated in whole or in
part as ordinary interest income to the extent of the Certificate Owner's
interest in accrued market discount not previously taken into income on
Underlying Securities.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of
the Certificates will not be subject to a "backup" withholding tax of 31%
unless, in general, the Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to Certificate Owners that are
not United States persons ("Foreign Certificate Owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such Foreign Certificate Owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." Under
such requirements, the holder must certify, under penalties of perjury, that it
is not a "United States person" and provide its name and address.
[Describe the Federal income tax consequences to Foreign
Certificate Owners of an interest in any other Deposited assets of the Trust.]
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A "United States person" means a citizen or resident of the
U.S., a corporation, partnership or other entity created or organized in or
under the laws of the U.S. or any political subdivision thereof, or an estate or
trust the income of which is includible in gross income for U.S. Federal income
tax purposes, regardless of its source or a trust with respect to which a court
within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions.]
[TAX CHARACTERIZATION OF THE TRUST
The Depositor and the Administrative Agent, if any, have agreed,
and the Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of Federal, state and local
income, franchise and any other tax measured in whole or in part by income.
However, the proper characterization of the arrangement involving the Trust, the
Certificate Owners, the Depositor and the Administrative Agent, if any, is not
entirely clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership"
it could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificate Owners could be liable for any such
tax that is unpaid by the Trust).
A publicly traded partnership is taxed in the same manner as a
corporation unless at least 90% of its gross income consists of specified types
of "qualifying income." Such qualifying income includes, among other things,
interest income not derived in the conduct of a financial or insurance business,
dividend income, and gain from the disposition of assets producing such income.
In the opinion of Federal Tax Counsel, because of the nature of the income of
the Trust, the Trust will not be a publicly traded partnership taxable as a
corporation.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal
income tax, but each Certificate Owner will be required to separately take into
account such holder's allocable share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of [___] and any
gain upon collection or disposition [___]. The Trust's deductions will consist
primarily of [___].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that each class of Certificate Owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of Certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of Certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities
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that corresponds to any excess of the principal amount of such class of
Certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of Certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the Certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all Certificate Owners, even though their Certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions
(which do not include interest expense) are subject to limitations and as a
result may be disallowed in whole or in part. Those limitations, which also
apply to estates and trusts, would apply to a Certificate Owner's share of
expenses of the Trust (including fees to the Administrative Agent, if any) and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
Certificate Owners on an aggregate basis. Were the Service to require that such
calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but the Depositor believes that there would
not be a material adverse effect on Certificate Owners.
A Certificate Owner would increase or decrease its tax basis in
its Certificate for its allocable share of the Trust's income or loss,
respectively. Any cash distributions by the Trust to a Certificate Owner will
constitute (i) first, a return of capital to the extent of such Certificate
Owner's tax basis in the Certificate (with a corresponding dollar-for-dollar
reduction in such tax basis), and (ii) thereafter, to the extent in excess
thereof, gain on the sale or exchange of such Certificate Owner's Certificate.
See "Disposition of Certificates" below.
DISCOUNT AND PREMIUM
The Depositor believes that the Underlying Securities were not
issued with original issue discount ("OID") and, therefore, the Trust should not
have OID income. However, the purchase price paid by the Trust for the
Underlying Securities may be greater or less than the remaining principal
balance of the Underlying Securities at the time of purchase. If so, the
Underlying Securities will have been acquired at a premium or discount, as the
case may be. (As indicated above, if the Trust acquires a large number of
Underlying Securities it will make this calculation on an aggregate basis, but
might be required to recompute it on an instrument-by- instrument basis.)
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The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to Certificate Owners.
MODIFICATION OR EXCHANGE OF UNDERLYING SECURITIES
Depending upon the circumstances, it is possible that a
modification of the terms of the Underlying Securities, or a substitution of
other assets for the Underlying Securities following a default on the Underlying
Securities, would be a taxable event to Certificate Owners on which they would
recognize gain or loss.
FOREIGN TAX CREDITS
Any foreign income taxes withheld from payments to the Trust
will be includible in the income of Certificate Owners and will likewise be
deductible to Certificate Owners, or, alternatively, Certificate Owners may be
eligible for a U.S. foreign tax credit subject to various limitations.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of
the Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to
terminate for Federal income tax purposes if 50% or more of the capital and
profits interests in the Trust are sold or exchanged within a 12-month period.
Were such a termination to occur, the Trust would be considered to have
contributed its assets to a new partnership and distributed the interests in the
new partnership to the Certificate Owner. If any such constructive termination
occurs, the Trust does not intend to comply with certain technical requirements
that might be applicable for various reasons including the likely lack of
relevant data. As a result, the Trust may be subject to certain tax penalties
and may incur additional expenses. Moreover, the Schedule K-1 information
thereafter distributed to the Certificate Owners may be incorrect.
DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or
other disposition of Certificates in an amount equal to the difference between
the amount realized and the seller's tax basis in the Certificates sold. A
Certificate Owner's tax basis in a Certificate will generally equal its cost,
increased by his share of Trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible Trust losses
and any distributions received with respect to
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such Certificate. In addition, both his tax basis in, and the amount realized on
a sale of, a Certificate would include the holder's share of liabilities of the
Trust. A holder acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificate and, upon
sale or other disposition of some of the Certificates, allocate a pro rata
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of computing
gain or loss on a sale of that Certificate).
On the sale of a Certificate, any gain attributable to the
holder's share of any accrued market discount on the Underlying Securities that
has not otherwise been included in the holder's income would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificate Owner is required to recognize an aggregate
amount of income (not including income attributable to disallowed itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be
determined monthly and the tax items for a particular calendar month allocable
to a particular class of Certificates will be apportioned among holders of such
Certificates in proportion to the principal amount of such Certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by
existing regulations. If such a convention is not allowed (or only applies to
transfers of less than all of a partner's interest), taxable income or losses of
the Trust might be reallocated among the Certificate Owners. The Trustee is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION
In the event that a Certificate Owner sells its Certificates at
a profit (loss), the purchasing Certificate Owner will have a higher (lower)
basis in the Certificates than the selling Certificate Owner had. The tax basis
of the Trust's assets will not be adjusted to reflect that higher (or lower)
basis unless the Trust were to file an election under Section 754 of the Code.
In order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous information
reporting requirements, the Trust will not make such election. As a result
Certificate Owners might be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
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ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of
the Trust. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the Trust will be the
calendar year. The Trustee will file a partnership information return (Internal
Revenue Service Form 1065) with the Service for each taxable year of the Trust
and will report each Certificate Owner's allocable share of items of Trust
income and expense to holders and the Service on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties, unless the
holder notifies the Service of all such inconsistencies.
Under Code Section 6031, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Depositor, as the tax matters partner, will be responsible
for representing the Certificate Owners in any dispute with the Service. The
Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificate Owners and, under certain circumstances, a Certificate Owner may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificate Owner's
returns and adjustments of items not related to the income (or loss) of the
Trust.
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TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. [Although it is not expected that the Trust would be engaged
in a trade or business in the United States for such purposes, the Trust expects
to withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign Certificate
Owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
[Each foreign holder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign holder must
obtain a taxpayer identification number from the Service and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.]
[The foregoing summary will be modified, as necessary, to
reflect differences caused by the precise nature of the Deposited Assets
relating to a given Series of Certificates.]
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of
the Certificates will not be subject to a "backup" withholding tax of 31%
unless, in general, the Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
[TAX CHARACTERIZATION OF THE TRUST; FASIT
Upon the proposed issuance of Certificates representing
interests in a FASIT and the promulgation of Treasury regulations relating to
the federal income taxation of FASITs and to the federal income tax consequences
of the ownership of FASIT interests, the prospectus supplement relating to such
Certificates will describe the requirements for the classification of the Trust
as a FASIT and the consequences to a holder of owning such Certificates.]
S-39
<PAGE>
[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given Series of Certificates or the degree of servicing required with respect
to such Deposited Assets.]]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing
in a Certificate, a Plan fiduciary should determine whether such an investment
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its investment policy and the composition of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering an investment in Certificates should also consider whether such an
investment might constitute or give rise to a non-exempt prohibited transaction
under ERISA or the Code.
An investment in Certificates by a Plan might result in the
assets of the Trust being deemed to constitute Plan assets which, in turn, might
mean that certain aspects of such investment, including the operation of the
Trust, might be non-exempt prohibited transactions under ERISA and the Code.
Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may include an interest in the underlying assets
of an entity (such as a trust) for certain purposes, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Regulation states that a beneficial interest in a
trust is an equity interest. Thus, if a Plan acquired a Certificate of a
particular class the Plan might be considered to own its share of the underlying
assets of the Trust unless, among other exceptions set forth in the Regulation,
(1) such Certificate is a "publicly-offered security" or (2) equity
participation by benefit plan investors in each class of equity interests is not
"significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, and (3) either is (A) part of a class of securities registered
under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the Plan as a
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act
S-40
<PAGE>
within 120 days (or such later time as may be allowed by the Commission) after
the end of the fiscal year of the issuer during which such public offering
occurred. The Depositor does not anticipate that the Certificates of any class
will be considered publicly-offered securities within the meaning of the
Regulation.
Participation by benefit plan investors in any class of
Certificates would not be significant if, immediately after the most recent
acquisition of any equity interest in the Trust (whether or not from the
Depositor or an Agent or Underwriter), less than 25 percent of the value of each
class of equity interest were held by benefit plan investors, which are defined
as Plans and employee benefit plans not subject to ERISA (for example,
governmental plans). For purposes of such less than 25 percent limit, the value
of any equity interests held by a person (other than a benefit plan investor)
who has discretionary authority or provides investment advice for a fee with
respect to the assets of the entity, or any affiliate thereof, shall be
disregarded. There can be no assurance that less than 25 percent of the value of
any given class of Certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
Certificate, the acquisition of the Certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
Certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95- 60
(an exemption for certain transactions involving insurance company general
accounts) and PTCE 96-23 (an exemption for certain in-house asset managers).
Any Plan acquiring Certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of Certificates. In addition, any Plan acquiring Certificates shall
be deemed to have represented that its acquisition and holding of Certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the Certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a Certificate.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement, dated as of [____], 199[_] (the "Underwriting
Agreement"), the Depositor has agreed to sell and [Lehman Brothers Inc. (an
affiliate of the Depositor)] [each of the Underwriters named below, including
Lehman Brothers Inc. (an affiliate of the Depositor)] (the "Underwriter[s]")[,]
has [severally] agreed
S-41
<PAGE>
to purchase, the [Certificates] [the principal amount of each class of
Certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
Lehman Brothers Inc................ $ $ $
Total........................... $ $ $
============ =========== ===========
[Lehman Brothers Inc. has] [The several Underwriters have] agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all Certificates offered hereby if any of such Certificates are purchased. [In
the event of default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.]
The Depositor has been advised by the Underwriter[s] that [it]
[they] propose[s] to offer the Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriter[s] may effect such transactions by selling Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter[s] and
any purchasers of Certificates for whom they may act as agents. The
Underwriter[s] and any dealers that participate with the Underwriter[s] in the
distribution of Certificates may be deemed to be underwriters, and any profit on
the resale of Certificates by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Underwriting Agreement provides that the Depositor will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments the
Underwriter[s] may be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of the Depositor, and
the participation by Lehman Brothers Inc. in the offering of the Certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's)] [Moody's Investors
Service, Inc. ("Moody's")] [Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")] (the Rating [Agency]
[Agencies]"). The ratings address the likelihood of the receipt by the
Certificateholders of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Deposited Assets and any
S-42
<PAGE>
providers of Credit Support, as well as on the relative priorities of the
Certificateholders of each class of the Certificates with respect to collections
and losses with respect to the Deposited Assets. The rating on the Certificates
does not, however, constitute a statement regarding the occurrence or frequency
of redemptions or prepayments on, or extensions of the maturity of, the
Deposited Assets, the corresponding effect on yield to investors, or whether
investors in the Class [ ] Certificates [specify class with Notional Amount] may
fail to recover fully their initial investment.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of any other security rating.
The Depositor has not requested a rating on the Certificates
by any rating agency other than the Rating [Agency] [Agencies]. However, there
can be no assurance as to whether any other rating agency will rate the
Certificates, or, if it does, what rating would be assigned by any such other
rating agency. A rating on the Certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned to the Certificates by
the Rating [Agency] [Agencies].
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be
passed upon for the Depositor and the Underwriter[s] by [Weil, Gotshal & Manges
LLP, New York, New York].
S-43
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
LEHMAN ABS CORPORATION
DEPOSITOR
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time to
time in one or more series (each a "Series") and in one or more classes within
each such Series (each a "Class"), denominated in dollars or one or more foreign
or composite currencies, including the European Currency Unit ("ECU").
Certificates of each respective Series and Class will be offered on terms to be
determined at the time of sale as described in the related Prospectus Supplement
accompanying the delivery of this Prospectus. Certificates may be sold for
United States dollars or for one or more foreign or composite currencies, and
the principal of, premium on, if any, and any interest to be distributed in
respect of Certificates may be payable in United States dollars or in one or
more foreign or composite currencies. Each Series and Class of Certificates may
be issuable as individual securities in registered form without coupons
("Registered Certificates") or in bearer form with or without coupons attached
("Bearer Certificates") or as one or more global securities in registered or
bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
or a pool of such debt securities (the "Underlying Securities"), together with
certain other assets described herein and in the related Prospectus Supplement
(such assets, together with the Underlying Securities, the "Deposited Assets"),
to be deposited in a trust (the "Trust") for the benefit of holders of
Certificates of such Series ("Certificateholders") by Lehman ABS Corporation
(the "Depositor") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Depositor, the administrative agent, if any (the "Administrative Agent") and the
trustee (the "Trustee") named in the related Prospectus Supplement. The
Underlying Securities will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor), and will not be
acquired from the issuer thereof as part of any distribution by or pursuant to
any agreement with such issuer. Each of the Underlying Securities discussed
herein and in the related Prospectus Supplement represents an obligation issued
by or guaranteed by one or more foreign governments, foreign political
subdivisions or agencies or instrumentalities thereof. If so specified in the
related Prospectus Supplement, the Trust for a Series of Certificates may also
include, or the Certificateholders of such Certificates may have the benefit of,
any combination of insurance policies, letters of credit, reserve accounts and
other types of rights or assets designed to support or ensure the servicing and
distribution of amounts due in respect of the Deposited Assets (collectively,
"Credit Support"). See "Description of Certificates" and "Description of
Deposited Assets and Credit Support."
Each Class of Certificates of any Series will represent the right, which may be
senior to those of one or more of the other Classes of such Series, to receive
specified portions of payments of principal, interest and certain other amounts
on the Deposited Assets in the manner described herein and in the related
Prospectus Supplement. A Series may include two or more Classes differing as to
the timing, sequential order or amount of distributions of principal, interest
or premium and one or more Classes within such Series may be subordinated in
certain respects to other Classes of such Series.
LEHMAN BROTHERS
December 12, 1997
<PAGE>
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 specified in the applicable Prospectus Supplement, with respect to a
Series of Certificates will be pursuant to its contractual administrative
obligations and, only as and to the extent provided in the related Prospectus
Supplement, its obligation to make certain cash advances in the event of payment
delinquencies on the Deposited Assets. See "Description of the Trust
Agreement--Advances in Respect of Delinquencies."
The Certificates of each Series will not represent an obligation of or interest
in the 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 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters, through
dealers or agents or directly to purchasers, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
2
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates
to be offered thereby and hereby will set forth, among other things, the
following with respect to such Series: (a) the specific designation and
aggregate principal amount or, if applicable, notional amount (b) the currency
or currencies in which the principal (the "Specified Principal Currency"),
premium, if any (the "Specified Premium Currency"), and any interest (the
"Specified Interest Currency") are distributable (the Specified Principal
Currency, the Specified Premium Currency and the Specified Interest Currency
being collectively referred to as the "Specified Currency"), (c) the number of
Classes of such Series and, with respect to each Class of such Series, its
designation, aggregate principal amount or, if applicable, notional amount and
authorized denominations, (d) certain information concerning the type,
characteristics and specifications of the Deposited Assets and any Credit
Support for such Series or Class, (e) the relative rights and priorities of each
such Class (including the method for allocating collections from the Deposited
Assets to the Certificateholders of each Class and the relative ranking of the
claims of the Certificateholders of each Class to such Deposited Assets), (f)
the name of the Trustee and the Administrative Agent, if any, for such Series,
(g) the Pass Through Rate (as defined below) or the terms relating to the
applicable method of calculation thereof, (h) the time and place of distribution
(each such date, a "Distribution Date") of any interest, premium (if any) and/or
principal (if any), (i) the date of issue, (j) the Final Scheduled Distribution
Date (as defined below), if applicable, (k) the offering price, (l) any
exchange, whether mandatory or optional, the redemption terms and any other
specific terms of Certificates of each such Series or Class. See "Description of
Certificates--General" for a listing of other items that may be specified in the
applicable Prospectus Supplement.
AVAILABLE INFORMATION
Each Trust is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith the Depositor files on behalf of each Trust reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports with respect to each Trust and other information
concerning each Trust can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a site on the World Wide Web
(the "Web") at "http://www.sec.gov" at which users can view and download copies
of reports, proxy, information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The Depositor does not intend to send any financial reports to
Certificateholders.
3
<PAGE>
Reports and other information concerning each Trust can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
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 prior to and subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Certificates shall be deemed to be incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to
whom a copy of this Prospectus is delivered, on the written or oral request of
any such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Secretary of Lehman ABS Corporation, 3
World Financial Center, New York, New York 10285. Telephone requests for such
copies should be directed to the Secretary of Lehman ABS Corporation at (212)
526-5594.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus
Supplement, unless and until Definitive Certificates (as defined below) are
issued, on each Distribution Date unaudited reports containing information
concerning the related Trust will be prepared by the related Trustee and sent on
behalf of each Trust only to Cede & Co. ("Cede"), as nominee of DTC and
registered holder of the Certificates. See "Description of Certificates--Global
Securities" and "Description of the Trust Agreement--Reports to
Certificateholders; Notice." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Depositor, on behalf of each Trust, will cause to be filed with the
Commission such periodic reports as are required under the Exchange Act.
4
<PAGE>
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the
Specified Principal Currency for such Certificate. Currently, there are limited
facilities in the United States for conversion of U.S. dollars into foreign
currencies and vice versa, and banks do not currently offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested by a prospective purchaser of a Certificate having a Specified
Principal Currency other than U.S. dollars, Lehman Brothers Inc. (the "Offering
Agent") will arrange for the exchange of U.S. dollars into such Specified
Principal Currency to enable the purchaser to pay for such Certificate. Such
request must be made on or before the fifth Business Day (as defined below)
preceding the date of delivery of such Certificate or by such later date as is
determined by the Offering Agent. Each such exchange will be made by the
Offering Agent on such terms and subject to such conditions, limitations and
charges as the Offering Agent may from time to time establish in accordance with
its regular foreign exchange practice. All costs of exchange will be borne by
the purchaser.
References herein to "U.S. dollars," "U.S.$," USD, "dollar" or
"$" are to the lawful currency of the United States.
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or
Class within such Series) of Certificates prior to the issuance thereof, and
there can be no assurance that a secondary market will develop or, if it does
develop, that it will provide Certificateholders with liquidity of investment or
will continue for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement
may set forth certain legal considerations that are applicable to a specific
Series (or Class or Classes within such Series) of Certificates being offered in
connection with that Prospectus Supplement or the assets deposited in or
assigned to the related Trust.
Limited Obligations and Interests. The Certificates will not
represent a recourse obligation of or interest in the 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 Trust, 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
5
<PAGE>
funds for such repurchases. Unless otherwise specified in the applicable
Prospectus Supplement, 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 (including acceleration resulting from any default
or rescheduling resulting from any moratorium or similar circumstance with
respect to a Underlying Securities Issuer (as defined below)) and the manner and
priority in which collections from such Underlying Securities and any other
Deposited Assets are allocated to each Class of such Series. Certain of these
factors may be influenced by a variety of accounting, tax, economic, social,
political and other factors. The related Prospectus Supplement will discuss any
calls, puts or other redemption options, any extension of maturity provisions
and certain other terms applicable to such Underlying Securities and any other
Deposited Assets. See "Maturity and Yield Considerations."
Tax Considerations. The Federal income tax consequences of the
purchase, ownership and disposition of the Certificates and the tax treatment of
the Trust will depend on the specific terms of the Certificates, the Trust, any
Credit Support and the Deposited Assets. See the description under "Certain
Federal Income Tax Consequences" in the related Prospectus Supplement.
Purchasers of the Certificates may also be affected by the tax treatment of the
Underlying Securities by the relevant issuing government.
Ratings of the Certificates. At the time of issue, the
Certificates of any given Series (or each Class of such Series that is offered
hereby) will be rated in one of the investment grade categories recognized by
one or more nationally recognized rating agencies (a "Rating Agency"). Unless
otherwise specified in the applicable Prospectus Supplement, the rating of any
Series or Class of Certificates is based primarily on the related Deposited
Assets and any Credit Support and the relative priorities of the
Certificateholders of such Series or Class to receive collections from, and to
assert claims against, the Trust with respect to such Deposited Assets and any
Credit Support. The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does
6
<PAGE>
not comment as to market price or suitability for a particular investor. There
can be no assurance that the rating will remain for any given period of time or
that the rating will not be lowered or withdrawn entirely by the Rating Agency
if in its judgment circumstances in the future so warrant. Any Class or Classes
of a given Series of Certificates may not be offered pursuant to this
Prospectus, in which case such Class or Classes may or may not be rated in an
investment grade category by a Rating Agency.
Global Securities. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series (or, if more than one
Class exists, each Class of such Series) will initially be represented by one or
more Global Securities deposited with, or on behalf of, a Depositary (as defined
below) and will not be issued as individual Definitive Certificates to the
purchasers of such Certificates. Consequently, unless and until such individual
Definitive Certificates of a particular Series or Class are issued, such
purchasers will not be recognized as Certificateholders under the Trust
Agreement. Hence, until such time, such purchasers will only be able to exercise
the rights of Certificateholders indirectly through the Depositary and its
respective participating organizations and, as a result, the ability of any such
purchaser to pledge that Certificate to persons or entities that do not
participate in the Depositary's system, or to otherwise act with respect to such
Certificate, may be limited. See "Description of Certificates--Global
Securities" and "Limitations on Issuance of Bearer Certificates" and any further
description contained in the related Prospectus Supplement.
Foreign Government Issuer. The Underlying Securities will
include obligations of, or guaranteed by, foreign governments, foreign political
subdivisions, or agencies and instrumentalities thereof (each such issuer and
guarantor, if any, sometimes referred to herein as a "Foreign Government Issuer"
and a "Foreign Government Guarantor," respectively; and collectively referred to
as "Foreign Governments"). Consequently, it may be difficult for the applicable
Trust as a holder of the Underlying Securities to obtain or realize upon
judgments in the United States against such obligor. In the absence of a waiver
of immunity by a Foreign Government, it would not be possible to obtain a United
States judgment against such Foreign Government unless a court were to determine
that such issuer is not entitled under the Sovereign Immunities Act of 1976 (the
"Immunities Act") to sovereign immunity with respect to such action. Even if
such an issuer is amenable to suit in the United States, the enforceability of
any judgment obtained may be limited by a lack of substantial assets which can
be levied upon in the United States or the inability to obtain recognition and
enforcement of the judgment in the issuer's country. Because the Underlying
Securities represent direct or indirect obligations of foreign governments,
Certificateholders should consider the political, economic and other risks
attendant on holding the obligations of a foreign government which are not
typically associated with an investment in securities of a domestic issuer. Such
risks include future political and economic developments, governmental
repudiation, moratorium on payment or rescheduling of external debts,
confiscatory taxation, imposition of any withholding tax, exchange rate
fluctuations, political or social instability or diplomatic developments and the
imposition of additional governmental laws or restrictions. While a Foreign
Government Issuer may make certain information available by filing periodic
reports and other information with the Commission, such information
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(including financial information) may differ in timing, form and substance from
that normally available with respect to domestic issuers.
Currency Risks. The Certificates of any given Series (or Class
within such Series) may be denominated in a currency other than U.S. dollars to
the extent specified in the applicable Prospectus Supplement. This Prospectus
does not describe all the risks of an investment in such Certificates, and the
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." In addition, there are certain
risks associated with Underlying Securities denominated in a currency other than
the local currency of a Foreign Government. Governments have from time to time
imposed, and may in the future impose, exchange controls that could affect the
availability of a currency for making distributions in respect of Underlying
Securities denominated in such currency.
Passive Nature of the Trust. The Trustee with respect to any
Series of Certificates will hold the Deposited Assets for the benefit of the
Certificateholders. Each Trust will generally hold the related Deposited Assets
to maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any Underlying Securities Issuer or the value of the
Deposited Assets. Under certain circumstances the holders of the Certificates
may direct the Trustee to dispose of the Underlying Securities or take certain
other actions in respect of the Deposited Assets.
In addition, the Prospectus Supplement for each Series of
Certificates will set forth information regarding additional risk factors, if
any, applicable to such Series (and each Class within such Series).
THE 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 Company 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
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Depositor may not issue any securities which would result in the lowering of the
then current ratings of the outstanding Certificates of any Series.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus
Supplement, the net proceeds to be received from the sale of each Series or
Class of Certificates (whether or not offered hereby) will be used by the
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
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from other sources available for such purposes. See "Description of the Trust
Agreement -- Advances in Respect of Delinquencies."
Unless otherwise provided in the related Prospectus
Supplement, each Trust will consist of (i) such Deposited Assets, or interests
therein, exclusive of any interest in such assets (the "Retained Interest")
retained by the 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.
MATURITY AND YIELD CONSIDERATIONS
Each Prospectus Supplement will, to the extent applicable,
contain information with respect to the type and maturities of the related
Underlying Securities and the terms, if any, upon which such Underlying
Securities may be subject to early redemption (either by the applicable obligor
or pursuant to a third-party call option), repayment (at the option of the
holders thereof) or extension of maturity. The provisions of the Underlying
Securities with respect to the foregoing will, unless otherwise specified in the
applicable Prospectus Supplement, affect the weighted average life of the
related Series of Certificates.
The effective yield to holders of the Certificates of any
Series (and Class within such Series) may be affected by certain aspects of the
Deposited Assets or any Credit Support or the manner and priorities of
allocations of collections with respect to such Deposited Assets between the
Classes of a given Series. With respect to any Series of Certificates the
Underlying Securities of which consist of one or more redeemable securities,
extendable securities or securities subject to a third-party call option, the
yield to maturity of such Series (or Class within such Series) may be affected
by any optional or mandatory redemption or repayment or extension of the related
Underlying Securities prior to the stated maturity thereof. A variety of
political, economic, social, tax, accounting and other factors influence whether
a Foreign Government will exercise any right of redemption in respect of its
securities. All else remaining equal, if prevailing interest rates fall
significantly below the interest rates on the related Underlying Securities, the
likelihood of redemption
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would be expected to increase. There can be no certainty as to whether any
Underlying Security redeemable at the option of a Foreign Government will be
repaid prior to its stated maturity.
Unless otherwise specified in the related Prospectus
Supplement, each of the Underlying Securities will be subject to acceleration
upon the occurrence of certain Underlying Security Events of Default (as defined
below). The maturity and yield on the Certificates will be affected by any early
repayment of the Underlying Securities as a result of the acceleration of the
Outstanding Debt Securities by the holders thereof. See "Description of the
Deposited Assets -- Underlying Securities." If a Foreign Government Issuer or
Foreign Government Guarantor, as applicable, repudiates or places any limitation
or moratorium on the payment of external indebtedness or imposes any
confiscatory or withholding tax, the timing and amount of payments on the
Certificates may be materially and adversely affected. A variety of factors
could influence a Foreign Government's willingness or ability to satisfy its
obligations under the related Underlying Securities, and no assurance can be
given as to the probability of a moratorium or other action affecting any
Underlying Security.
The extent to which the yield to maturity of such Certificates
may vary from the anticipated yield due to the rate and timing of payments on
the Deposited Assets will depend upon the degree to which they are purchased at
a discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series (or Class) of Certificates
will also be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such Certificates, to the extent that the
Pass-Through Rate (as defined below) for such Series (or Class) is based on
variable or adjustable interest rates. With respect to any Series of
Certificates representing an interest in a pool of foreign government debt
securities, disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled maturity or
upon early redemption) on the related Underlying Securities having interest
rates higher or lower than the then applicable Pass-Through Rates applicable to
such Certificates may affect the yield thereon.
A variety of economic, social, political, tax, accounting and
other factors may affect the degree to which any of the Underlying Securities
are redeemed or called (whether by the applicable obligor or pursuant to a
third-party call option) or the maturity of such Underlying Securities is
extended, as specified in the related Prospectus Supplement. There can be no
assurance as to the rate or likelihood of redemption, third-party call or
extension of maturity, in each case to the extent applicable, of any Underlying
Security. The applicable Prospectus Supplement will, to the extent available,
provide further information with respect to any such experience applicable to
the related Underlying Securities. In addition, the Prospectus Supplement for
each Series of Certificates will set forth additional information regarding
yield and maturity considerations applicable to such Series (and each Class
within such Series) and the related Deposited Assets, including the applicable
Underlying Securities.
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DESCRIPTION OF CERTIFICATES
Each Series (or, if more than one Class exists, the Classes
within such Series) of Certificates will be issued pursuant to a Trust Agreement
and a separate series supplement thereto among the 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
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any Underlying Security which at the time of such deposit represents a
significant portion of all such Deposited Assets and any related Credit Support,
certain information concerning the terms of each such Underlying Security, the
identity of the issuer thereof and where publicly available information
regarding such issuer may be obtained); (iv) the limit, if any, upon the
aggregate principal amount or notional amount, as applicable, of each Class
thereof; (v) the dates on which or periods during which such Series or Classes
within such Series may be issued (each, an "Original Issue Date"), the offering
price thereof and the applicable Distribution Dates on which the principal, if
any, of (and premium, if any, on) such Series or Classes within such Series will
be distributable; (vi) if applicable, the relative rights and priorities of each
such Class (including the method for allocating collections from and defaults or
losses on the Deposited Assets to the Certificateholders of each such Class);
(vii) whether the Certificates of such Series or each Class within such Series
are Fixed Rate Certificates or Floating Rate Certificates (each as defined
below) and the applicable interest rate (the "Pass-Through Rate") for each such
Class, including the applicable rate, if fixed (a "Fixed Pass-Through Rate"), or
the terms relating to the particular method of calculation thereof applicable to
such Series or each Class within such Series, if variable (a "Variable
Pass-Through Rate"); the date or dates from which such interest will accrue; the
applicable Distribution Dates on which interest, principal and premium, in each
case as applicable, on such Series or Class will be distributable and the
related Record Dates (as defined in the related Prospectus Supplement), if any;
(viii) the option, if any, of any Certificateholder of such Series or Class to
withdraw a portion of the assets of the Trust in exchange for surrendering such
Certificateholder's Certificate or of the Depositor or Administrative Agent, if
any, or another third party to purchase or repurchase any Deposited Assets (in
each case to the extent not inconsistent with the Depositor's continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 under
the Investment Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder) and the periods within which or the dates on which,
and the terms and conditions upon which any such option may be exercised, in
whole or in part; (ix) the rating of each Series or each Class within such
Series offered hereby (provided, however, that one or more Classes within such
Series not offered hereunder may be unrated or may be rated below investment
grade); (x) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which such Series or Class within such Series will
be issuable; (xi) whether the Certificates of any Class within a given Series
are to be entitled to (1) principal distributions, with disproportionate,
nominal or no interest distributions, or (2) interest distributions, with
disproportionate, nominal or no principal distributions ("Strip Certificates"),
and the applicable terms thereof; (xii) whether the Certificates of such Series
or of any Class within such Series are to be issued as Registered Certificates
or Bearer Certificates or both and, if Bearer Certificates are to be issued,
whether coupons ("Coupons") will be attached thereto; whether Bearer
Certificates of such Series or Class may be exchanged for Registered
Certificates of such Series or Class and the circumstances under which and the
place or places at which any such exchanges, if permitted, may be made; (xiii)
whether the Certificates of such Series or of any Class within such series are
to be issued in the form of one or more Global Securities and, if so, the
identity of the Depositary (as defined below), if other than The Depository
Trust Company, for such Global Security or Securities; (xiv) if a temporary
Certificate is to be issued with respect to such Series or any Class within such
Series, whether any interest thereon distributable on a Distribution Date prior
to the issuance of a definitive Certificate of such Series or Class will be
credited to the account of the persons entitled thereto on
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such Distribution Date; (xv) if a temporary Global Security is to be issued with
respect to such Series or Class, the terms upon which beneficial interests in
such temporary Global Security may be exchanged in whole or in part for
beneficial interests in a definitive Global Security or for individual
Definitive Certificates (as defined below) of such Series or Class and the terms
upon which beneficial interests in a definitive Global Security, if any, may be
exchanged for individual Definitive Certificates of such Series or Class; (xvi)
if other than U.S. dollars, the Specified Currency applicable to the
Certificates of such Series or Class for purposes of denominations and
distributions on such Series or each Class within such Series and the
circumstances and conditions, if any, when such Specified Currency may be
changed, at the election of the Depositor or a Certificateholder, and the
currency or currencies in which any principal of or any premium or any interest
on such Series or Class are to be distributed pursuant to such election; (xvii)
any additional Administrative Agent Termination Events (as defined below), if
applicable, provided for with respect to such Class; (xviii) all applicable
Required Percentages and Voting Rights (each as defined below) relating to the
manner and percentage of votes of Certificateholders of such Series and each
Class within such Series required with respect to certain actions by the
Depositor or the applicable Administrative Agent, if any, or Trustee under the
Trust Agreement or with respect to the applicable Trust; and (xix) any other
terms of such Series or Class within such Series of Certificates not
inconsistent with the provisions of the Trust Agreement relating to such Series.
Unless otherwise indicated in the applicable Prospectus
Supplement, Certificates of each Series (including any Class of Certificates not
offered hereby) will be issued only as Registered Certificates in denominations
of $1,000 and any integral multiple thereof and will be payable only in U.S.
dollars (Section 5.01). The authorized denominations of Registered Certificates
of a given Series or Class within such Series having a Specified Currency other
than U.S. dollars will be set forth in the applicable Prospectus Supplement.
The United States Federal income tax consequences and the
consequences of the Employee Retirement Income Security Act of 1974, as amended,
relating to any Series or any Class within such Series of Certificates will be
described in the applicable Prospectus Supplement. Furthermore, after September
1, 1997 an election may be made to treat a Trust as a "financial asset
securitization investment trust" ("FASIT"). To date, Treasury regulations have
not been issued describing the federal income tax consequences to holders of
interests in FASIT's of owning such interests. The Prospectus Supplement
relating to any Class or Series of Certificates representing interests in a
FASIT will describe the federal income tax consequences of the purchase and
ownership of such Certificates. In addition, any risk factors, the specific
terms and other information with respect to the issuance of any Series or Class
within such Series of Bearer Certificates or Certificates on which the principal
of and any premium and interest are distributable in a Specified Currency other
than U.S. dollars will be described in the applicable Prospectus Supplement
relating to such Series or Class. Unless otherwise specified in the applicable
Prospectus Supplement, the U.S. dollar equivalent of the public offering price
or purchase price of a Certificate having a Specified Principal Currency other
than U.S. dollars will be determined on the basis of the noon buying rate in New
York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Specified Principal Currency on
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the applicable issue date. As specified in the applicable Prospectus Supplement,
such determination will be made by the Depositor, the Trustee, the
Administrative Agent, if any, or an agent thereof as exchange rate agent for
each Series of Certificates (the "Exchange Rate Agent").
Unless otherwise provided in the applicable Prospectus
Supplement, Registered Certificates may be transferred or exchanged for like
Certificates of the same Series and Class at the corporate trust office or
agency of the applicable Trustee in the City and State of New York, subject to
the limitations provided in the Trust Agreement, without the payment of any
service charge, other than any tax or governmental charge payable in connection
therewith (Section 5.04). Bearer Certificates will be transferable by delivery.
Provisions with respect to the exchange of Bearer Certificates will be described
in the applicable Prospectus Supplement. Unless otherwise specified in the
applicable Prospectus Supplement, Registered Certificates may not be exchanged
for Bearer Certificates. The Depositor may at any time purchase Certificates at
any price in the open market or otherwise. Certificates so purchased by the
Depositor may, at the discretion of the Depositor, be held or resold or
surrendered to the Trustee for cancellation of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and
interest on the Certificates of each Series (and Class within such Series) will
be made in the Specified Currency for such Certificates by or on behalf of the
Trustee on each Distribution Date as specified in the related Prospectus
Supplement and the amount of each distribution will be determined as of the
close of business on the date specified in the related Prospectus Supplement
(the "Determination Date"). If the Specified Currency for a given Series or
Class within such Series is other than U.S. dollars, the Administrative Agent,
if any, or otherwise the Trustee will (unless otherwise specified in the
applicable Prospectus Supplement) arrange to convert all payments in respect of
each Certificate of such Series or Class to U.S. dollars in the manner described
in the following paragraph. The Certificateholder of a Registered Certificate of
a given Series or Class within such Series denominated in a Specified Currency
other than U.S. dollars may (if the applicable Prospectus Supplement and such
Certificate so indicate) elect to receive all distributions in respect of such
Certificate in the Specified Currency by delivery of a written notice to the
Trustee and Administrative Agent, if any, for such Series not later than fifteen
calendar days prior to the applicable Distribution Date, except under the
circumstances described under "Currency Risks -- Payment Currency" below. Such
election will remain in effect until revoked by written notice to such Trustee
and Administrative Agent, if any, received by each of them not later than
fifteen calendar days prior to the applicable Distribution Date.
Unless otherwise specified in the applicable Prospectus
Supplement, in the case of a Registered Certificate of a given Series or Class
within such Series having a Specified Currency other than U.S. dollars, the
amount of any U.S dollar distribution in respect of such Registered Certificate
will be determined by the Exchange Rate Agent based on the highest firm bid
quotation expressed in U.S. dollars received by the Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable Distribution Date (or, if no such rate is quoted
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on such date, the last date on which such rate was quoted), from three (or, if
three are not available, then two) recognized foreign exchange dealers in The
City of New York (one of which may be the Offering Agent and another of which
may be the Exchange Rate Agent) selected by the Exchange Rate Agent, for the
purchase by the quoting dealer, for settlement on such Distribution Date, of the
aggregate amount payable in such Specified Currency on such payment date in
respect of all Registered Certificates. All currency exchange costs will be
borne by the Certificateholders of such Registered Certificates by deductions
from such distributions. If no such bid quotations are available, such
distributions will be made in such Specified Currency, unless such Specified
Currency is unavailable due to the imposition of exchange controls or to other
circumstances beyond the Depositor's control, in which case such distributions
will be made as described under "Currency Risks -- Payment Currency" below. The
applicable Prospectus Supplement will specify such information with respect to
Bearer Certificates.
Unless otherwise provided in the applicable Prospectus
Supplement and except as provided in the succeeding paragraph, distributions
with respect to Certificates will be made (in the case of Registered
Certificates) at the corporate trust office or agency of the Trustee specified
in the applicable Prospectus Supplement in The City of New York or (in the case
of Bearer Certificates) at the principal London office of the applicable
Trustee; provided, however, that any such amounts distributable on the final
Distribution Date of a Certificate will be distributed only upon surrender of
such Certificate at the applicable location set forth above (Sections 4.01 and
9.01). Except as otherwise provided in the applicable Prospectus Supplement, no
distribution on a Bearer Certificate will be made by mail to an address in the
United States or by wire transfer to an account maintained by the
Certificateholder thereof in the United States.
Unless otherwise specified in the applicable Prospectus
Supplement, distributions on Registered Certificates in U.S. dollars will be
made, except as provided below, by check mailed to the Registered
Certificateholders of such Certificates (which, in the case of Global
Securities, will be a nominee of the Depositary); provided, however, that, in
the case of a Series or Class of Registered Certificates issued between a Record
Date (as defined below) and the related Distribution Dates, interest for the
period beginning on the issue date for such Series or Class and ending on the
last day of the interest accrual period ending immediately prior to or
coincident with such Distribution Date will, unless otherwise specified in the
applicable Prospectus Supplement, be distributed on the next succeeding
Distribution Date to the Registered Certificateholders of the Registered
Certificates of such Series or Class on the related Record Date. A
Certificateholder of $10,000,000 (or the equivalent thereof in a Specified
Principal Currency other than U.S. dollars) or more in aggregate principal
amount of Registered Certificates of a given Series shall be entitled to receive
such U.S. dollar distributions by wire transfer of immediately available funds,
but only if appropriate wire transfer instructions have been received in writing
by the Trustee for such Series not later than fifteen calendar days prior to the
applicable Distribution Date. Simultaneously with the election by any
Certificateholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such Certificateholder shall provide appropriate
wire transfer instructions to the Trustee for such Series, and all such payments
will be made by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States.
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Except as otherwise specified in the applicable Prospectus
Supplement, "Business Day" with respect to any Certificate means any day, other
than a Saturday or Sunday, that is (i) not a day on which banking institutions
are authorized or required by law or regulation to be closed in (a) The City of
New York or (b) if the Specified Currency for such Certificate is other than
U.S. dollars, the financial center of the country issuing such Specified
Currency (which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such Certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Certificate means any day on which
dealings in deposits in the Specified Currency of such Certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
INTEREST ON THE CERTIFICATES
General. Each Class of Certificates (other than certain
Classes of Strip Certificates) of a given Series may have a different
Pass-Through Rate, which may be a Fixed or Variable Pass- Through Rate, as
described below. In the case of Strip Certificates with no or, in certain cases,
a nominal Certificate Principal Balance, such distributions of interest will be
in an amount (as to any Distribution Date, "Stripped Interest") described in the
related Prospectus Supplement. For purposes hereof, "Notional Amount" means the
notional principal amount specified in the applicable Prospectus Supplement on
which interest on Strip Certificates with no or, in certain cases, a nominal
Certificate Principal Balance will be made on each Distribution Date. Reference
to the Notional Amount of a Class of Strip Certificates herein or in a
Prospectus Supplement does not indicate that such Certificates represent the
right to receive any distribution in respect of principal in such amount, but
rather the term "Notional Amount" is used solely as a basis for calculating the
amount of required distributions and determining certain relative voting rights,
all as specified in the related Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one
Class exists, each Class within such Series) of Certificates with a Fixed
Pass-Through Rate ("Fixed Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (as defined below) (or Notional
Amount, if applicable), from its Original Issue Date, or from the last date to
which interest has been paid, at the fixed Pass-Through Rate stated on the face
thereof and in the applicable Prospectus Supplement until the principal amount
thereof is distributed or made available for repayment (or in the case of Fixed
Rate Certificates with no or a nominal principal amount, until the Notional
Amount thereof is reduced to zero), except that, if so specified in the
applicable Prospectus Supplement, the Pass-Through Rate for such Series or any
such Class or Classes may be subject to adjustment from time to time in response
to designated changes in the rating assigned to such Certificates by one or more
rating agencies, in accordance with a schedule or otherwise, all as described in
such Prospectus Supplement. Unless otherwise set forth in the applicable
Prospectus Supplement, interest on each Series or Class of Fixed Rate
Certificates will be distributable in arrears on each Distribution Date
specified in such Prospectus Supplement. Each such distribution of interest
shall include interest accrued through the day specified in the applicable
Prospectus Supplement. Unless otherwise
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specified in the applicable Prospectus Supplement, interest on Fixed Rate
Certificates will be computed on the basis of a 360-day year of twelve 30-day
months.
Floating Rate Certificates. Each Series (or, if more than one
Class exists, each Class within such Series) of Certificates with a Variable
Pass-Through Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance (or Notional Amount, if applicable),
from its Original Issue Date to the first Interest Reset Date (as defined below)
for such Series or Class at the initial Pass-Through Rate set forth on the face
thereof and in the applicable Prospectus Supplement ("Initial Pass-Through
Rate"). Thereafter, the Pass-Through Rate on such Series or Class for each
Interest Reset Period (as defined below) will be determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points (one basis point equals one one-hundredth of a percentage point) that may
be specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, and the "Spread Multiplier" is the percentage that may be
specified in the applicable Prospectus Supplement as being applicable to such
Series or Class, except that if so specified in the applicable Prospectus
Supplement, the Spread or Spread Multiplier on such Series or any such Class or
Classes of Floating Rate Certificates may be subject to adjustment from time to
time in response to designated changes in the rating assigned to such
Certificates by one or more rating agencies, in accordance with a schedule or
otherwise, all as described in such Prospectus Supplement. The applicable
Prospectus Supplement, unless otherwise specified therein, will designate one of
the following Base Rates as applicable to a Floating Rate Certificate: (i) LIBOR
(a "LIBOR Certificate"), (ii) the Commercial Paper Rate (a "Commercial Paper
Rate Certificate"), (iii) the Treasury Rate (a "Treasury Rate Certificate"),
(iv) the Federal Funds Rate (a "Federal Funds Rate Certificate"), (v) the CD
Rate (a "CD Rate Certificate") or (vi) such other Base Rate (which may be based
on, among other things, one or more market indices or the interest and/or other
payments (whether scheduled or otherwise) paid, accrued or available with
respect to a designated asset, pool of assets or type of asset) as is set forth
in such Prospectus Supplement and in such Certificate. The "Index Maturity" for
any Series or Class of Floating Rate Certificates is the period of maturity of
the instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), Selected Interest
Rates," or any successor publications, published by the Board of Governors of
the Federal Reserve System. "Composite Quotations" means the daily statistical
release entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities"
published by the Federal Reserve Bank of New York.
As specified in the applicable Prospectus Supplement, Floating
Rate Certificates of a given Series or Class may also have either or both of the
following (in each case expressed as a rate per annum on a simple interest
basis): (i) a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period specified in the applicable Prospectus
Supplement ("Maximum Pass-Through Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest accrual
period ("Minimum Pass-Through Rate"). In addition to any Maximum Pass-Through
Rate that may be applicable to any Series or Class of Floating Rate
Certificates, the Pass-Through Rate applicable to any Series or Class of
Floating Rate Certificates will in no event be higher than the maximum rate
permitted by applicable law, as the
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same may be modified by United States law of general application. The Floating
Rate Certificates will be governed by the law of the State of New York and,
under such law as of the date of this Prospectus, the maximum rate of interest,
with certain exceptions, is 25% per annum on a simple interest basis.
The 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 Final Scheduled Distribution Date (as defined in the Prospectus
Supplement) will be that in effect on the tenth day preceding such Final
Scheduled Distribution Date. If an Interest Reset Date for any Class of Floating
Rate Certificates would otherwise be a day that is not a Business Day, such
Interest Reset Date will occur on a prior or succeeding Business Day, specified
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, interest payable in respect of Floating Rate Certificates shall be
the accrued interest from and including the Original Issue Date of such Series
or Class or the last Interest Reset Date to which interest has accrued and been
distributed, as the case may be, to but excluding the immediately following
Distribution Date.
With respect to a Floating Rate Certificate, accrued interest
shall be calculated by multiplying the Certificate Principal Balance of such
Certificate (or, in the case of a Strip Certificate with no or a nominal
Certificate Principal Balance, the Notional Amount specified in the applicable
Prospectus Supplement) by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Prospectus Supplement, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding) for
each such day is computed by dividing the Pass-Through Rate in effect on such
day by 360, in the case of LIBOR Certificates, Commercial Paper Rate
Certificates, Federal Funds Rate Certificates and CD Rate Certificates or by the
actual number of days in the year, in the case of Treasury Rate Certificates.
For purposes of making the foregoing calculation, the variable Pass-Through Rate
in effect on any Interest Reset Date will be the applicable rate as reset on
such date.
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Unless otherwise specified in the applicable Prospectus
Supplement, all percentages resulting from any calculation of the Pass-Through
Rate on a Floating Rate Certificate will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of
Floating Rate Certificates will be distributable on the Distribution Dates and
for the interest accrual periods as and to the extent set forth in the
applicable Prospectus Supplement.
Upon the request of the holder of any Floating Rate
Certificate of a given Series or Class, the Calculation Agent for such Series or
Class will provide the Pass-Through Rate then in effect and, if determined, the
Pass-Through Rate that will become effective on the next Interest Reset Date
with respect to such Floating Rate Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any, specified
in such Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "CD Rate" for each Interest Reset Period shall be the rate as of
the second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)." In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
CD Rate Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus Supplement
as published in Composite Quotations under the heading "Certificates of
Deposit." If by 3:00 p.m., New York City time, on such CD Rate Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations, then
the "CD Rate" for such Interest Reset Period will be calculated by the
Calculation Agent for such CD Rate Certificate and will be the arithmetic mean
of the secondary market offered rates as of 10:00 a.m., New York City time, on
such CD Rate Determination Date, of three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent for such CD Rate Certificate for negotiable certificates of
deposit of major United States money center banks of the highest credit standing
(in the market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the related Prospectus Supplement in
a denomination of $5,000,000; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "CD Rate" for such Interest Reset Period will be the same
as the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Pass-Through Rate).
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<PAGE>
The "CD Rate Calculation Date" pertaining to any CD Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such CD Rate Determination Date or, if such day is not a Business Day, the
next succeeding Business Day or (b) the second Business Day preceding the date
any distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper
Rate Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Certificate
as of the second Business Day prior to the Interest Reset Date for such Interest
Reset Period (a "Commercial Paper Rate Determination Date") and shall be the
Money Market Yield (as defined below) on such Commercial Paper Rate
Determination Date of the rate for commercial paper having the Index Maturity
specified in the applicable Prospectus Supplement, as such rate shall be
published in H.15(519) under the heading "Commercial Paper." In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Commercial Paper Rate Calculation Date (as defined below) pertaining to such
Commercial Paper Rate Determination Date, then the "Commercial Paper Rate" for
such Interest Reset Period shall be the Money Market Yield on such Commercial
Paper Rate Determination Date of the rate for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 p.m., New York City time, on such Commercial
Paper Rate Calculation Date such rate is not yet published in either H.15(519)
or Composite Quotations, then the "Commercial Paper Rate" for such Interest
Reset Period shall be the Money Market Yield of the arithmetic mean of the
offered rates, as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers of commercial paper in The City
of New York selected by the Calculation Agent for such Commercial Paper Rate
Certificate for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Pass-Through Rate).
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
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where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Commercial Paper Rate Calculation Date" pertaining to any
Commercial Paper Rate Determination Date shall be the first to occur of (a) the
tenth calendar day after such Commercial Paper Rate Determination Date or, if
such day is not a Business Day, the next succeeding Business Day or (b) the
second Business Day preceding the date any distribution of interest is required
to be made following the applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such Certificate and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Federal
Funds Rate Calculation Date (as defined below) pertaining to such Federal Funds
Rate Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date made publicly available by the Federal
Reserve Bank of New York which is equivalent to the rate which appears in
H.15(519) under the heading "Federal Funds (Effective)"; provided, however, that
if such rate is not made publicly available by the Federal Reserve Bank of New
York by 3:00 p.m., New York City time, on such Federal Funds Rate Calculation
Date, the "Federal Funds Rate" for such Interest Reset Period will be the same
as the Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Pass-Through
Rate). Unless otherwise specified in the applicable Prospectus Supplement, in
the case of a Federal Funds Rate Certificate that resets daily, the Pass-Through
Rate on such Certificate for the period from and including a Monday to but
excluding the succeeding Monday will be reset by the Calculation Agent for such
Certificate on such second Monday (or, if not a Business Day, on the next
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rate in effect with respect to each such day in such week.
The "Federal Funds Rate Calculation Date" pertaining to any
Federal Funds Rate Determination Date shall be the next succeeding Business Day.
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(4) LIBOR Certificates. Each LIBOR Certificate will bear
interest for each Interest Reset Period at the Pass-Through Rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
such Certificate and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rate for U.S.
dollar deposits, unless otherwise specified in the applicable Prospectus
Supplement, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest
Reset Date for such Interest Reset Period (a "LIBOR Determination
Date"), the Calculation Agent for such LIBOR Certificate will determine
the arithmetic mean of the offered rates for deposits in U.S. dollars
for the period of the Index Maturity specified in the applicable
Prospectus Supplement, commencing on such Interest Reset Date, which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m.,
London time, on such LIBOR Determination Date. "Reuters Screen LIBO
Page" means the display designated as page "LIBOR" on the Reuters
Monitor Money Rates Service (or such other page may replace the LIBO
page on that service for the purpose of displaying London interbank
offered rates of major banks). If at least two such offered rates
appear on the Reuters Screen LIBO Page, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of such offered rates as determined
by the Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters
Screen LIBO Page on such LIBOR Determination Date, the Calculation
Agent for such LIBOR Certificate will request the principal London
offices of each of four major banks in the London interbank market
selected by such Calculation Agent to provide such Calculation Agent
with its offered quotations for deposits in U.S. dollars for the period
of the specified Index Maturity, commencing on such Interest Reset
Date, to prime banks in the London interbank market at approximately
11:00 a.m., London time, on such LIBOR Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. If
at least two such quotations are provided, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such quotations. If fewer
than two such quotations are provided, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of rates quoted by three major banks
in The City of New York selected by the Calculation Agent for such
LIBOR Certificate at approximately 11:00 a.m., New York City time, on
such LIBOR Determination Date for loans in U.S. dollars to leading
European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal
to an amount of not less than $1,000,000 that is representative of a
single transaction in such market at such time; provided, however, that
if fewer than three banks selected as aforesaid by such Calculation
Agent are quoting rates as specified in this sentence, "LIBOR" for such
Interest Reset Period will be the same as LIBOR for the immediately
preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
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If LIBOR with respect to any LIBOR Certificate is indexed to
the offered rates for deposits in a currency other than U.S. dollars, the
applicable Prospectus Supplement will set forth the method for determining such
rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate
will bear interest for each Interest Reset Period at the Pass-Through Rate
calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Treasury Rate" for each Interest Reset Period will be the rate
for the auction held on the Treasury Rate Determination Date (as defined below)
for such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Certificates-Treasury bills-auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Treasury Rate Calculation Date (as defined
below) pertaining to such Treasury Rate Determination Date, the auction average
rate (expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of the Treasury. In
the event that the results of the auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 p.m., New
York City time, on such Treasury Rate Calculation Date, or if no such auction is
held on such Treasury Rate Determination Date, then the "Treasury Rate" for such
Interest Reset Period shall be calculated by the Calculation Agent for such
Treasury Rate Certificate and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Reset
Period will be the day of the week in which the Interest Reset Date for such
Interest Reset Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Treasury Rate Determination Date pertaining to
the Interest Reset Period commencing in the next succeeding week. Unless
otherwise specified in the applicable Prospectus Supplement, if an auction date
shall fall on
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any day that would otherwise be an Interest Reset Date for a Treasury Rate
Certificate, then such Interest Reset Date shall instead be the Business Day
immediately following such auction date.
The "Treasury Rate Calculation Date" pertaining to any
Treasury Rate Determination Date shall be the first to occur of (a) the tenth
calendar day after such Treasury Rate Determination Date or, if such a day is
not a Business Day, the next succeeding Business Day or (b) the second Business
Day preceding the date any distribution of interest is required to be made
following the applicable Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise,
each Certificate (other than certain Classes of Strip Certificates) will have a
"Certificate Principal Balance" which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related Trust. Unless otherwise specified in the related
Prospectus Supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such Certificate of the Class or Classes entitled thereto (in the manner and
priority specified in such Prospectus Supplement) until the aggregate
Certificate Principal Balance of such Class or Classes has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable pursuant
to the terms of the related Series, by the amount of any net losses realized on
any Deposited Asset ("Realized Losses") allocated thereto. Unless the related
Prospectus Supplement provides otherwise, the initial aggregate Certificate
Principal Balance of all Classes of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a Series and each Class thereof will be specified in the related Prospectus
Supplement. Distributions of principal of any Class of Certificates will be made
on a pro rata basis among all the Certificates of such Class. Strip Certificates
with no Certificate Principal Balance will not receive distributions of
principal.
FOREIGN CURRENCY CERTIFICATES
If the specified currency of any Certificate is not U.S.
dollars (a "Foreign Currency Certificate"), certain provisions with respect
thereto will be set forth in the related Prospectus Supplement which will
specify the denominations, the currency or currencies in which the principal and
interest with respect to such Certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise applicable
to the Certificates.
INDEXED CERTIFICATES
From time to time, the Trust may offer a Series of
Certificates ("Indexed Certificates"), the principal amount payable at the
stated maturity date of which (the "Indexed Principal Amount") and/or interest
with respect to which is determined by reference to (i) the rate of
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<PAGE>
exchange between the specified currency for such Certificate and the other
currency or composite currency (the "Indexed Currency") specified therein; (ii)
the difference in the price of a specified commodity (the "Indexed Commodity")
on specified dates; (iii) the difference in the level of a specified stock index
(the "Stock Index"), which may be based on U.S. or foreign stocks, on specified
dates; or (iv) such other objective price or economic measure as are described
in the related Prospectus Supplement. The manner of determining the Indexed
Principal Amount of an Indexed Certificate, and historical and other information
concerning the Indexed Currency, Indexed Commodity, Stock Index or other price
or economic measure used in such determination, will be set forth in the related
Prospectus Supplement, together with any information concerning tax consequences
to the Holders of such Indexed Certificates.
Except as otherwise specified in the related Prospectus
Supplement, interest on an Indexed Certificate will be payable based on the
amount designated in the related Prospectus Supplement as the "Face Amount" of
such Indexed Certificate. The related Prospectus Supplement will describe
whether the principal amount of the related Indexed Certificate that would be
payable upon redemption or repayment prior to the stated maturity date will be
the Face Amount of such Indexed Certificate, the Indexed Principal Amount of
such Indexed Certificate at the time of redemption or repayment, or another
amount described in such Prospectus Supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates
("Dual Currency Certificates"), in which case payments of principal and/or
interest in respect of Dual Currency Certificates will be made in such
currencies, and rates of exchange will be calculated upon such bases, as
indicated in the Certificates and described in the related Prospectus
Supplement. Other material terms and conditions relating to Dual Currency
Certificates will be set forth in the Certificates and the related Prospectus
Supplement.
OPTIONAL EXCHANGE
If a holder may exchange Certificates of any given Series for
a pro rata portion of the Deposited Assets, an "Exchangeable Series," the terms
upon which a holder may exchange Certificates of any Exchangeable Series for a
pro rata portion of the Deposited Assets of the related Trust will be specified
in the related Prospectus Supplement and/or the related Trust Agreement;
provided that any right of exchange shall be exercisable only to the extent that
such exchange would not be inconsistent with the 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;
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<PAGE>
(b) a minimum Certificate Principal Balance or Notional
Amount, as applicable, with respect to each Certificate being tendered
for exchange;
(c) a requirement that the Certificate Principal Balance or
Notional Amount, as applicable, of each Certificate tendered for
exchange be an integral multiple of an amount specified in the
Prospectus Supplement;
(d) specified dates during which a holder may effect such an
exchange (each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to
receive any benefit upon exchange from any Credit Support or other
non-Underlying Securities deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange
based upon the required prepayment of future expense allocations and
the establishment of a reserve for any anticipated Extraordinary Trust
Expenses as set forth in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, in order for a Certificate of a given Exchangeable Series (or Class
within such Exchangeable Series) to be exchanged by the applicable
Certificateholder, the Trustee for such Certificate must receive, at least 30
(or such shorter period acceptable to the Trustee) but not more than 45 days
prior to an Optional Exchange Date (i) such Certificate with the form entitled
"Option to Elect Exchange" on the reverse thereof duly completed, or (ii) in the
case of Registered Certificates, a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc., the Depositary (in accordance with its
normal procedures) or a commercial bank or trust company in the United States
setting forth the name of the holder of such Registered Certificate, the
Certificate Principal Balance or Notional Amount of such Registered Certificate
to be exchanged, the certificate number or a description of the tenor and terms
of such Registration Certificate, a statement that the option to elect exchange
is being exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by such Trustee not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Certificate and form duly
completed must be received by such Trustee by such fifth Business Day. Any
tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of such Certificate provided that the
Certificate Principal Balance or Notional Amount, as applicable, of such
Certificate remaining outstanding after redemption is an authorized denomination
and all other exchange requirements set forth in the related Prospectus
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for the remaining Certificate
Principal Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged Certificate).
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Unless otherwise specified in the applicable Prospectus
Supplement, because initially and until Definitive Certificates are issued each
Certificate will be represented by a Global Security, the Depositary's nominee
will be the Certificateholder of such Certificate and therefore will be the only
entity that can exercise a right of exchange. In order to ensure that the
Depositary's nominee will timely exercise a right of exchange with respect to a
particular Certificate, the beneficial owner of such Certificate must instruct
the broker or other direct or indirect participant through which it holds an
interest in such Certificate to notify the Depositary of its desire to exercise
a right of exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Certificate in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus
Supplement, upon the satisfaction of the foregoing conditions and any applicable
conditions with respect to the related Deposited Assets, as described in such
Prospectus Supplement, the applicable Certificateholder will be entitled to
receive a distribution of a pro rata share of the Deposited Assets related to
the Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described in such
Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus
Supplement, all Certificates of a given Series (or, if more than one Class
exists, any given Class within that Series) will, upon issuance, be represented
by one or more Global Securities that will be deposited with, or on behalf of,
The Depository Trust Company, New York, New York (for Registered Certificates
denominated and payable in U.S. dollars), or such other depositary identified in
the related Prospectus Supplement (the "Depositary"), and registered in the name
of a nominee of the Depositary. Global Securities may be issued in either
registered or bearer form and in either temporary or definitive form. See
"Limitations on Issuance of Bearer Certificates" for provisions applicable to
Certificates issued in bearer form. Unless and until it is exchanged in whole or
in part for the individual Certificates represented thereby (each a "Definitive
Certificate"), a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor (Sections 5.02 and 5.04).
The Depository Trust Company has advised the Depositor as
follows: The Depository Trust Company is a limited-purpose trust company
organized under the laws of the State of New
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York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository Trust Company was created to hold securities of its participating
organizations and to facilitate the clearance and settlement of securities
transactions among the institutions that have accounts with such Depositary
("participants") in such securities through electronic book-entry changes in the
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. Such Depositary's participants include securities
brokers and dealers (including the Offering Agent), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own such Depositary. Access to such Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly. The Depository Trust Company has
confirmed to the 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 or notional amounts, if applicable, of
the individual Certificates represented by such Global Security to the accounts
of its participants. The accounts to be accredited shall be designated by the
underwriters of such Certificates, or, if such Certificates are offered and sold
directly through one or more agents, by the 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.
Subject to the restrictions discussed under "Limitations on
Issuance of Bearer Certificates" below, distributions of principal of (and
premium, if any) and any interest on individual Certificates represented by a
Global Security will be made to the Depositary or its nominee, as the case may
be, as the Certificateholder of such Global Security. None of the Depositor, the
Adminis-
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trative Agent, if any, the Trustee for such Certificates, any paying agent or
the Certificate registrar for such Certificates will have responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests in such Global Security or for maintaining, supervising
or reviewing any records relating to such beneficial interests.
The 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. Receipt
by owners of beneficial interests in a temporary Global Security of payments of
principal, premium or interest in respect thereof will be subject to the
restrictions discussed below under "Limitations on Issuance of Bearer
Certificates" below.
If the Depositary for Certificates of a given Class of any
Series is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the 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 or notional amount, if applicable, to such
beneficial interest and to have such Definitive Certificates registered in its
name (if the Certificates of such Class are issuable as Registered
Certificates). Individual Definitive Certificates of such Class so issued will
be issued (a) as Registered Certificates in denominations, unless otherwise
specified by the Depositor or in the related Prospectus Supplement, of $1,000
and integral multiples thereof if the Certificates of such Class are issuable as
Registered Certificates, (b) as Bearer Certificates in the denomination or
denominations specified by the Depositor or in the related Prospectus Supplement
if the Certificates of such Class are issuable as Bearer Certificates or (c) as
either Registered or Bearer Certificates, if the Certificates of such Class are
issuable in either form (Section 5.03). See, however, "Limitations on Issuance
of Bearer Certificates" below for a description of certain restrictions on the
issuance of individual Bearer Certificates in exchange for beneficial interests
in a Global Security.
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The applicable Prospectus Supplement will set forth any
specific terms of the depositary arrangement with respect to any Class or Series
of Certificates being offered thereby to the extent not set forth or different
from the description set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
Each Certificate of each Series (or if more than one Class
exists, each Class (whether or not each such Class is offered hereby) within
such Series) will represent an ownership interest specified for such Series (or
Class) of Certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Underlying Securities"),
purchased by the 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 an obligation issued or guaranteed by a
foreign government, political subdivision or agency or instrumentality thereof.
Any pool of such publicly offered foreign government debt securities may include
both registered and unregistered offerings. Each Underlying Security, or
Underlying Securities in the case of debt securities with a common obligor, that
represents ten percent or more of the total Underlying Securities with respect
to any Series of Certificates as of the date of the related Prospectus
Supplement ("Concentrated Underlying Securities") will represent an obligation
issued or guaranteed by a foreign government, one of its political subdivisions
or an agency or instrumentality of the foregoing which has offered debt
securities in the United States pursuant to a registration statement filed with
the Commission containing information required by Schedule B of the Securities
Act ("Schedule B"), that qualifies as a "seasoned" issuer under Commission
practice and which issuer or guarantor the Depositor reasonably believes (based
on publicly available information) is eligible to use Schedule B as of the time
of any offering of Certificates hereunder. The Underlying Securities may include
obligations of any or all of the following Foreign Governments (which may
include obligations guaranteed by the following): Austria, Australia, Canada,
Canadian Provinces, Denmark, Finland, France, Germany, Ireland, Japan, Norway,
Italy, Spain, Sweden and the United Kingdom. The Prospectus Supplement for any
series will set forth the Foreign Government obligations included in the related
Trust.
This Prospectus relates only to the Certificates offered
hereby and does not relate to the Underlying Securities. The following
description of the Underlying Securities is intended only to summarize certain
characteristics of the Underlying Securities the 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 and Underlying
Securities themselves.
UNDERLYING SECURITIES
General. Unless otherwise specified in the related Prospectus
Supplement, none of the Underlying Securities will have been issued pursuant to
an indenture and no trustee is provided
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for with respect to any Underlying Security. Generally, there will be a fiscal
agent (each, a "Fiscal Agent") for the Foreign Government Issuer with respect to
the Underlying Securities whose actions will be governed by a fiscal agency
agreement. A Fiscal Agent does not have the same responsibilities or duties to
act on behalf of the holders of a Foreign Government's debt securities as would
a trustee. Unless otherwise specified in the related Prospectus Supplement, the
due and punctual payment of each Underlying Security and the due and timely
performance of all obligations with respect thereto will be backed by the full
faith and credit of the related Foreign Government Issuer or unconditionally
guaranteed by the related Foreign Government Guarantor, as the case may be.
Contractual Restrictions. There will generally be few, if any,
contractual restrictions on the Foreign Government Issuers or Foreign Government
Guarantors in respect of the Underlying Securities. The Underlying Securities by
their terms and provisions may, however, restrict certain actions of the related
Foreign Governments and may also require, among other things, the creation or
maintenance of reserves or a sinking fund or contain an undertaking or pledge of
the Foreign Government not to encumber its assets to secure any other external
indebtedness without providing like security for the related Underlying
Securities. Certain actions in respect of the debt securities of Foreign
Governments may also be subject to proper executive, legislative or
administrative approval.
The Prospectus Supplement used to offer any Series of
Certificates will describe material covenants or undertakings in relation to any
Concentrated Underlying Security and, as applicable, will describe material
covenants or undertakings which are common to any pool of Underlying Securities.
There can be no assurance that any such provision will protect the Trust as a
holder of the Underlying Securities against losses. In the event of a breach of
any such covenant or undertaking, it may not be possible to force any action in
respect of the Underlying Securities or to obtain an enforceable judgment
against a Foreign Government.
Events of Default. Debt securities issued by foreign
governments generally provide that any one of a number of specified events will
constitute an event of default with respect to such securities. Such events of
default typically include the following or variations thereof: (i) failure by
the issuer to pay an installment of interest or principal on the securities at
the time required (subject to any specified grace period) or to redeem any of
the securities when required (subject to any specified grace period); (ii)
failure by the issuer to observe or perform any covenant, agreement or condition
contained in the securities, which failure is materially adverse to security
holders and continues for a specified period after notice thereof; (iii) the
declaration of a moratorium on payment of interest or principal in respect of
external indebtedness; and (iv) failure by the issuer to make any required
payment of principal (and premium, if any) or interest with respect to certain
of the other outstanding debt obligations of the issuer (including other
external indebtedness) or the acceleration by or on behalf of the holders
thereof of such securities.
Each Underlying Security may include some, all or none of the
foregoing provisions or variations thereof or additional events of default not
discussed herein. The Prospectus Supplement with respect to any Series of
Certificates will describe the events of default under the Underlying
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Securities with respect to any Concentrated Underlying Security ("Underlying
Security Events of Default") and applicable remedies with respect thereto. With
respect to any Trust comprised of a pool of securities, the applicable
Prospectus Supplement will describe certain common Underlying Security Events of
Default with respect to such pool. There can be no assurance that any such
provision will protect the Trust, as a holder of the Underlying Securities,
against losses. If an Underlying Security Event of Default occurs and the
Trustee as a holder of the Underlying Securities is entitled to vote or take
such other action to declare the principal amount of an Underlying Security and
any accrued and unpaid interest thereon to be due and payable, the
Certificateholders' objectives may differ from those of holders of other
securities of the same series and class as any Underlying Security ("Outstanding
Debt Securities") in determining whether to declare the acceleration of the
Underlying Securities.
Remedies. Generally, upon the occurrence of an event of
default, the holders of not less than a specified percentage of the outstanding
securities of a Foreign Government may enforce their rights under the
securities, including in some cases, the right to declare all or a portion of
the principal and accrued interest on the outstanding securities immediately due
and payable, subject to the issuer's right to cure, if applicable. A fiscal
agency agreement will not typically provide for the agent to enforce the rights
of the security holders as would an indenture trustee. Consequently, any rights
in respect of the Underlying Securities must be pursued through the Trustee as a
holder thereof in the manner prescribed with respect to the Underlying
Securities. There can be no assurance that the Trustee will be able to enforce
any contractual obligation against a Foreign Government. Additionally, where
action may be taken in respect of the Underlying Securities only by a specified
percentage of the holders of the Outstanding Debt Securities, the Trustee's
ability to influence such action will be limited by the proportion of such
securities held by the Trust.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable Prospectus Supplement with
respect to each Series of Certificates for a description of the following terms,
as applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the issuer; (iii) whether any of the obligations are
secured or unsecured and the nature of any collateral; (iv) the limit, if any,
upon the aggregate principal amount of such debt securities; (v) the dates on
which, or the range of dates within which, the principal of (and premium, if
any, on) such debt securities will be payable; (vi) the rate or rates or the
method of determination thereof, at which such Underlying Securities will bear
interest, if any ("Underlying Securities Rate"); the date or dates from which
such interest will accrue ("Underlying Securities Interest Accrual Periods");
and the dates on which such interest will be payable ("Underlying Securities
Payment Dates"); (vii) the obligation, if any, of the issuer to redeem the
securities pursuant to any sinking fund or analogous provisions, or at the
option of a holder thereof, and the periods within which or the dates on which,
the prices at which and the terms and conditions upon which such debt securities
may be redeemed or repurchased, in whole or in part, pursuant to such
obligation; (viii) the periods within which or the dates on which, the prices at
which and the terms and conditions upon which such debt securities may
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be redeemed, if any, in whole or in part, at the option of the issuer; (ix)
whether the Underlying Securities were issued at a price lower than the
principal amount thereof; (x) if other than United States dollars, the foreign
or composite currency in which such debt securities are denominated, or in which
payment of the principal of (and premium, if any) or any interest on such
Underlying Securities will be made (the "Underlying Securities Currency"), and
the circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such Underlying Securities; (xii) the rating thereof, if any; and (xiii) any
other material terms of such Underlying Securities.
With respect to a Trust comprised of a pool of Underlying
Securities, the related Prospectus Supplement will describe the composition of
the Underlying Securities pool as of the Cutoff Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on an
aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (ii), (iii),
(v), (vi), (vii), (viii) and (ix) of the preceding paragraph and any other
material terms regarding such pool of securities.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, with respect to each
Concentrated Underlying Security the applicable Prospectus Supplement will
disclose the identity of the applicable obligor and will describe the existence
and type of certain information that is made publicly available by each obligor
regarding such Underlying Security or Underlying Securities and will disclose
where and how prospective purchasers of the Certificates may obtain such
publicly available information with respect to each such obligor.
Certain Foreign Government Issuers have obtained no-action
letters from the Commission which condition a Foreign Government Issuer's
eligibility to continue to use shelf procedures for delayed offerings and
incorporation of certain documents by reference on such Foreign Government
Issuer periodically filing with the Commission on Form 18-K under the Exchange
Act. However, a Foreign Government Issuer is not required to use these delayed
offering procedures to offer securities in the United States and is not subject
to the reporting requirements of the Exchange Act by reason of having filed a
registration statement under Schedule B. Foreign Government Issuers are subject
to the reporting requirements of the Exchange Act only if, and for so long as,
their securities are listed on a U.S. exchange. With respect to any Foreign
Government Issuer whose obligations represent ten percent or more of the total
Underlying Securities of a Trust, the applicable Prospectus Supplement will set
forth whether the prospectus offering the related Underlying Securities states
that such obligor is subject to the informational requirements of the Exchange
Act or if such obligor files periodic reports with the Commission on a voluntary
basis. The precise source and nature of publicly available information and where
and how it may be obtained with respect to any such Foreign Government Issuer
will vary, and, as described above will be set forth in the applicable
Prospectus Supplement with respect to any such obligor. If any Foreign
Government Issuer of Concentrated Underlying Securities ceases to file periodic
reports with the Commission, the Depositor, on behalf of the related Trust, will
continue to be subject to the reporting requirements of
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the Exchange Act, but certain information with respect to such Foreign
Government Issuer may be unavailable.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, the Depositor may
also deposit into a given Trust, or the Trustee on behalf of the
Certificateholders of a Trust may enter into an agreement constituting or
providing for the purchase of, to the extent described in the related Prospectus
Supplement, certain assets related or incidental to one or more of such
Underlying Securities or to some other asset deposited in the Trust, including
hedging contracts and other similar arrangements (such as puts, calls, interest
rate swaps, currency swaps, floors, caps and collars), cash and assets ancillary
or incidental to the foregoing or to the Underlying Securities (including assets
obtained through foreclosure or in settlement of claims with respect thereto)
and direct obligations of the United States (all such assets for any given
Series, together with the related Underlying Securities, the "Deposited
Assets"). The applicable Prospectus Supplement will, to the extent appropriate,
contain analogous disclosure with respect to the foregoing assets as referred to
above with respect to the Underlying Securities.
Unless otherwise specified in the related Prospectus
Supplement, the Deposited Assets for a given Series of Certificates and the
related Trust will not constitute Deposited Assets for any other Series of
Certificates and the related Trust and the Certificates of each Class of a given
Series possess an equal and ratable undivided ownership interest in such
Deposited Assets. The applicable Prospectus Supplement may, however, specify
that certain assets constituting a part of the Deposited Assets relating to any
given Series may be beneficially owned solely by or deposited solely for the
benefit of one Class or a group of Classes within such Series. In such event,
the other Classes of such Series will not possess any beneficial ownership
interest in those specified assets constituting a part of the Deposited Assets.
CREDIT SUPPORT
As specified in the applicable Prospectus Supplement for a
given Series of Certificates, the Trust for any Series of Certificates may
include, or the Certificateholders of such Series (or any Class or group of
Classes within such Series) may have the benefit of, Credit Support for any
Class or group of Classes within such Series. Such Credit Support may be
provided by any combination of the following means described below or any other
means described in the applicable Prospectus Supplement. The applicable
Prospectus Supplement will set forth whether the Trust for any Class or group of
Classes of 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 unless such obligor is subject to the informational
requirements of the Exchange Act.
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Subordination. As discussed below under "- Collections," the
rights of the Certificateholders of any given Class within a Series of
Certificates to receive collections from the Trust for such Series and any
Credit Support obtained for the benefit of the Certificateholders of such Series
(or Classes within such Series) may be subordinated to the rights of the
Certificateholders of one or more other Classes of such Series to the extent
described in the related Prospectus Supplement. Such subordination accordingly
provides some additional credit support to those Certificateholders of those
other Classes. For example, if losses are realized during a given period on the
Deposited Assets relating to a Series of Certificates such that the collections
received thereon are insufficient to make all distributions on the Certificates
of such Series, those realized losses would be allocated to the
Certificateholders of any Class of any such Series that is subordinated to
another Class, to the extent and in the manner provided in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, certain amounts otherwise payable to Certificateholders of any Class
that is subordinated to another Class may be required to be deposited into a
reserve account. Amounts held in any reserve account may be applied as described
below under "-Reserve Accounts" and in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the
Credit Support for any Series or Class of Certificates may include, in addition
to the subordination of certain Classes of such Series and the establishment of
a reserve account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
Class will be limited to the extent necessary to make required distributions to
the Certificateholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any
Series (or Class or group of Classes of Certificates within such Series) may, if
specified in the applicable Prospectus Supplement, have the benefit of a letter
or letters of credit (a "Letter of Credit") issued by a bank (a "Letter of
Credit Bank") or a surety bond or bonds (a "Surety Bond") issued by a surety
company (a "Surety"). In either case, the Trustee or such other person specified
in the applicable Prospectus Supplement will use its reasonable efforts to cause
the Letter of Credit or the Surety Bond, as the case may be, to be obtained, to
be kept in full force and effect (unless coverage thereunder has been exhausted
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. The Trustee or such other person
specified in the applicable Prospectus Supplement will make or cause to be made
draws under the Letter of Credit or the Surety Bond, as the case may be, under
the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will provide
the manner, priority and source of funds by which any such draws are to be
repaid.
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Unless otherwise specified in the applicable Prospectus
Supplement, in the event that the Letter of Credit Bank or the Surety, as
applicable, ceases to satisfy any credit rating or other applicable requirements
specified in the related Prospectus Supplement, the Trustee or such other person
specified in the applicable Prospectus Supplement will use its reasonable
efforts to obtain or cause to be obtained a substitute Letter of Credit or
Surety Bond, as applicable, or other form of credit enhancement providing
similar protection, that meets such requirements and provides the same coverage
to the extent available for the same cost. There can be no assurance that any
Letter of Credit Bank or any Surety, as applicable, will continue to satisfy
such requirements or that any such substitute Letter of Credit, Surety Bond or
similar credit enhancement will be available providing equivalent coverage for
the same cost. To the extent not so available, the credit support otherwise
provided by the Letter of Credit or the Surety Bond (or similar credit
enhancement) may be reduced to the level otherwise available for the same cost
as the original Letter of Credit or Surety Bond.
Reserve Accounts. If so provided in the related Prospectus
Supplement, the Trustee or such other person specified in the Prospectus
Supplement will deposit or cause to be deposited into an account maintained with
an eligible institution (which may be the Trustee) (a "Reserve Account") any
combination of cash or permitted investments in specified amounts, which will be
applied and maintained in the manner and under the conditions specified in such
Prospectus Supplement. In the alternative or in addition to such deposit, a
Reserve Account may be funded through application of a portion of collections
received on the Deposited Assets for a given Series of Certificates, in the
manner and priority specified in the applicable Prospectus Supplement. Amounts
deposited in such Reserve Account may be distributed to Certificateholders of
such Class or group of Classes within such Series, or may be used for other
purposes, in the manner and to the extent provided in the related Prospectus
Supplement. Amounts deposited in any Reserve Account will be invested in certain
permitted investments by, or at the direction of, the Trustee, the 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 such collections from time
to time prior to any applicable Distribution Date into a segregated account
maintained or controlled by the applicable Trustee for the benefit of such
Series (each a "Certificate Account"). An Administrative Agent, if any is
appointed pursuant to the applicable Prospectus Supplement, will direct the
Trustee, and otherwise the Trustee will make all determinations, as to the
appropriate application of such collections and other amounts available for
distribution to the payment of any administrative or collection expenses (such
as the administrative fee) and certain Credit Support-related ongoing fees (such
as insurance premiums, letter of credit fees or any required account deposits)
and to the payment of amounts then due and owing on the Certificates of such
Series (and Classes within such Series), all in the manner and priorities
described in the related Prospectus Supplement. The applicable Prospectus
Supplement will specify the collection periods, if applicable, and Distribution
Dates for a given Series of Certificates
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and the particular requirements relating to the segregation and investment of
collections received on the Deposited Assets during a given collection period or
on or by certain specified dates. There can be no assurance that amounts
received from the Deposited Assets and any Credit Support obtained for the
benefit of Certificateholders for a particular Series or Class of Certificates
over a specified period will be sufficient, after payment of all prior expenses
and fees for such period, to pay amounts then due and owing to holders of such
Certificates. The applicable Prospectus Supplement will also set forth the
manner and priority by which any Realized Losses will be allocated among the
Classes of any Series of Certificates, if applicable.
The relative priorities of distributions with respect to
collections from the assets of the Trust assigned to Classes of a given Series
of Certificates may permanently or temporarily change over time upon the
occurrence of certain circumstances specified in the applicable Prospectus
Supplement. Moreover, the applicable Prospectus Supplement may specify that the
relative distribution priority assigned to each Class of a given Series for
purposes of payments of certain amounts, such as principal, may be different
from the relative distribution priority assigned to each such Class for payments
of other amounts, such as interest or premium.
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of certain provisions of the Trust
Agreement and the Certificates do not purport to be complete and such summary is
qualified in its entirety by reference to the detailed provisions of the form of
Trust Agreement filed as an exhibit to the Registration Statement. Article and
section references in parentheses below are to articles and sections in the
Trust Agreement. Wherever particular sections or defined terms of the Trust
Agreement are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the
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 2.05). Each Deposited Asset will be identified in a schedule
appearing as an exhibit to the Trust Agreement. Such schedule will include
certain statistical information with respect to each Underlying Security and
each other Deposited Asset as of the Cut-off Date, and in the event any
Underlying Security
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represents ten percent or more of the total Underlying Securities with respect
to any Series of Certificates, such schedule will include, to the extent
applicable, information regarding the payment terms thereof, the Retained
Interest, if any, with respect thereto, the maturity or terms thereof, the
rating, if any, thereof and certain other information with respect thereto.
In addition, the 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 2.04).
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates the
Trustee or such other person specified in the Prospectus Supplement directly or
through sub-administrative agents, will make reasonable efforts to collect all
scheduled payments under the Deposited Assets and will follow or cause to be
followed such collection procedures, if any, as it would follow with respect to
comparable financial assets that it held for its own account, provided that such
procedures are consistent with the Trust Agreement and any related instrument
governing any Credit Support (collectively, the "Credit Support Instruments")
and provided that, except as otherwise expressly set forth in the applicable
Prospectus Supplement, it shall not be required to expend or risk its own funds
or otherwise incur personal financial liability.
Sub-Administration. Any Trustee or Administrative Agent may
delegate its obligations in respect of the Deposited Assets to third parties
they deem qualified to perform such obligations (each, a "Sub-Administrative
Agent"), but the Trustee or Administrative Agent will remain obligated with
respect to such obligations under the Trust Agreement. Each Sub- Administrative
Agent will be required to perform the customary functions of an administrator of
comparable financial assets, including, if applicable, collecting payments from
obligors and remitting such collections to the Trustee; maintaining accounting
records relating to the Deposited Assets, attempting to cure defaults and
delinquencies; and enforcing any other remedies with respect thereto all as and
to the extent provided in the applicable Sub-Administration Agreement (as
defined below).
The agreement between any Administrative Agent or Trustee and
a Sub- Administrative Agent (a "Sub-Administration Agreement") will be
consistent with the terms of the
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Trust Agreement and such assignment to the Sub-Administrator by itself will not
result in a withdrawal or downgrading of the rating of any Class of Certificates
issued pursuant to the Trust Agreement. With respect to any Sub-Administrative
Agreement between an Administrative Agent and a Sub-Administrative Agent,
although each such Sub-Administration Agreement will be a contract solely
between such Administrative Agent and the Sub-Administrative Agent, the Trust
Agreement pursuant to which a Series of Certificates is issued will provide
that, if for any reason such Administrative Agent for such Series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Administrative Agent must recognize the Sub-Administrative Agent's rights and
obligations under such Sub-Administration Agreement.
The Administrative Agent or Trustee, as applicable, will be
solely liable for all fees owed by it to any Sub-Administrative Agent,
irrespective of whether the compensation of the Administrative Agent or Trustee,
as applicable, pursuant to the Trust Agreement with respect to the particular
Series of Certificates is sufficient to pay such fees. However, a
Sub-Administrative Agent may be entitled to a Retained Interest in certain
Deposited Assets to the extent provided in the related Prospectus Supplement.
Each Sub-Administrative Agent will be reimbursed by the Administrative Agent, if
any, or otherwise the Trustee for certain expenditures which it makes, generally
to the same extent the Administrative Agent or Trustee, as applicable, would be
reimbursed under the terms of the Trust Agreement relating to such Series. See
"--Retained Interest; Administrative Agent Compensation and Payment of
Expenses."
The Administrative Agent or Trustee, as applicable, may
require any Sub- Administrative Agent to agree to indemnify the Administrative
Agent or Trustee, as applicable, for any liability or obligation sustained by
the Administrative Agent or Trustee, as applicable, in connection with any act
or failure to act by the Sub-Administrative Agent.
Realization upon Defaulted Deposited Assets. Unless otherwise
specified in the applicable Prospectus Supplement, as administrator with respect
to the Deposited Assets, the Trustee, on behalf of the Certificateholders of a
given Series (or any Class or Classes within such Series), will present claims
under each applicable Credit Support Instrument, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Deposited Assets. As set forth above, all collections by or
on behalf of the Trustee or Administrative Agent under any Credit Support
Instrument are to be deposited in the Certificate Account for the related Trust,
subject to withdrawal as described above.
Unless otherwise provided in the applicable Prospectus
Supplement, if recovery on a defaulted Deposited Asset under any related Credit
Support Instrument is not available, the Trustee will be obligated to follow or
cause to be followed such normal practices and procedures as it deems necessary
or advisable to realize upon the defaulted Deposited Asset (Section 3.07),
provided that, except as otherwise expressly provided in the applicable
Prospectus Supplement, it shall not be required to expend or risk its own funds
or otherwise incur personal financial liability. If the proceeds of any
liquidation of the defaulted Deposited Asset are less than the sum of (i) the
outstanding principal balance of the defaulted Deposited Asset, (ii) interest
accrued but unpaid thereon
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at the applicable interest rate and (iii) the aggregate amount of expenses
incurred by the Administrative Agent and the Trustee, as applicable, in
connection with such proceedings to the extent reimbursable from the assets of
the Trust under the Trust Agreement, the Trust will realize a loss in the amount
of such difference (Section 3.07). Only if and to the extent provided in the
applicable Prospectus Supplement, the Administrative Agent or Trustee, as so
provided, will be entitled to withdraw or cause to be withdrawn from the related
Certificate Account out of the net proceeds recovered on any defaulted Deposited
Asset, prior to the distribution of such proceeds to Certificateholders, amounts
representing its normal administrative compensation on the Deposited Asset,
unreimbursed administrative expenses incurred with respect to the Deposited
Asset and any unreimbursed advances of delinquent payments made with respect to
the Deposited Asset.
RETAINED INTEREST; ADMINISTRATIVE AGENT COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will
specify whether there will be any Retained Interest in the Deposited Assets,
and, if so, the owner thereof. If so provided, the Retained Interest will be
established on an asset-by-asset basis and will be specified in an exhibit to
the applicable series supplement to the Trust Agreement. A Retained Interest in
a Deposited Asset represents a specified interest therein. Payments in respect
of the Retained Interest will be deducted from payments on the Deposited Assets
as received and, in general, will not be deposited in the applicable Certificate
Account or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, any partial recovery of interest on a
Deposited Asset, after deduction of all applicable administration fees, will be
allocated between the Retained Interest (if any) and interest distributions to
Certificateholders on a pari passu basis.
The applicable Prospectus Supplement will specify the
Administrative Agent's, if any, and the Trustee's compensation, and the source,
manner and priority of payment thereof, with respect to a given Series of
Certificates.
If and to the extent specified in the applicable Prospectus
Supplement, in addition to amounts payable to any Sub-Administrative Agent, the
Administrative Agent, if any; and otherwise the Trustee will pay from its
compensation certain expenses incurred in connection with its administration of
the Deposited Assets, including, without limitation, payment of the fees and
disbursements of the Trustee, if applicable, and independent accountants,
payment of expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement (Section 3.11).
ADVANCES IN RESPECT OF DELINQUENCIES
Unless otherwise specified in the applicable Prospectus
Supplement, the Administrative Agent, if any, specified therein or the Trustee
will have no obligation to make any advances with respect to collections on the
Deposited Assets or in favor of the Certificateholders of the related Series of
Certificates. However, to the extent provided in the applicable Prospectus
Supplement, any such Administrative Agent or the Trustee will advance on or
before each
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Distribution Date its own funds or funds held in the Certificate Account for
such Series that are not part of the funds available for distribution for such
Distribution Date, in an amount equal to the aggregate of payments of principal,
premium (if any) and interest (net of related administration fees and any
Retained Interest) with respect to the Deposited Assets that were due during the
related Collection Period (as defined in the Prospectus Supplement) and were
delinquent on the related Determination Date, subject to (i) any such
Administrative Agent's or the Trustee's good faith determination that such
advances will be reimbursable from Related Proceeds (as defined below) and (ii)
such other conditions as may be specified in the Prospectus Supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the Class or
Classes of Certificates entitled thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related Prospectus Supplement,
advances of an Administrative Agent's or Trustee's funds, if any, will be
reimbursable only out of related recoveries on the Deposited Assets (and amounts
received under any form of Credit Support) for such Series with respect to which
such advances were made (as to any Deposited Assets, "Related Proceeds");
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account for such Series to the extent that such
Administrative Agent or Trustee shall determine, in its sole judgment, that such
advance (a "Nonrecoverable Advance") is not ultimately recoverable from Related
Proceeds. If advances have been made by such Administrative Agent or Trustee
from excess funds in the Certificate Account for any Series, such Administrative
Agent or Trustee will replace such funds in such Certificate Account on any
future Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date (Section 4.04). If so specified in the related
Prospectus Supplement, the obligations, if any, of an Administrative Agent or
Trustee to make advances may be secured by a cash advance reserve fund or a
surety bond. If applicable, information regarding the characteristics of, and
the identity of any obligor on, any such surety bond, will be set forth in the
related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE ADMINISTRATIVE AGENT AND THE 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 "Deposited Asset Provider" is the relevant person who sold
the applicable Deposited Asset to the Depositor.
The Trust Agreement will provide that an Administrative Agent,
if any, may resign from its obligations and duties under the Trust Agreement
with respect to any Series of Certificates only if such resignation, and the
appointment of a successor, will not result in a withdrawal or downgrading of
the rating of any Class of Certificates of such Series or upon a determination
that its duties under the Trust Agreement with respect to such Series are no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor has
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assumed the Administrative Agent's obligations and duties under the Trust
Agreement with respect to such Series.
The Trust Agreement will further provide that neither such an
Administrative Agent, if any, the 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
6.02). The applicable Prospectus Supplement will describe how such legal
expenses and costs of such action and any liability resulting therefrom will be
allocated.
Any person into which an Administrative Agent may be merged or
consolidated, or any person resulting from any merger or consolidation to which
an Administrative Agent is a part, or any person succeeding to the business of
an Administrative Agent, will be the successor of the Administrative Agent under
the Trust Agreement with respect to the Certificates of any given Series.
ADMINISTRATIVE AGENT TERMINATION EVENTS;
RIGHTS UPON ADMINISTRATIVE AGENT TERMINATION EVENT
Unless otherwise provided in the related Prospectus
Supplement, "Administrative Agent Termination Events," if applicable, under the
Trust Agreement with respect to any given Series of Certificates will consist of
the following: (i) any failure by an Administrative Agent to remit to the
Trustee any funds in respect of collections on the Deposited Assets and Credit
Support, if any, as required under the Trust Agreement, that continues
unremedied for five days after the giving of written notice of such failure to
the Administrative Agent by the Trustee or the 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
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duly to observe or perform in any material respect any of its other covenants or
obligations under the Trust Agreement with respect to such Series which
continues unremedied for thirty days after the giving of written notice of such
failure to the Administrative Agent by the Trustee or the Depositor, or to the
Administrative Agent, the Depositor and the Trustee by the holders of such
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by or on behalf of an
Administrative Agent indicating its insolvency or inability to pay its
obligations. Any additional Administrative Agent Termination Events with respect
to any given Series of Certificates will be set forth in the applicable
Prospectus Supplement. In addition, the applicable Prospectus Supplement and the
related series supplement to the Trust Agreement will specify as to each matter
requiring the vote of holders of Certificates of a Class or group of Classes
within a given Series, the circumstances and manner in which the Required
Percentage (as defined below) applicable to each such matter is calculated.
"Required Percentage" means with respect to any matter requiring a vote of
holders of Certificates of a given Series, the specified percentage (computed on
the basis of outstanding Certificate Principal Balance or Notional Amount, as
applicable) of Certificates of a designated Class or group of Classes within
such Series (either voting as separate classes or as a single class) applicable
to such matter, all as specified in the applicable Prospectus Supplement and the
related series supplement to the Trust Agreement. "Voting Rights" evidenced by
any Certificate will be the portion of the voting rights of all the Certificates
in the related Series allocated in the manner described in the related
Prospectus Supplement (Article I).
Unless otherwise specified in the applicable Prospectus
Supplement, so long as an Administrative Agent Termination Event, if applicable,
under the Trust Agreement with respect to a given Series of Certificates remains
unremedied, the Depositor or the Trustee may, and at the direction of holders of
such Certificates evidencing not less than the "Required Percentage--
Administrative Agent Termination" (as defined in the Prospectus Supplement, if
applicable) of the Voting Rights, the Trustee will, terminate all the rights and
obligations of such Administrative Agent under the Trust Agreement relating to
the applicable Trust and in and to the related Deposited Assets (other than any
Retained Interest of such Administrative Agent), whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of such
Administrative Agent under the Trust Agreement with respect to such Series
(except that if the Trustee is prohibited by law from obligating itself to make
advances regarding delinquent Deposited Assets, then the Trustee will not be so
obligated) and will be entitled to similar compensation arrangements. In the
event that the Trustee is unwilling or unable to act, it may or, at the written
request of the holders of such Certificates evidencing not less than the
"Required Percentage--Administrative Agent Termination" of the Voting Rights, it
will appoint, or petition a court of competent jurisdiction for the appointment
of, an administration agent acceptable to the Rating Agency with a net worth at
the time of such appointment of at least $15,000,000 to act as successor to such
Administrative Agent under the Trust Agreement with respect to such Series.
Pending such appointment, the Trustee is obligated to act in such capacity
(except that if the Trustee is prohibited by law from obligating itself to make
advances regarding delinquent Deposited Assets, then the Trustee will not be so
obligated). The Trustee and any such successor may agree upon the compensation
be paid to such successor, which in no event
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may be greater than the compensation payable to such Administrative Agent under
the Trust Agreement with respect to such Series.
No Certificateholder will have the right under the Trust
Agreement to institute any proceeding with respect thereto unless such holder
previously has given to the Trustee written notice of breach and unless the
holders of Certificates evidencing not less than the "Required Percentage--
Remedies" (as defined in the Prospectus Supplement) of the Voting Rights have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for fifteen days has neglected or refused to institute any such
proceeding (Section 10.02). The Trustee, however, is under no obligation to
exercise any of the trusts or powers vested in it by the Trust Agreement or to
make any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by the Trust Agreement,
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby (Section 10.02).
MODIFICATION AND WAIVER
Unless otherwise specified in the applicable Prospectus
Supplement, the Trust Agreement for each Series of Trust Certificates may be
amended by the Depositor and the Trustee with respect to such Series, without
notice to or consent of the Certificateholders, for certain purposes including
(i) to cure any ambiguity, (ii) to correct or supplement any provision therein
which may be inconsistent with any other provision therein or in the Prospectus
Supplement, (iii) to add or supplement any Credit Support for the benefit of any
Certificateholders (provided that if any such addition affects any series or
class of Certificateholders differently than any other series or class of
Certificateholders, then such addition will not, as evidenced by an opinion of
counsel, have a material adverse effect on the interests of any affected series
or class of Certificateholders), (iv) to add to the covenants, restrictions or
obligations of the Depositor, the Administrative Agent, if any, or the Trustee
for the benefit of the Certificateholders, (v) to add, change or eliminate any
other provisions with respect to matters or questions arising under such Trust
Agreement so long as (x) any such addition, change or elimination will not, as
evidenced by an opinion of counsel, affect the tax status of the Trust or result
in a sale or exchange of any Certificate for tax purposes and (y) the Trustee
has received written confirmation from each Rating Agency rating such
Certificates that such amendment will not cause such Rating Agency to reduce or
withdraw the then current rating thereof, or (vi) to comply with any
requirements imposed by the Code. Without limiting the generality of the
foregoing, unless otherwise specified in the applicable Prospectus Supplement,
the Trust Agreement may also be modified or amended from time to time by the
Depositor, and the Trustee, with the consent of the holders of Certificates
evidencing not less than the "Required Percentage--Amendment" (as defined in the
Prospectus Supplement) of the Voting Rights of those Certificates that are
materially adversely affected by such modification or amendment for the purpose
of adding any provision to or changing in any manner or eliminating any
provision of the Trust Agreement or of modifying in any manner the rights of
such Certificateholders; provided, however, that in the event such modification
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or amendment would materially adversely affect the rating of any Series or Class
by each Rating Agency, the "Required Percentage--Amendment" specified in the
related series supplement to the Trust Agreement shall include an additional
specified percentage of the Certificates of such Series or Class.
Except as otherwise set forth in the applicable Prospectus
Supplement, no such modification or amendment may, however, (i) reduce in any
manner the amount of or alter the timing of, distributions or payments which are
required to be made on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any such amendment without the consent of the
holders of all Certificates covered by the Trust Agreement then outstanding.
Unless otherwise specified in the applicable Prospectus
Supplement, holders of Certificates evidencing not less than the "Required
Percentage--Waiver" (as defined in the Prospectus Supplement) of the Voting
Rights of a given Series may, on behalf of all Certificateholders of that
Series, (i) waive, insofar as that Series is concerned, compliance by the
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 5.20).
REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in
the applicable Prospectus Supplement, with each distribution to
Certificateholders of any Class of Certificates of a given Series, the
Administrative Agent or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such
Certificateholder, to the 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 4.03).
Notices. Unless otherwise provided in the applicable
Prospectus Supplement, any notice required to be given to a holder of a
Registered Certificate will be mailed to the last address of such holder set
forth in the applicable Certificate register. Any notice required to be given to
a holder of a Bearer Certificate will be published in a daily morning newspaper
of general circulation in the city or cities specified in the Prospectus
Supplement relating to such Bearer Certificate.
EVIDENCE AS TO COMPLIANCE
If so specified in the applicable Prospectus Supplement, the
Trust Agreement will provide that commencing on a certain date and on or before
a specified date in each year thereafter, a firm of independent public
accountants will furnish a statement to the Trustee to the effect that such firm
has examined certain documents and records relating to the administration of the
Deposited
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Assets during the related 12-month period (or, in the case of the first such
report, the period ending on or before the date specified in the Prospectus
Supplement, which date shall not be more than one year after the related
Original Issue Date) and that, on the basis of certain agreed upon procedures
considered appropriate under the circumstances, such firm is of the opinion that
such administration was conducted in compliance with the terms of the Trust
Agreement, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions and qualifications as shall be set forth in
such report.
The Trust Agreement may also provide for delivery to the
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.
Copies of the annual accountants' statement, if any, and the
statement of officers of the Trustee may be obtained by Certificateholders
without charge upon written request to either the Administrative Agent or the
Trustee, as applicable, at the address set forth in the related Prospectus
Supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus
Supplement, if a Certificate is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the applicable Trustee in
the City and State of New York (in the case of Registered Certificates) or at
the principal London office of the applicable Trustee (in the case of Bearer
Certificates), or such other location as may be specified in the applicable
Prospectus Supplement, upon payment by the holder of such expenses as may be
incurred by the applicable Trustee in connection therewith and the furnishing of
such evidence and indemnity as such Trustee may require. Mutilated Certificates
must be surrendered before new Certificates will be issued (Section 5.05).
TERMINATION
The obligations created by the Trust Agreement for each Series
of Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related Prospectus Supplement. In no event, however, will any trust
created by the Trust Agreement continue beyond the respective date specified in
the related Prospectus Supplement. Written notice of termination of the
obligations with respect to the related Series of Certificates under the Trust
Agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices--
48
<PAGE>
Notices," and the final distribution will be made only upon surrender and
cancellation of the Certificates at an office or agency appointed by the Trustee
which will be specified in the notice of termination (Section 9.01).
Any such purchase of Deposited Assets and property acquired in
respect of Deposited Assets evidenced by a Series of Certificates shall be made
at a price approximately equal to the aggregate fair market value of all the
assets in the Trust (as determined by the Trustee, the Administrative Agent, if
any, and, if different than both such persons, the person entitled to effect
such termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable Prospectus Supplement, a specified
price as determined therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such Series
at the time of purchase being less than the percentage of the aggregate
principal balance of the Deposited Assets at the Cut-off Date for that Series
specified in the related Prospectus Supplement (Section 9.01).
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or
sufficiency of the Trust Agreement, the Certificates of any Series or any
Deposited Asset or related document and is not accountable for the use or
application by or on behalf of any Administrative Agent of any funds paid to
such Administrative Agent or its designee in respect of such Certificates or the
Deposited Assets, or deposited into or withdrawn from the related Certificate
Account or any other account by or on behalf of such Administrative Agent
(Section 7.04). If no Administrative Agent Termination Event has occurred and is
continuing with respect to any given Series, the Trustee is required to perform
only those duties specifically required under the Trust Agreement with respect
to such Series. However, upon receipt of the various certificates, reports or
other instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the applicable
requirements of the Trust Agreement (Section 7.01).
THE TRUSTEE
The Trustee for any given Series of Certificates under the
Trust Agreement will be named in the related Prospectus Supplement. The
commercial bank, national banking association or trust company serving as
Trustee will be unaffiliated with, but may have normal banking relationships
with, the Depositor, any Administrative Agent and their respective affiliates.
49
<PAGE>
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, the Depositor and any underwriter, agent or dealer participating in
the offering of any Bearer Certificate will agree that, in connection with the
original issuance of such Bearer Certificate and during the period ending 40
days after the issue of such Bearer Certificate, they will not offer, sell or
deliver such Bearer Certificate, directly or indirectly, to a U.S. Person (as
defined below) or to any person within the United States; except to the extent
permitted under U.S. Treasury regulations.
Bearer Certificates will bear a legend to the following
effect: "Any United States Person who holds this obligation will be subject to
limitations under the United States income tax laws, including the limitations
provided in Sections 165(j) and 1287(a) of the Internal Revenue Code." The
sections referred to in the legend provide that, with certain exceptions, a
United States taxpayer who holds Bearer Certificates will not be allowed to
deduct any loss with respect to, and will not be eligible for capital gain
treatment with respect to any gain realized on a sale, exchange, redemption or
other disposition of, such Bearer Certificates.
As used herein, "United States" means the United States of
America and its possessions, and "U.S. Person" means a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, or an estate or trust the
income of which is subject to United States Federal income taxation regardless
of its source.
Pending the availability of a definitive Global Security or
individual Bearer Certificates, as the case may be, Certificates that are
issuable as Bearer Certificates may initially be represented by a single
temporary Global Security, without interest coupons, to be deposited with a
common depositary in London for Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System ("Euroclear"), and Centrale
de Livraison de Valeurs Mobilieres S.A. ("CEDEL") for credit to the accounts
designated by or on behalf of the purchasers thereof. Following the availability
of a definitive Global Security in bearer form, without coupons attached, or
individual Bearer Certificates and subject to any further limitations described
in the applicable Prospectus Supplement, the temporary Global Security will be
exchangeable for interests in such definitive Global Security or for such
individual Bearer Certificates, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership." A "Certificate of Non-U.S.
Beneficial Ownership" is a certificate to the effect that a beneficial interest
in a temporary Global Security is owned by a person that is not a U.S. Person or
is owned by or through a financial institution in compliance with applicable
U.S. Treasury regulations. No Bearer Certificate will be delivered in or to the
United States. If so specified in the applicable Prospectus Supplement, interest
on a temporary Global Security will be distributed to each of Euroclear and
CEDEL with respect to that portion of such temporary Global Security held for
its account, but only upon receipt as of the relevant Distribution Date of a
Certificate of Non-U.S. Beneficial Ownership.
50
<PAGE>
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Certificate having a Specified Currency
other than U.S. dollars entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Such risks
include, without limitation, the possibility of significant changes in rates of
exchange between the U.S. dollar and such Specified Currency and the possibility
of the imposition or modification of foreign exchange controls with respect to
such Specified Currency. Such risks generally depend on factors over which the
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.
As set forth in the applicable Prospectus Supplement, certain
of the Underlying Securities may be denominated in a currency other than the
Specified Currency. Although payments in respect of principal and interest on
the Certificates will be made in the Specified Currency, such payments may be
based in whole or in part upon receipt by the related Trust of payments in the
Underlying Securities Currency. An investment in Certificates supported by
Underlying Securities denominated in a currency other than the Specified
Currency entails significant risks not associated with an investment in
securities supported by obligations denominated in the same currency as the
currency of payment on such securities. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the
Specified Currency and the Underlying Securities Currency and the possibility of
the imposition or modification of foreign exchange controls with respect to
either the Specified Currency or the Underlying Securities Currency.
51
<PAGE>
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES
DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN
APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus is directed to
prospective purchasers of Certificates who are United States residents. The
applicable Prospectus Supplement for certain issuances of Certificates may set
forth certain information applicable to prospective purchasers who are residents
of countries other than the United States with respect to matters that may
affect the purchase or holding of, or receipt of distributions of principal,
premium or interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a
Specified Currency other than U.S. dollars will contain information concerning
historical exchange rates for such currency against the U.S. dollar, a
description of such currency, any exchange controls affecting such currency and
any other required information concerning such currency.
PAYMENT CURRENCY
Except as set forth below or unless otherwise provided in the
applicable Prospectus Supplement, if distributions in respect of a Certificate
are required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the 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
52
<PAGE>
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
If the official unit of any component currency is altered by
way of combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or more
component currencies are consolidated into a single currency, the amounts of
those currencies as Components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a Component
shall be replaced by amounts of such two or more currencies, each of which shall
be equal to the amount of the former component currency divided by the number of
currencies into which that currency was divided.
All determinations referred to above made by the applicable
Trustee shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on the related
Certificateholders of such Series.
FOREIGN CURRENCY JUDGMENTS
Unless otherwise specified in the applicable Prospectus
Supplement, the Certificates will be governed by and construed in accordance
with the law of the State of New York. Courts in the United States customarily
have not rendered judgments for money damages denominated in any currency other
than the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New
York provides, however, that an action based upon an obligation denominated in a
currency other than U.S. dollars will be rendered in the foreign currency of the
underlying obligation and converted into U.S. dollars at the rate of exchange
prevailing on the date of the entry of the judgment or decree.
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Series of Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such Certificates and
the proceeds to the Depositor from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers, any
securities exchanges on which such Certificates may be listed, any restrictions
on the sale and delivery of Certificates in bearer form and the place and time
of delivery of the Certificates to be offered thereby.
53
<PAGE>
If underwriters are used in the sale, Certificates will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Such Certificates may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Such managing underwriters or underwriters in the United States will
include Lehman Brothers Inc., an affiliate of the 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 Section 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
affiliate.
As to each Series of Certificates, only those Classes rated in
one of the investment grade rating categories by a Rating Agency will be offered
hereby. Any unrated Classes or Classes
54
<PAGE>
rated below investment grade may be retained by the 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
LLP, New York, New York or other counsel identified in the applicable Prospectus
Supplement.
55
<PAGE>
No dealer, salesman or other person has been authorized to
given any information or to make any representation not contained in the
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or Lehman Brothers Inc. The
Prospectus does not constitute an offer of any securities other than those to
which they relate or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of the Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date of the
Prospectus.
TABLE OF CONTENTS
Prospectus
Prospectus Supplement........................................................3
Available Information........................................................3
Incorporation of Certain Documents by Reference..............................4
Reports to Certificateholders................................................4
Important Currency Information ..............................................5
Risk Factors.................................................................5
The Depositor................................................................8
Use of Proceeds..............................................................9
Formation of the Trust.......................................................9
Maturity and Yield Considerations...........................................10
Description of Certificates.................................................12
Description of Deposited Assets and Credit Support..........................31
Description of the Trust Agreement..........................................38
Limitations on Issuance of Bearer Certificates..............................50
Currency Risks..............................................................51
Plan of Distribution........................................................53
Legal Opinions..............................................................55
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the SEC
registration and filing fees, are estimated:
SEC Registration Fee...................................... $295,008.03
Legal Fees and Expenses................................... $**
Accounting Fees and Expenses.............................. $**
Trustee's Fees and Expenses
(including counsel Fees)................................ $**
Blue Sky Qualification Fees
and expenses........................................... $**
Printing and Engraving Fees............................... $**
Rating Agency Fees........................................ $**
Miscellaneous............................................. $**
----
Total..................................................... $**
- ------------------
* $303.03 was previously paid
** To be provided by amendment
Item 15. Indemnification of Directors and Officers.
Section 145 of the General corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or witness or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses, costs and fees (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with such action suit or proceeding if the person indemnified acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. If the person indemnified is not wholly successful in such action,
suit or proceeding, but is successful, on the merits or otherwise, in one or
more but less than all claims, issues or matters in such proceeding, he or she
may be indemnified against expenses actually and reasonably incurred in
connection with each successfully resolved claim, issue or matter. In the case
of an action or suit by or in the right of the corporation, no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Section 145 provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
<PAGE>
The Certification of Incorporation of the Registrant provides that no
Director of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a Director;
provided, however, that this limitation of liability of a Director shall not
apply with respect to (i) any breach of the Director's duty of loyalty to the
Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) any
liability arising under Section 174 of the General Corporation Law of the State
of Delaware and (iv) for any transaction from which the Director derives an
improper personal benefit. The Bylaws of the Registrant require that the
Registrant indemnify each of its Directors and officers, who serve as a Director
or officer of the Registrant, or as a director, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Registrant, to the fullest extent permitted under and in
accordance with the laws of the State of Delaware.
Reference is made to Section 6 of the form of Underwriting Agreement filed
as Exhibit 1.1 hereto for provisions relating to the indemnification of
directors, officers and controlling persons against certain liabilities
including liabilities under the Securities Act of 1933, as amended.
Item 16. Exhibits:
*1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation of Lehman ABS Corporation as
currently in effect
*3.2 Bylaws of Lehman ABS Corporation as currently in effect
*4.1 Form of Trust Agreement, with form of Certificate attached
thereto.
*5.1 Opinion of Weil, Gotshal & Manges LLP as to legality
(including consent of such firm)
*8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax
matters (including consent of such firm)
*23.1 Consents of Weil, Gotshal & Manges LLP (included in Exhibits
5.1 and 8.1)
*24.1 Power of Attorney (included on Signature Page)
*25.1(a) Statement of eligibility of Trustee
- -----------------
* Previously filed; incorporated by reference.
<PAGE>
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933 each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
B. Filing Incorporating Subsequent Exchange Act Documents By Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at the time shall be deemed to be the initial bona fide
offering thereof.
C. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant, as the case may be, will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
D. Undertaking in respect of the eligibility of the Trustee.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned hereby certifies on behalf of Lehman ABS Corporation (the
"Company") that he has reasonable grounds to believe that the Company meets all
of the requirements for filing on Form S-3 and the Company has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 12th day of December, 1997.
LEHMAN ABS CORPORATION
By: /s/ Mark L. Zusy
-----------------------------
Mark L. Zusy
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby severally constitutes and
appoints Mark L. Zusy his true and lawful attorney-in-fact, for him and in his
name, place and stead, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to cause the same to be filed
with the Securities and Exchange Commission, hereby granting to said
attorney-in-fact full power and authority to do and perform each and every act
and thing whatsoever requisite or desirable to be done and about the premises as
fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorney-in-fact may do or cause to be done by virtue of these presents.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Position Date
- --------- -------- ----
* /s/ Theodore P. Janulis President December 12, 1997
- ------------------------- (Principal Executive Officer);
Theodore P. Janulis and Director
* /s/ Charles B. Hintz Chief Financial Officer December 12, 1997
- ------------------------ (Principal Financial Officer)
Charles B. Hintz
* /s/ David Goldfarb Controller December 12, 1997
- ------------------------
David Goldfarb
* /s/ James J. Sullivan Director December 12, 1997
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James J. Sullivan
/s/ Mark L. Zusy Director December 12, 1997
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Mark L. Zusy
* By /s/ Mark L. Zusy
--------------------
Mark L. Zusy
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
*1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation of Lehman ABS Corporation as
currently in effect
*3.2 Bylaws of Lehman ABS Corporation as currently in effect
*4.1 Form of Trust Agreement, with form of Certificate attached
*5.1 Opinion of Weil, Gotshal & Manges LLP as to legality
(including consent of such firm)
*8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax
matters (including consent of such firm)
*23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibits
5.1 and 8.1)
*24.1 Power of Attorney (included on Signature Page to
Registration Statement)
*25.1(a) Statement of eligibility of Trustee
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* Previously filed; incorporated by reference.
