<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 12, 1997)
$65,775,000
CORPORATE BOND-BACKED CERTIFICATES,
SERIES 1998-ADM-1
(Underlying Securities will be 6.95% Debentures Due December 15, 2097
issued by Archer-Daniels-Midland Company)
Each Corporate Bond-Backed Certificate, Series 1998-ADM-1 offered hereby
(collectively, the "Certificates") represents a proportionate undivided
beneficial ownership interest in a trust (the "Trust") formed pursuant to the
Trust Agreement, dated as of March 30, 1998, between Lehman ABS Corporation (the
"Depositor") and The Bank of New York, as trustee (the "Trustee"). The
Certificates will be issued in two classes, Class A-1 and Class A-2, having the
characteristics described herein.
The principal assets of the Trust will be $65,775,000 aggregate principal
amount of 6.95% Debentures due December 15, 2097 (the "Underlying Securities")
issued by Archer-Daniels-Midland Company (the "Company" or the "Underlying
Securities Issuer"), having the characteristics described herein under
"Description of the Underlying Securities."
Archer-Daniels-Midland Company is not participating in, and will not
receive any proceeds in connection with, the offering of the Certificates, and
is not an affiliate of the Depositor or any of its affiliates. The Underlying
Securities were originally issued and sold as part of a public offering in
December 1997, were acquired by an affiliate of the Depositor in the secondary
market and will be deposited on behalf of the Depositor into the Trust for the
benefit of the Certificateholders.
The holders of the Class A-1 Certificates (the "Class A-1
Certificateholders") will be entitled to receive, on June 15 and December 15 of
each year (or if such date is not a Business Day (as defined herein), the next
succeeding Business Day) (each a "Distribution Date"), commencing June 15, 1998
and ending on the Final Scheduled Distribution Date (as defined below), as and
if interest is received on the Underlying Securities, interest distributions at
a rate of 6.50% per annum on the outstanding principal amount of the Class A-1
Certificates. The Class A-1 Certificates will amortize on each Distribution Date
on a level yield basis. The holders of the Class A-2 Certificates (the "Class
A-2 Certificateholders" and, together with the Class A-1 Certificateholders, the
"Certificateholders") will not be entitled to distributions of interest. On
December 15, 2017 (the "Final Scheduled Distribution Date"), the Class A-2
Certificateholders will be entitled to a distribution of all Underlying
Securities held by the Trust as of such date. All distributions of interest and
principal (in the case of the Class A-1 Certificates) or Underlying Securities
(in the case of the Class A-2 Certificates) will be made on a pro rata basis to
the Certificateholders of each respective class. It is a condition to the
issuance of the Certificates that the Certificates have ratings assigned by
Moody's Investors Service, Inc. ("Moody's") and by Standard & Poor's, a division
of The McGraw-Hill Companies, Inc. ("S&P"), equivalent to the ratings of the
Underlying Securities, which, as of the date of this Prospectus Supplement, were
"Aa3" by Moody's and "AA-" by S&P.
The Class A-1 and Class A-2 Certificates have been authorized for listing,
upon official notice of issuance, with the New York Stock Exchange ("NYSE").
See "Risk Factors" herein on pages S-12 and S-13, and in the Prospectus on
pages 4 and 5.
(Cover continued on next page)
____________________
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY OF ITS AFFILIATES.
THE CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE UNDERLYING
SECURITIES ISSUER OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Initial Aggregate Certificate Final Scheduled CUSIP
Class Principal Amount Interest Rate Distribution Date Number
----- ---------------- ------------- ----------------- ------
Class A-1 $50,694,774(1) 6.50%(1) December 15, 2017 21987H AS 4
Class A-2 $65,775,000 (2) December 15, 2017 21987H AT 2
- ------------------
(1) The Class A-1 Certificateholders will be entitled to receive, on June 15
and December 15 of each year, commencing on June 15, 1998 and ending on
the Final Scheduled Distribution Date, interest distributions at a rate of
6.50% per annum on the outstanding principal amount of the Class A-1
Certificates. The Class A-1 Certificates will amortize on each
Distribution Date.
(2) The Class A-2 Certificateholders generally will not be entitled to
distributions of interest or other cash distributions. On the Final
Scheduled Distribution Date, the Class A-2 Certificateholders will be
entitled to a distribution of all of the Underlying Securities then held
by the Trust.
----------------
The Class A-1 and Class A-2 Certificates offered hereby will be purchased
by Lehman Brothers Inc. (the "Underwriter") from the Depositor and will be
offered by the Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The combined
maximum offering price of the Class A-1 and Class A-2 Certificates offered
hereby will be $69,326,167. The aggregate proceeds to the Depositor from the
sale of the Class A-1 and Class A-2 Certificates will be approximately
$68,626,167, before deducting expenses payable by the Depositor, subject to the
terms and conditions set forth in the Underwriting Agreement referred to herein
under "Method of Distribution." For further information with respect to the plan
of distribution and any discounts, commissions or profits that may be deemed
underwriting discounts or commissions, see "Method of Distribution." The
Certificates are offered subject to receipt and acceptance by the Underwriter,
to prior sale and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Certificates will be made in book-entry form through the
facilities of The Depository Trust Company on March 30, 1998 (the "Closing
Date").
----------------
LEHMAN BROTHERS
March 27, 1998
<PAGE>
(Cover page continued)
As and to the extent described herein, collections received by the Trustee
with respect to the Underlying Securities will be distributed to Certificate-
holders in the manner and priority described herein.
There is currently no secondary market for the Certificates, and there can
be no assurance that a secondary market for the Certificates will develop or, if
it does develop, that it will continue. See "Risk Factors" herein and in the
Prospectus.
The Certificates initially will be represented by certificates registered
in the name of CEDE & Co., as nominee of The Depository Trust Company ("DTC").
The interests of beneficial owners of such Certificates will be represented by
book entries on the records of participating members of DTC ("Participants").
Definitive certificates will be available for such Certificates only under the
limited circumstances described herein. See "Description of the
Certificates--Definitive Certificates."
----------------
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR PURSUANT TO ITS
PROSPECTUS, DATED DECEMBER 12, 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 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
SUMMARY
The following summary of certain pertinent information does not purport to
be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus, including under
the headings "Description of the Certificates," "Description of the Underlying
Securities" and "Description of Deposited Assets and Credit Support." Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Defined Terms" or, to the
extent not defined herein, have the meanings assigned to such terms in the
Prospectus or the Underlying Securities Prospectus.
The Certificates
<TABLE>
<S> <C>
Certificates Offered........................ The Corporate Bond-Backed Certificates, Series 1998-ADM-1 (the
"Certificates"). The Certificates will be offered in two classes,
Class A-1 and Class A-2, having the characteristics described
herein. Each class of Certificates represents a proportionate
undivided beneficial ownership interest in certain distributions to
be made by the Trust, and will be issued pursuant to the Trust
Agreement (as defined below). The Underlying Securities will be
the sole asset of the Trust from which Certificateholders will
receive any distributions.
The Trust................................... The Corporate Bond-Backed Certificates Series 1998-ADM-1 Trust
(the "Trust"). The Trust will be formed pursuant to the Series
Supplement, Series 1998-ADM-1 (the "Series Supplement"), which
incorporates the Standard Terms for Trust Agreements (the
"Standard Terms" and, together with the Series Supplement, the
"Trust Agreement") by and between the Depositor and the Trustee.
Depositor................................... Lehman ABS Corporation (the "Depositor"), an indirect wholly-owned
subsidiary of Lehman Brothers Inc., will deposit the Underlying
Securities into the Trust. See "The Depositor" in the
Prospectus.
Trustee..................................... The Bank of New York. The Trustee will receive compensation at
the rate set forth in the Trust Agreement, payable on each
Distribution Date (the "Trustee Fee").
Closing Date................................ March 30, 1998.
Trust Assets................................ The principal assets of the Trust will be $65,775,000 aggregate
principal amount of the 6.95% Debentures due December 15, 2097
(the "Underlying Securities") issued by Archer-Daniels-Midland
Company (the "Company" or the "Underlying Securities Issuer"),
having the characteristics described herein.
Initial Aggregate Principal Amount
of Class A-1 Certificate................. $50,694,774.
Aggregate Principal Amount of
Class A-2 Certificates................... $65,775,000.
Final Scheduled Distribution Date........... December 15, 2017.
Distributions............................... The Underlying Securities will be the sole source of distributions
on the Certificates. All distributions of interest and
principal (in the
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
case of the Class A-1 Certificates) or Underlying Securities (in
the case of the Class A-2 Certificates) will be made on a pro rata
basis to the holders of each respective Certificate class.
Class A-1 Certificates...................... The Class A-1 Certificates will be issued with an initial aggregate
principal amount of $50,694,774. The holders of the Class A-1
Certificates (the "Class A-1 Certificateholders") will be entitled to
receive, on June 15 and December 15 of each year (or if any such
date is not a Business Day, the next succeeding Business Day)
(each, a "Distribution Date"), commencing June 15, 1998 and
ending on the Final Scheduled Distribution Date, the interest
payment, if any, received on the Underlying Securities less
ordinary Trustee's fees and scheduled expenses due to the Trustee
on such Distribution Date, which will represent a return of
principal on the Class A-1 Certificates in accordance with Schedule
A, the amortization schedule, set forth herein under "Description of
the Certificates," and the payment of interest at a rate of 6.50% per
annum on the outstanding principal amount of the Class A-1
Certificates. The Class A-1 Certificates will amortize on each
Distribution Date on a level yield basis. The Class A-1
Certificateholders generally will not be entitled to any allocation of
any principal payments received on the Underlying Securities.
Class A-2 Certificates...................... The Class A-2 Certificates will be issued with an aggregate principal
amount of $65,775,000 and will not entitle holders thereof (the
"Class A-2 Certificateholders") to distributions of interest. With
the exception of an occurrence of an Optional Redemption of the
Underlying Securities by the Underlying Securities Issuer or an
advance of maturity date based upon the Underlying Securities
Issuer's Conditional Right to Shorten Maturity or Optional
Redemption upon the Occurrence of a Tax Event (see "Description
of the Underlying Securities--Conditional Right to Shorten
Maturity or Optional Redemption upon the Occurrence of a Tax
Event" herein), no cash distributions will be made on the Class A-
2 Certificates. Instead, on December 15, 2017 (the "Final
Scheduled Distribution Date"), the holders of Class A-2
Certificates outstanding will be entitled to a distribution of all of
the Underlying Securities held by the Trust as of such date.
Distributions on the
Certificates in the Event
of a Default on the
Underlying Securities.................... In the event of the occurrence of a payment default on the Underlying
Securities or an acceleration of the maturity of the Underlying
Securities in connection with a default thereon, the Trustee will
distribute the Underlying Securities to the Class A-1 and the Class
A-2 Certificateholders in accordance with the Allocation Ratio, as
calculated on the date of such default, within 30 days of the
occurrence of such default.
......................................... As used herein, "Allocation Ratio" means the ratio of the Class A-1
Allocation to the Class A-2 Allocation. The "Class A-1
Allocation" means the present value (discounted at the rate of
6.861% per annum) of the unpaid interest coupons due or to
become due on the Underlying Securities on or prior to the Final
S-4
<PAGE>
Scheduled Distribution Date. The "Class A-2 Allocation" means the
sum of the present values (discounted at the rate of 6.861% per
annum) of (i) the unpaid interest coupons due or to become due on
the Underlying Securities after the Final Scheduled Distribution
Date and (ii) the principal amount of the Underlying Securities (in
each case assuming that the scheduled payments on the Underlying
Securities were paid when due and that the Underlying Securities
were not redeemed prior to their stated maturity).
......................................... If, as a result of the minimum denominations of the Underlying
Securities, the Trustee cannot distribute the Underlying Securities
in accordance with the Allocation Ratio, the Trustee will be
permitted to sell, in accordance with the Sales Procedures (as
defined in "The Market Agent Agreement--Sale of the Underlying
Securities"), such minimum amount of the Underlying Securities as
will be necessary in order that the Underlying Securities, together
with the proceeds received from the sale of any portion thereof,
may be distributed in accordance with the Allocation Ratio.
Distributions on the Certificates upon
the Redemption of the Underlying
Securities at the Option of the
Underlying Securities Issuer............. In the event of an optional redemption of the Underlying Securities
by the Underlying Securities Issuer (see "Description of the
Underlying Securities--Redemption at the Option of the
Underlying Securities Issuer" herein), the proceeds of such
redemption will be allocated between the Class A-1 Certificates
and the Class A-2 Certificates in accordance with the Allocation
Ratio as calculated on such redemption date. Schedule B, set forth
herein under "Description of the Certificates--Distributions upon
Optional Redemption or Conditional Shortening of Maturity Date,"
shows the percentages of such payment that would be distributable
to the Class A-1 and Class A-2 Certificates, respectively, if the
redemption occurred on any semiannual Distribution Date on or
prior to December 15, 2017.
Distributions on the Certificates upon
a Conditional Shortening of Maturity
Date or Optional Redemption of the
Underlying Securities following a
Tax Event ............................... In the event of an advance of maturity date to a date prior to the
Final Scheduled Distribution Date as a result of a Tax Event or an
Optional Redemption of the Underlying Securities upon the
occurrence of a Tax Event (see "Description of the Underlying
Securities--Conditional Right to Shorten Maturity or Optional
Redemption upon the Occurrence of a Tax Event" herein), the
payment, if any, received on such "advanced" maturity date or the
proceeds of such redemption will be allocated between the Class
A-1 Certificates and the Class A-2 Certificates in accordance with
the Allocation Ratio as calculated on such advanced maturity date
or redemption date. Schedule B, set forth herein under
"Description of the Certificates--Distributions upon Optional
Redemption or Conditional Shortening of Maturity Date," shows
the percentages of such payment that would be distributable to the
S-5
<PAGE>
Class A-1 and Class A-2 Certificates, respectively, if the
redemption occurred on any semiannual Distribution Date on or
prior to December 15, 2017.
Record Dates................................ The day immediately preceding each Distribution Date.
Business Day................................ Any day other than (i) Saturday and Sunday or (ii) a day on which
banking institutions in New York City are authorized or obligated
by law or executive order to be closed for business or (iii) a day
that is not a business day, as such term is used in the indenture to
the Underlying Securities.
Denominations and Specified
Currency................................. The Certificates will be denominated and payable in U.S. dollars (the
"Specified Currency"). The Class A-1 Certificates will be issued
in minimum principal amounts of $100,000, and in integral
multiples of $1,000 in excess thereof (except that a single Class A-
1 Certificate may be issued in an amount in excess of $100,000
that is not an integral multiple of $1,000). The Class A-2
Certificates will be issued in minimum denominations of $100,000
and in integral multiples of $1,000 in excess thereof.
Form of Security............................ Book-entry Certificates registered with The Depository Trust
Company ("DTC"), except in certain limited circumstances. See
"Description of the Certificates--Definitive Certificates."
Distributions thereon will be settled in immediately available
(same-day) funds.
CUSIP Numbers............................... Class A-1 Certificates: 21987H AS 4.
....................................... Class A-2 Certificates: 21987H AT 2.
Certain Federal Income Tax
Consequences............................. In the opinion of tax counsel to the Trust, the Trust will be
classified for Federal income tax purposes as a grantor trust and
not as an association (or publicly traded partnership) taxable as
a corporation. Although it is unclear under the Code (as defined
in "Certain Federal Income Tax Consequences--General"), the Class
A-1 Certificates will be treated by the Trust as newly-issued
self- amortizing debt obligations maturing on the Final Scheduled
Distribution Date. Assuming the Underlying Securities constitute
indebtedness for federal income tax purposes, the Class A-2
Certificates will be deemed to be issued with original issue
discount. See "Certain Federal Income Tax Consequences."
Listing..................................... The Class A-1 and Class A-2 Certificates have been authorized for
listing, upon official notice of issuance, with the New York Stock
Exchange ("NYSE").
Ratings..................................... It is a condition to the issuance of the Certificates that the
Certificates have ratings assigned by Moody's Investors Service,
Inc. ("Moody's") and by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") equivalent to the ratings of
the Underlying Securities, which, as of the date of this
Prospectus Supplement, were "Aa3" by Moody's and "AA-" by S&P.
S-6
<PAGE>
......................................... The rating of the Certificates by Moody's addresses the likelihood
that Certificateholders will receive the timely payment of
principal and interest on a semi-annual basis beginning June 15,
1998 and lasting until the Final Scheduled Distribution Date.
The rating of the Certificates by S&P addresses the likelihood of
timely receipt of interest on the Class A-1 Certificates or any
Underlying Securities distributed in respect of the Class A-2
Certificates and ultimate receipt of principal on any Underlying
Securities distributed in respect of the Class A-2 Certificates.
There is no assurance that any such rating will continue for any
period of time or that it will not be revised or withdrawn
entirely by the related rating agency if, in its judgment,
circumstances (including, without limitation, the rating of the
Underlying Securities) so warrant. A revision or withdrawal of
such rating may have an adverse effect on the market price of
Certificates. A security rating is not a recommendation to buy,
sell or hold securities. The rating on the Certificates does not
constitute a statement regarding the occurrence or frequency of
redemptions on, or extensions of the maturity of, the Underlying
Securities, and the corresponding effect on yield to investors.
See "Ratings."
ERISA Considerations........................ An employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including an
individual retirement account (an "IRA") or Keogh plan (a
"Keogh") (each, a "Plan") should consult its advisors concerning
the ability of such Plan to purchase Certificates under ERISA or
the Code. See "ERISA Considerations."
</TABLE>
S-7
<PAGE>
The Underlying Securities
The Underlying Securities were issued under an Indenture dated as of June
1, 1986 as amended and supplemented by a Supplemental Indenture dated as of
August 1, 1989 and as amended by the Trust Indenture Reform Act of 1990 (the
"Indenture") between the Underlying Securities Issuer and The Chase Manhattan
Bank, formerly known as Chemical Bank, as Trustee (the "Underlying Securities
Trustee"), providing for the issuance of debt securities by the Underlying
Securities Issuer. The Underlying Securities were part of one series of
Debentures totalling $250,000,000 out of the entire issuance of $450,000,000.
The following summary of certain provisions of the Underlying Securities and the
Indenture relating thereto does not purport to be complete and is based upon the
Prospectus and Prospectus Supplement each dated December 10, 1997 (collectively,
the "Underlying Securities Prospectus") of the Underlying Securities Issuer, and
is subject to, and is qualified in its entirety by reference to, all provisions
of the Underlying Securities and the Indenture relating thereto, including the
definitions therein of certain terms. None of the Depositor, the Trustee, the
Underwriter, or any of their respective affiliates, have made any investigation
of the Underlying Securities Issuer (including, without limitation, any
investigation as to its financial condition or creditworthiness) or of the
Underlying Securities (including, without limitation, any investigation as to
their rating).
<TABLE>
<S> <C>
Underlying Securities....................... $65,775,000 aggregate principal balance of the 6.95% Debentures due
December 15, 2097, comprising a portion of a fixed rate, publicly
issued, unsecured debt security issue of Archer-Daniels-Midland
Company. Interest on the Underlying Securities accrues at the
annual rate of 6.95% for each semi-annual accrual period and is
payable on each June 15 and December 15 (each an "Underlying
Securities Interest Payment Date"). The entire principal balance
of the Underlying Securities will be payable on December 15, 2097
(the "Underlying Securities Maturity Date").
Underlying Securities Issuer................ Archer-Daniels-Midland Company (the "Company" or the "Underlying
Securities Issuer") is a major processor of agricultural products
for the food and feed industries whose executive offices are
located at 4666 Faries Parkway, Decatur, Illinois 62526 and whose
telephone number is (217) 424-5200. See "Description of the
Underlying Securities."
Security.................................... None.
Underlying Securities Original
Issue Date............................... December 15, 1997.
Original Amount of Underlying
Securities Issued........................ $250,000,000.
Underlying Securities Maturity
Date..................................... December 15, 2097.
Amortization................................ None.
Underlying Securities Interest
Payment Dates............................ June 15 and December 15.
Underlying Securities Interest
Rate..................................... 6.95% per annum.
Underlying Securities Interest
Accrual Periods.......................... Semi-annual.
S-8
<PAGE>
Redemption at the Option of the
Underlying Securities Issuer............. The Underlying Securities are redeemable as a whole or in part, at
any time, at the option of the Company, on not less than 30 nor
more than 60 days prior written notice to the holders thereof, at
a redemption price equal to the greater of (i) 100% of the
principal amount of the Underlying Securities to be redeemed and
(ii) the sum of the present values of the Remaining Scheduled
Payments (as defined in "Description of the Underlying
Securities- Redemption at the Option of the Underlying Securities
Issuer") of principal and interest thereon, discounted to the
redemption date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as
defined in "Description of the Underlying Securities--Redemption
at the Option of the Underlying Securities Issuer"), plus 15
basis points, together in either case with accrued interest on
the principal amount being redeemed to the date of redemption.
Conditional Shortening of Maturity
Date or Optional Redemption upon the
Occurrence of a Tax Event................ According to the Underlying Securities Prospectus, the Underlying
Securities Issuer intends to deduct interest paid on the
Underlying Securities for United States federal income tax
purposes. During the past several years there have been several
legislative proposals which, although not enacted, contained
proposed tax law changes that, among other things, would prohibit
an issuer from deducting interest payments on debt instruments
with a maturity of more than 40 years. Upon the occurrence of a
Tax Event (as defined below), the Underlying Securities Issuer
will have the right, without the consent of the holders of the
Underlying Securities, to shorten the maturity of the Underlying
Securities to the minimum extent required, in the opinion of
nationally recognized independent tax counsel, such that, after
the shortening of the maturity, the interest paid on the
Underlying Securities will be deductible for United States
federal income tax purposes.
......................................... As used herein, "Tax Event" means that the Underlying Securities
Issuer shall have received an opinion of a nationally recognized
independent tax counsel to the effect that, as a result of (a)
any amendment to, clarification of, or change (including any
announced prospective amendment, clarification or change) in any
law, or any regulation thereunder, of the United States, (b) any
judicial decision, official administrative pronouncement, ruling,
regulatory procedure, regulation, notice or announcement,
including any notice or announcement of intent to adopt or
promulgate any ruling, regulatory procedure or regulation (any of
the foregoing, an "Administrative or Judicial Action") or (c) any
amendment to, clarification of or change in any official position
or the interpretation of any Administrative or Judicial Action or
any law or regulation of the United States that differs from the
theretofore generally accepted position or interpretation, in
each case, occurring on or after December 15, 1997, there is more
than insubstantial risk that interest paid by the Underlying
Securities Issuer on the Underlying Securities is not, or will
not be, deductible, in whole or in part, by the Underlying
Securities Issuer for purposes of United States federal income
tax.
S-9
<PAGE>
......................................... If a Tax Event occurs and in the opinion of a nationally recognized
independent tax counsel, there would, notwithstanding any
shortening of the maturity of the Underlying Securities, be more
than an insubstantial risk that the interest payable by the
Underlying Securities Issuer is not, or will not be, deductible,
in whole or in part, by the Underlying Securities Issuer for
United States federal income tax purposes, the Underlying
Securities Issuer may, within 90 days following the occurrence of
such Tax Event, redeem the Underlying Securities in whole (but
not in part) at a redemption price equal to the greater of (i)
100% of the principal amount of the Underlying Securities and
(ii) the sum of the present values of the Remaining Scheduled
Payments (as defined in "The Underlying Securities--Optional
Redemption by the Underlying Securities Issuer") thereon
discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate (as defined in "The Underlying
Securities--Optional Redemption by the Underlying Securities
Issuer") plus 35 basis points, together in either case with
accrued interest on the principal amount being redeemed to the
date of redemption.
Denominations and Underlying
Securities Currency...................... The Underlying Securities are denominated and payable in U.S.
dollars and are available in minimum denominations of $1,000 and
integral multiples thereof.
Form of Underlying Securities............... Book-entry debt securities registered with DTC.
Underlying Securities CUSIP
Number................................... 039483 AP 7.
Underlying Securities Record
Dates.................................... The first day of the month of an Underlying Securities Interest
Payment Date.
Underlying Securities Trustee............... The Chase Manhattan Bank, formerly known as Chemical Bank, as
Trustee (the "Underlying Securities Trustee"). The Underlying
Securities were issued pursuant to an Indenture dated as of June
1, 1986 as amended and supplemented by a Supplemental Indenture
dated as of August 1, 1989, and as amended by the Trust Indenture
Reform Act of 1990, (the "Indenture"), between the Underlying
Securities Issuer and the Underlying Securities Trustee.
Rating of the Underlying Securities
as of the Date of this Prospectus
Supplement............................... "Aa3" by Moody's and "AA-" by S&P.
Information with Respect to the
Underlying Securities Issuer............. The Underlying Securities Issuer is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith files reports and other information
with the Securities and Exchange Commission (the "SEC"). Such
reports and other information may be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the
S-10
<PAGE>
following Regional Offices of the SEC: New York Regional Office,
13th Floor, 7 World Trade Center, New York, New York 10048 and
Chicago Regional Office, Citicorp Center, Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and copies of such material can be obtained by mail
from the Public Reference Section of the SEC, Washington, D.C.
20549, at prescribed rates. Such reports and other information may
also be inspected at the New York Stock Exchange, 20 Broad Street,
New York, New York 10005 and the offices of the Chicago Stock
Exchange, 440 South LaSalle Street, Chicago, Illinois 60603, where
the Company's Common Stock is listed. Copies of the above documents
which have been electronically filed through the Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR") are publicly
available through the SEC's website (http://www.sec.gov).
</TABLE>
This Prospectus Supplement does not provide information with respect to
the Underlying Securities Issuer. No investigation of the Underlying Securities
Issuer (including, without limitation, no investigation as to its financial
condition or creditworthiness) or of the Underlying Securities (including,
without limitation, no investigation as to its rating) has been made. Potential
Certificateholders should obtain and evaluate the same information concerning
the Underlying Securities Issuer as it would obtain and evaluate the information
if it were investing directly in the Underlying Securities or in other
securities issued by the Underlying Securities Issuer. None of the Depositor,
the Trustee, the Underwriter, or any of their respective affiliates, assumes any
responsibility for the accuracy or completeness of any publicly available
information of the Underlying Securities Issuer filed with the SEC or otherwise
made publicly available or considered by a purchaser of the Certificates in
making its investment decision in connection therewith.
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RISK FACTORS
Prospective purchasers should consider, among other things, the following
factors (as well as the factors set forth under "Risk Factors" in the
Prospectus) in connection with an investment in the Certificates.
Limited Liquidity. There is currently no secondary market for the
Certificates. Lehman Brothers Inc. is under no obligation to make a market in
the Certificates. It is unlikely that a secondary market will develop and, if a
secondary market does develop, it is unlikely that it will provide
Certificateholders with liquidity of investment or will continue for the life of
the Certificates.
Maturity and Yield Considerations. The yield realized by a
Certificateholder is dependent upon a number of factors, including, without
limitation, the purchase price of the Certificates, the time of acquisition and
whether a redemption at the option of the Underlying Securities Issuer occurs or
a Tax Event (as defined in "Description of the Underlying Securities--
Conditional Right to Shorten Maturity or Optional Redemption upon the Occurrence
of a Tax Event") occurs and either (i) the maturity of the Underlying Securities
is advanced or (ii) the Underlying Securities Issuer exercises its right to
redeem the Underlying Securities. The Depositor has not formulated an opinion as
to the likelihood of a Tax Event. If the Underlying Securities Issuer exercises
its right to redeem Underlying Securities prior to their maturity or the
maturity of the Underlying Securities is shortened as a result of a Tax Event,
or if the Underlying Securities are paid or sold prior to maturity as a result
of a default, an investment in the Certificates may have a shorter average
maturity than if such right were not exercised or if such default had not
occurred.
Zero Coupon Nature of the Class A-2 Certificates. Since the Class A-2
Certificates do not receive allocations of either interest or principal until
the Final Scheduled Distribution Date, the changes in market value of the Class
A-2 Certificates as a result of changes in interest rates or spreads are
expected to be more than for the Underlying Securities. The Class A-2
Certificates will be deemed to be issued with original issue discount. See
"Certain Federal Income Tax Consequences" herein.
Limited Assets. The Trust has no significant assets other than the
Underlying Securities. If the Underlying Securities are insufficient to make
payments or distributions on the Certificates, no other assets will be available
for payment of the deficiency.
No Management of Underlying Securities. Except as described herein, the
Trust will not dispose of any Underlying Securities, regardless of adverse
events, financial or otherwise, which may affect the value of the Underlying
Securities or the Underlying Securities Issuer. If there is a payment default on
the Underlying Securities or any other default which may result in an
acceleration of the Underlying Securities, the Trust will only dispose of or
otherwise deal with the defaulted Underlying Securities in the manner provided
in the Trust Agreement.
Credit Risk. The Certificates represent interests in obligations of a
single obligor. In particular, the Certificates will be subject to all the risks
associated with a direct investment in unsecured debt obligations of
Archer-Daniels-Midland Company.
Unsecured Status of Underlying Securities. The Depositor believes that the
Underlying Securities are general unsecured obligations of the Underlying
Securities Issuer, which should rank on a parity with all other unsecured and
unsubordinated indebtedness of the Underlying Securities Issuer, but which are
subordinate in right of payment to the Underlying Securities Issuer's existing
and future senior secured indebtedness.
No Investigation of Underlying Securities. None of the Depositor, the
Underwriter or the Trustee will (i) make any investigation of the business
condition, financial or otherwise, of the Underlying Securities Issuer, or (ii)
verify any reports or information filed by the Underlying Securities Issuer with
the SEC. Investors are encouraged to consider publicly available financial
information and other information regarding Archer-Daniels-Midland Company. The
issuance of the Certificates should not be construed as an endorsement by the
Depositor, the Underwriter or the Trustee of the financial condition or business
prospects of Archer-Daniels-Midland Company.
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Ratings of the Certificates. At the time of issuance, the Certificates
will have ratings assigned by Moody's and S&P equivalent to the ratings of the
Underlying Securities, which, as of the date of this Prospectus Supplement were
"Aa3" by Moody's and "AA-" by S&P. It is expected that the ratings of the
Certificates will change if the ratings of the Underlying Securities change.
Any rating issued with respect to the Certificates is not a recommendation
to purchase, sell or hold a security inasmuch as such ratings do not comment on
the market price of the Certificates or their suitability for a particular
investor. There can be no assurance that the ratings will remain for any given
period of time or that the ratings will not be revised or withdrawn entirely by
the related rating agency if, in its judgment, circumstances (including, without
limitation, the rating of the Underlying Securities) so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Certificates.
THE TRUST
The Trust will be formed pursuant to the Series Supplement, Series
1998-ADM-1 (the "Series Supplement"), which incorporates the Standard Terms for
Trust Agreements (the "Standard Terms" and, together with the Series Supplement,
the "Trust Agreement") by and between the Depositor and the Trustee.
Concurrently with the execution and delivery of the Series Supplement, the
Depositor will deposit the Underlying Securities into the Trust. The Trustee, on
behalf of the Trust, will accept such Underlying Securities and will deliver the
Certificates to or upon the order of the Depositor.
The Underlying Securities were purchased by an affiliate of the Depositor
in the secondary market. The Underlying Securities were not 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. Lehman Brothers Inc., an affiliate of the
Depositor, participated in the public offering of the Underlying Securities in
December 1997.
DESCRIPTION OF THE UNDERLYING SECURITIES
General
The Underlying Securities represent the sole assets of the Trust that are
available to make distributions in respect of the Certificates. The aggregate
principal balance of the Underlying Securities is $65,775,000. The primary
economic terms of the Underlying Securities are described in "Summary--The
Underlying Securities" herein.
This Prospectus Supplement sets forth certain relevant terms with respect
to the Underlying Securities, but does not provide detailed information with
respect to the Underlying Securities or the Underlying Securities Issuer. This
Prospectus Supplement relates only to the Certificates offered hereby and does
not relate to the Underlying Securities. All disclosure contained herein with
respect to the Underlying Securities Issuer and the Underlying Securities is
derived from publicly available documents.
The Underlying Securities Issuer is not participating in, and will not
receive any proceeds in connection with, the offering of the Certificates. The
Underlying Securities were purchased by an affiliate of the Depositor in the
secondary market and will be deposited into the Trust. The Underlying Securities
were not acquired either from the Underlying Securities Issuer or pursuant to
any distribution by or agreement with the Underlying Securities Issuer.
According to the publicly available documents of Archer-Daniels-Midland
Company (the "Company" or the "Underlying Securities Issuer"), its principal
executive offices are located at 4666 Faries Parkway, Decatur, Illinois 62526
and its telephone number is (217) 424-5200. The Company is a major processor of
agricultural products for the food and feed industries, and one of the world's
largest oilseed and vegetable oil processors, corn refiners, fuel alcohol
producers and wheat millers.
S-13
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The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith files reports and
other information with the Securities and Exchange Commission (the "SEC"). Such
reports and other information may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the SEC: New
York Regional Office, 13th Floor, 7 World Trade Center, New York, New York 10048
and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511, and copies of such material can be
obtained by mail from the Public Reference Section of the SEC, Washington, D.C.
20549, at prescribed rates. Such reports and other information may also be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and at the offices of the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60603, where the Company's Common Stock is listed.
Copies of the above documents which have been electronically filed through the
Electronic Data Gathering, Analysis and Retrieval system ("EDGAR") are publicly
available through the SEC's website (http://www.sec.gov).
Although the Depositor has no reason to believe the information concerning
the Underlying Securities or the Underlying Securities Issuer contained in the
Underlying Securities Prospectus (as defined below) is not reliable, the
Depositor has not participated in the preparation of such documents, or made any
due diligence inquiry with respect to the information provided therein. There
can be no assurance that events affecting the Underlying Securities or the
Underlying Securities Issuer have not occurred or have not yet been publicly
disclosed which would affect the accuracy or completeness of the publicly
available documents described above.
The Trust will have no significant assets other than the Underlying
Securities from which to make distributions of amounts due in respect of the
Certificates. Consequently, the ability of Certificateholders to receive
distributions in respect of the Certificates will depend entirely on the Trust's
receipt of payments on the Underlying Securities. Prospective purchasers of the
Certificates should consider carefully the financial condition of the Underlying
Securities Issuer and its ability to make payments in respect of such Underlying
Securities. This Prospectus Supplement relates only to the Certificates being
offered hereby and does not relate to the Underlying Securities or the
Underlying Securities Issuer. All information contained in this Prospectus
Supplement regarding the Underlying Securities Issuer and the Underlying
Securities is derived from publicly available documents. Neither the Depositor
nor the Trustee participated in the preparation of such documents or takes any
responsibility for the accuracy or completeness of the information provided
therein.
Indenture
The Underlying Securities were issued under an Indenture dated as of June
1, 1986 as amended and supplemented by a Supplemental Indenture dated as of
August 1, 1989 and as amended by the Trust Indenture Reform Act of 1990 (the
"Indenture") between the Underlying Securities Issuer and The Chase Manhattan
Bank, formerly known as Chemical Bank, as Trustee (the "Underlying Securities
Trustee") providing for the issuance of debt securities by the Underlying
Securities Issuer (the "Debt Securities"). The Underlying Securities were part
of one series of Debentures totalling $250,000,000 out of the entire Debt
Securities issuance of $450,000,000. The following summaries of certain
provisions of the Underlying Securities and the Indenture do not purport to be
complete and are based upon the Prospectus dated December 10, 1997, and the
Prospectus Supplement dated December 10, 1997 (together, the "Underlying
Securities Prospectus"), relating to Debt Securities, of which the Underlying
Securities are part of a series, of the Underlying Securities Issuer, and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Underlying Securities and the Indenture, including the definitions
therein of certain terms. Wherever particular sections or defined terms of the
Indenture are referred to, it is intended that such sections or defined terms
shall be incorporated herein by reference.
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According to the Underlying Securities Prospectus, the Debt Securities are
unsecured and unsubordinated obligations of the Underlying Securities Issuer
ranking pari passu with all other unsecured and unsubordinated indebtedness of
the Underlying Securities Issuer. The Indenture does not limit the amount of
Debt Securities that may be issued thereunder and provides that Debt Securities
may be issued thereunder from time to time in one or more series.
Reference is made to the Underlying Securities Prospectus for the terms of
the Underlying Securities not set forth herein. Principal, premium, if any, and
interest will be payable, and the Underlying Securities will be transferable, in
the manner described in the Underlying Securities Prospectus.
Restrictions on Secured Debt
The Underlying Securities Prospectus states that the Indenture provides
that if the Company or any Restricted Subsidiary (as defined below) shall incur,
assume or guarantee any Debt secured by a Mortgage on any Principal Domestic
Manufacturing Property (each as defined below) or on any shares of stock or Debt
of any Restricted Subsidiary, the Company will secure, or cause such Restricted
Subsidiary to secure, the Debt Securities equally and ratably with (or prior to)
such Debt, unless after giving effect thereto the aggregate amount of all such
Debt so secured together with all Attributable Debt (as defined below) in
respect of sale and leaseback transactions involving Principal Domestic
Manufacturing Properties would not exceed 5 percent of Consolidated Net Tangible
Assets (as defined below).
The restriction on secured Debt will not apply to, and there will be
excluded from Secured Debt in any computation under such restriction, Debt
secured by: (i) Mortgages on property of, or on any shares of stock or Debt of,
any corporation existing at the time such corporation becomes a Restricted
Subsidiary, (ii) Mortgages in favor of the Company or a Restricted Subsidiary,
(iii) Mortgages in favor of United States governmental bodies to secure progress
or advance payments, (iv) Mortgages on property, shares of stock or Debt
existing at or incurred within 120 days of the time of acquisition thereof
(including acquisition through merger or consolidation), purchase money
Mortgages and construction Mortgages, and (v) certain extensions, renewals or
replacements of Debt secured by any Mortgage referred to in the forgoing clauses
(i) through (iv), inclusive.
The following definitions apply only to the foregoing restrictions on
secured Debt and, where applicable, to the following restrictions on Sale and
Leaseback Transactions and restrictions on Mergers and Sales of Assets.
"Attributable Debt" means the net amount of rent (discounted to the date
of determination at a rate per annum of 15 percent, compounded semi-annually)
required to be paid during the remaining term of any lease.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities (excluding any thereof constituting Funded
Debt (defined below) by reason of being renewable or extendible) and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles to the extent not deducted as reserves and
deductible items as set forth above, all as set forth on the most recent
consolidated balance sheet of the Company and its consolidated Subsidiaries and
computed in accordance with generally accepted accounting principles.
"Funded Debt" means indebtedness for money borrowed having a maturity at
or being renewable or extendable by the borrower to a date more than 12 months
from the date of determination in the amount set forth on the most recent
consolidated balance sheet of the Company and its consolidated Subsidiaries and
computed in accordance with generally accepted accounting principles. Funded
Debt does not include any amount in respect of obligations under leases (or
guarantees thereof), whether or not such obligations would be included as
liabilities on a consolidated balance sheet, and does not include any principal
amount of indebtedness required to be redeemed within 12 months from the date of
determination pursuant to any sinking fund provisions or otherwise.
"Mortgage" means any mortgage, pledge, lien, security interest,
conditional sale or other title retention agreement or similar encumbrance.
"Principal Domestic Manufacturing Property" means any building, structure
or other facility (which for purposes of this definition shall not include
barges, railroad cars or other transportation equipment, vehicle or
S-15
<PAGE>
vessels), together with the land on which it is erected and fixtures
comprising a part thereof, used primarily for manufacturing, processing or
warehousing, located in the United States, owned or leased by the Company or a
Subsidiary and having a gross book value (without deduction of any depreciation
reserves) which on the date as of which the determination is being made is in
excess of 1 percent of Consolidated Net Tangible Assets, other than any such
building, structure or other facility or portion thereof or any such land or
fixture (i) which is financed by certain governmental obligations the interest
on which is excludable from gross income of the holder thereof pursuant to the
provisions of Section 103(a)(1) of the Internal Revenue Code of 1986, as amended
or (ii) which, in the opinion of the Board of Directors of the Company, is not
of material importance to the total business conducted by the Company and its
Subsidiaries as an entirety.
"Restricted Subsidiary" means a Subsidiary other than a Subsidiary (i)
which neither transacts any substantial portion of its business nor regularly
maintains any substantial portion of its fixed assets within the United States,
or (ii) which is engaged primarily in financing the operations of the Company or
its Subsidiaries, or both, outside the United States.
"Subsidiary" means a corporation more than 50 percent of the outstanding
voting stock of which is owned, directly or indirectly, by the Company and/or
one or more Subsidiaries.
The Indenture does not restrict the incurring of unsecured Debt by the
Company or its Subsidiaries.
Restrictions on Sale and Leaseback Transactions.
The Underlying Securities Prospectus states that the Indenture provides
that neither the Company nor any Restricted Subsidiary may enter into any sale
and leaseback transaction involving any Principal Domestic Manufacturing
Property which has been or is to be sold or transferred more than 120 days after
the acquisition thereof or the completion of construction and commencement of
full operation thereof, unless (i) the Company or such Restricted Subsidiary
could create Debt secured by a Mortgage on such property pursuant to the
Indenture (see "Restrictions on Secured Debt" above) in an amount equal to the
Attributable Debt with respect to the sale and leaseback transaction without
equally and ratably securing the Debt Securities or (ii) the Company, within 120
days after the sale or transfer, applies to the retirement of its Funded Debt an
amount equal to the greater of (a) the net proceeds of the sale of the Principal
Domestic Manufacturing Property leased pursuant to such arrangement or (b) the
fair market value of the Principal Domestic Manufacturing Property so leased
(subject to credits for certain voluntary retirements of Funded Debt and
cancellation or retirement of the Debt Securities). The restriction does not
apply to any sale and leaseback transaction (i) between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, or (ii) involving the
taking back of a lease for a period of three years or less.
Modification and Waiver
Subject to certain exceptions, the Indenture and the Debt Securities may
be modified or amended by the Underlying Securities Issuer and the Underlying
Securities Trustee with the consent of the holders of 66 2/3% in aggregate
principal amount of the outstanding Debt Securities that comprise each series
affected by such modification or amendment. However, without the consent of each
Debt Securityholder affected, an amendment or waiver may not (i) change the
stated maturity date of the principal of, or any installment of principal of or
interest on, any such Debt Security; (ii) reduce the principal amount of
premium, if any, and/or interest, if any, on any such Debt Security; (iii)
change the Place of Payment where, or the coin or currency in which, any
principal of, premium, if any, or interest, if any, on any such Debt Security is
payable; (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of outstanding Debt Securities of any series the consent
of the Holders of which is necessary to modify or amend the Indenture; or (vi)
modify the foregoing requirements or reduce the percentage of aggregate
principal amount of outstanding Debt Securities of any series necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
The Debt Securityholders of a majority in aggregate principal amount of
the outstanding Debt Securities of each series may, on behalf of all Debt
Securityholders of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The Debt Securityholders of a majority in aggregate principal amount of the
outstanding Debt Securities of each series may on behalf of all Debt
Securityholders of that series waive any past default under the Indenture with
respect to Debt Securities of that series, except a default in the payment of
principal of, premium, if any, and/or interest, if any, on any Debt
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Security of such series or in respect of a or provision under which the
Indenture cannot be modified or amended without the consent of each Debt
Securityholder of such series affected.
Restrictions on Mergers and Sale of Assets
The Company may not consolidate with or merge into any other corporation,
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company unless (i) the
corporation formed by such consolidation or into which the Company is merged or
the Person to which the properties and assets of the Company are transferred
substantially as an entirety shall be a corporation organized and existing under
the laws of the United States, any State thereof or the District of Columbia and
shall expressly assume the payment of the principal of, premium, if any, and
interest, if any, on the Debt Securities and the performance of the other
covenants of the Company under the Indenture, (ii) after giving effect to such
transaction, no Event of Default (as defined below), or event which after notice
or lapse of time or both would become an Event of Default, shall have occurred
and be continuing, (iii) if, as a result of such transaction, properties or
assets of the Company or any Restricted Subsidiary would become subject to a
Mortgage not permitted by the Indenture without equally and ratably securing the
Debt Securities as provided therein (see "Restrictions on Secured Debt" above),
steps shall have been taken to secure the Debt Securities equally and ratably
with (or prior to) all indebtedness secured thereby pursuant to the Indenture;
and (iv) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such transaction and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the Indenture and that all conditions precedent to such
transaction contained in the Indenture have been complied with. Notwithstanding
the provisions summarized in this paragraph, the Company may, without complying
with such provisions, transfer all of its property and assets to another
corporation if, immediately after giving effect to such transfer, such
corporation is a wholly-owned Restricted Subsidiary of the Company and the
Company would be permitted to become liable for an additional amount of secured
Debt. The Indenture does not contain any provisions that limit the Underlying
Securities Issuer's ability to incur unsecured indebtedness.
Events of Default
The following events are defined in the Indenture as "Events of Default"
with respect to any series of Debt Securities: (i) default for 30 days in any
payment of interest on such series; (ii) default in any payment of principal of,
and premium, if any, on such series when due; (iii) default in the payment of
any sinking fund installment with respect to such series when due; (iv) default
for 60 days after appropriate notice by the Holders of at least 10% in aggregate
principal amount of the Outstanding Debt Securities in performance of any other
covenant or warranty in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of series of Debt Securities
other than such series); (v) default under any evidence of indebtedness for
money borrowed (including a default with respect to Debt Securities other than
such series) or under any Mortgage, indenture or instrument under which any such
indebtedness is issued or secured (including the Indenture), which results in
acceleration of the maturity of such indebtedness, if such acceleration is not
annulled, or in the case of indebtedness not exceeding U.S. $1,000,000 such
indebtedness is not paid, in each case within 10 days after written notice as
provided in the Indenture; (vi) certain events in bankruptcy, insolvency or
reorganization; or (vii) any other Event of Default provided with respect to
Debt Securities of such series.
If an Event of Default with respect to Debt Securities of any series at
the time outstanding occurs and is continuing, the Underlying Securities Trustee
or the holders of at least 25% in aggregate principal amount of all of the
outstanding Debt Securities of that series by notice as provided in the
Indenture relating to the Underlying Securities may declare the principal amount
of all the Underlying Securities and other Debt Securities of that series to be
due and payable. Any Event of Default with respect to a particular series of
Debt Securities may be waived by the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of such series, except in
each case a failure to pay the principal of, premium, if any, or interest, if
any, on such Debt Security.
The Indenture provides that the Underlying Securities Trustee will not be
under any obligation to exercise any of its rights or powers under the Indenture
at the request, order or direction of any Debt securityholders,
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unless such Debt Securityholders shall have offered to the Underlying Securities
Trustee reasonable indemnity. Subject to such provisions for the indemnification
and certain other rights of the Underlying Securities Trustee, the Debt
Securityholders of a majority in aggregate principal amount of the outstanding
Debt Securities of any affected series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Underlying Securities Trustee, or of exercising any trust or power conferred on
the Underlying Securities Trustee, with respect to the Debt Securities of that
series.
The Company is required to furnish to the Underlying Securities Trustee
annually a statement as to the absence of certain defaults under the terms of
the Indenture.
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless (i) such Holder shall have previously given to the Underlying
Securities Trustee written notice of a continuing Event of Default with respect
to Debt Securities of such series, (ii) the Holders of at least 25 percent in
aggregate principal amount of the outstanding Debt Securities of such series
shall have made written request, and offered reasonable indemnity, to the
Underlying Securities Trustee to institute such proceeding as trustee, and (iii)
the Underlying Securities Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the outstanding Debt Securities of
such series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, the Holder of any Debt
Security will have an absolute right to receive payment of the principal of,
premium, if any, and interest, if any, on such Debt Security on or after the due
dates expressed in such Debt Security and to institute suit for the enforcement
of any such payment.
Defeasance
The Underlying Securities Issuer may terminate certain of its obligations
under the Indenture with respect to the Underlying Securities, including its
obligations to comply with the covenants described under the headings
"Restrictions on Secured Debt" and "Restrictions on Sales and Leaseback
Transactions" above, on the terms and subject to the conditions contained in the
Indenture, by depositing in trust with the Underlying Securities Trustee money
or U.S. Government Obligations (as defined in the Indenture) sufficient to pay
the principal of, and premium, if any, and interest on the Underlying Securities
to maturity. Such deposit and termination is conditioned upon the Underlying
Securities Issuer's delivery to the Underlying Securities Trustee of an opinion
of independent counsel of nationally recognized standing that the holders of the
Underlying Securities will have no federal income tax consequences as a result
of such deposit and termination. Such termination will not relieve the
Underlying Securities Issuer of its obligation to pay when due the principal of
or interest on the Underlying Securities if the Underlying Securities are not
paid from the money or U.S. Government Obligations held by the Underlying
Securities Trustee for the payment thereof.
Redemption at the Option of the Underlying Securities Issuer
The Underlying Securities are redeemable in whole or in part, at any time,
at the option of the Underlying Securities Issuer, upon not less than 30 nor
more than 60 days prior written notice, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Underlying Securities to be
redeemed and (ii) the sum of the present values of the Remaining Scheduled
Payments (as defined below), discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate (as defined below) plus 15 basis points, together, in either case,
with accrued interest on the principal amount being redeemed to the date of such
redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price of the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Underlying Securities. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Underlying Securities Trustee after
consultation with the Company.
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"Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (a) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(b) if the Underlying Securities Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Underlying
Securities Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Underlying Securities Trustee by such Reference Treasury Dealer
as of 3:30 p.m., New York time, on the third business day (a) preceding such
redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Goldman,
Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc. and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York, New York (a "Primary Treasury
Dealer"), the Underlying Securities Issuer will substitute therefor another
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Underlying
Security to be redeemed, the remaining scheduled payments of the principal
thereof and interest thereon that would be due after the related redemption date
but for such redemption; provided, however, that, if such redemption date is not
an interest payment date with respect to such Underlying Security, the amount of
the next succeeding scheduled interest payment thereon will be reduced by the
amount of interest accrued thereon to such redemption date.
Unless the Company defaults in payment of the redemption price, on and
after the applicable redemption date, interest will cease to accrue on the
Underlying Securities or portions thereof called for redemption.
Conditional Right to Shorten Maturity or Optional Redemption upon the Occurrence
of a Tax Event
The Underlying Securities Issuer states in the Underlying Securities
Prospectus that it intends to deduct interest paid on the Underlying Securities
for United States federal income tax purposes. However, during the past several
years there have been several legislative proposals which, although not enacted,
contained proposed tax law changes that, among other things, would prohibit an
issuer from deducting interest payments on debt instruments with a maturity of
more than 40 years.
Upon the occurrence of a Tax Event (as defined below), the Underlying
Securities Issuer will have the right, without the consent of the holders of the
Underlying Securities, to shorten the maturity of the Underlying Securities to
the minimum extent required, in the opinion of a nationally recognized
independent tax counsel, such that, after the shortening of the maturity,
interest paid on the Underlying Securities will be deductible for United States
federal income tax purposes. There can be no assurance that the Underlying
Securities Issuer would not exercise its right to shorten the maturity of the
Underlying Securities upon the occurrence of such a Tax Event or as to the
period by which such maturity would be shortened. In the event that the
Underlying Securities Issuer elects to exercise its right to shorten the
maturity of the Underlying Securities on the occurrence of a Tax Event, the
Underlying Securities Issuer will mail a notice of shortened maturity to each
holder of the Underlying Securities by first-class mail not less than 30 or more
than 60 days after the occurrence of such Tax Event, stating the new maturity
date of the Underlying Securities. Such notice shall be effective immediately
upon mailing.
The Underlying Securities Issuer states in the Underlying Securities
Prospectus that it believes that the Underlying Securities should constitute
indebtedness for United States federal income tax purposes under current law and
that, in that case, an exercise of its right to shorten the maturity of the
Underlying Securities would not be a taxable event to holders for such purposes.
However the Underlying Securities Issuer's exercise of its right to shorten the
maturity of the Underlying Securities will be a taxable event for United States
federal income tax purposes to beneficial owners of Underlying Securities if the
Underlying Securities are treated as equity for such
S-19
<PAGE>
purposes before the maturity is shortened and the Underlying Securities of
shortened maturity are treated as debt for such purposes.
"Tax Event" means that the Underlying Securities Issuer shall have
received an opinion of a nationally recognized independent tax counsel to the
effect that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective amendment, clarification or change) in any
law, or any regulation thereunder, of the United States, (b) any judicial
decision, official administrative pronouncement, ruling, regulatory procedure,
regulation, notice or announcement including any notice or announcement of
intent to adopt or promulgate any ruling, regulatory procedure or regulation
(any of the foregoing, an "Administrative or Judicial Action"), or (c) any
amendment to, clarification of, or change in any official position or the
interpretation of any Administrative or Judicial Action or any law or regulation
of the United States that differs from the theretofore generally accepted
position or interpretation, in each case, occurring on or after December 15,
1997, there is more than insubstantial risk that interest paid by the Underlying
Securities Issuer on the Underlying Securities is not, or will not be,
deductible, in whole or in part, by the Underlying Securities Issuer for
purposes of United States federal income tax.
If a Tax Event occurs and in the opinion of a nationally recognized
independent tax counsel, there would, notwithstanding any shortening of the
maturity of the Underlying Securities, be more than an insubstantial risk that
the interest payable by the Underlying Securities Issuer is not, or will not be,
deductible, in whole or in part, by the Underlying Securities Issuer for United
States federal income tax purposes, the Underlying Securities Issuer may, within
90 days following the occurrence of such Tax Event, redeem the Underlying
Securities in whole (but not in part) at a redemption price equal to the greater
of (i) 100% of the principal amount of the Underlying Securities and (ii) the
sum of the present values of the Remaining Scheduled Payments (as defined above
in "The Underlying Securities--Optional Redemption by the Underlying Securities
Issuer") thereon discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined above in "The Underlying Securities--Optional Redemption by the
Underlying Securities Issuer") plus 35 basis points, together in either case
with accrued interest on the principal amount being redeemed to the date of
redemption.
In addition, the Indenture provides for the optional redemption of the
Underlying Securities by the Underlying Securities Issuer. See "Description of
the Underlying Securities--Redemption at the Option of the Underlying Securities
Issuer."
Concerning The Underlying Securities Trustee
The Underlying Securities Issuer from time to time borrows from The Chase
Manhattan Bank, formerly known as Chemical Bank, the Underlying Securities
Trustee under the Indenture, and maintains deposit accounts and conducts other
banking transactions with it in the ordinary course of business. The Chase
Manhattan Bank also serves as trustee for certain other senior unsecured debt
obligations of the Underlying Securities Issuer.
Global Underlying Securities
The Underlying Securities and the other Debt Securities comprising the
same series were issued in the form of one or more fully registered global
securities (each a "Global Security") that were deposited with, or on behalf of,
The Depository Trust Company (the "Depositary" or "DTC") and registered in the
name of the Depository's nominee, as more fully described in the Underlying
Securities Prospectus. Except as set forth below, the Global Securities may be
transferred in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depositary for such Global Security
("participants") or persons that may hold interests through participants. Upon
the issuance of a Global Security, DTC will credit, on its book-entry
registration and transfer system, the participants' accounts with the respective
principal amounts of the Debt Securities represented by such Global Security
beneficially owned by such participants. Ownership of beneficial interests in
the Global Securities will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary or
its nominee (with respect to interests of participants) and on the records of
participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers
S-20
<PAGE>
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may limit or impair the ability to own, transfer or pledge
beneficial interests in the Global Securities.
So long as the Depositary, or its nominee, is the registered owner of such
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Underlying Securities represented by
such Global Security for all purposes under the Indenture governing the
Underlying Securities. Except as provided below, the Trust as the owner of
beneficial interests in a Global Security will not be entitled to have
Underlying Securities of the series represented by such Global Security
registered in its name, will not receive or be entitled to receive physical
delivery of Underlying Securities of such series in definitive form and will not
be considered the owners or holders thereof under the Indenture governing the
Underlying Securities.
Principal and interest payments on Underlying Securities registered in the
name of or held by the Depositary or its nominee will be made by the Underlying
Securities Issuer through the paying agent to the Depositary or its nominee, as
the case may be, as the registered owner or the holder of the Global Security
representing such Underlying Securities. None of the Underlying Securities
Issuer, the Underlying Securities Trustee, any paying agent or the registrar for
such Underlying Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Security for such Underlying Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Underlying Securities Issuer expects that the Depositary, upon receipt
of any payment of principal or interest, if any, in respect of a Global
Security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Underlying Securities Issuer 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 is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Underlying
Securities Issuer within 90 days, then the Underlying Securities Issuer will
issue Debt Securities of such series in definitive form in exchange for all the
Global Securities representing the Debt Securities of such series. In addition,
the Underlying Securities Issuer may at any time determine not to have the Debt
Securities of a series represented by Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all
Global Securities representing such Debt Securities. In any such instance, the
Trust as owner of a beneficial interest in a Global Security will be entitled to
physical delivery in definitive form of Debt Securities of the series
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name. Debt
Securities so issued in definitive form will be issued in denominations of
$1,000 and integral multiples thereof and will be issued in registered form
only, without coupons.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be denominated and distributions with respect
thereto will be payable in U.S. dollars (the "Specified Currency"). The Class
A-1 Certificates have an aggregate initial Certificate Principal Amount of
$50,694,774. The Class A-2 Certificates have an aggregate Certificate Principal
Amount of $65,775,000.
The Class A-1 Certificates
The aggregate "Certificate Principal Amount" of the Class A-1 Certificates
will initially be $50,694,774. On any Distribution Date, the aggregate
Certificate Principal Amount of the Class A-1 Certificates will be reduced by
the positive difference between (i) the semiannual fixed payment made on such
Distribution Date and (ii) interest accrued on the aggregate Certificate
Principal Amount at an annual rate of 6.50% compounded semiannually from the
prior Distribution Date (or, in the case of the initial Distribution Date, such
interest accrued from December 15, 1997). The Certificate Principal Amount of
any Class A-1 Certificate will represent a pro rata portion of the
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<PAGE>
then-current aggregate Certificate Principal Amount of all outstanding Class A-1
Certificates. See Schedule A below for the amortization schedule of the Class
A-1 Certificates.
The Class A-1 Certificateholders will be entitled to receive, on June 15
and December 15 of each year (or if such date is not a Business Day, the next
succeeding Business Day) (each, a "Distribution Date"), commencing June 15, 1998
and ending on the Final Scheduled Distribution Date, the interest, if any,
received on the Underlying Securities less ordinary Trustee's fees and scheduled
expenses due to the Trustee on such Distribution Date, which will represent a
return of principal on the Class A-1 Certificates in accordance with Schedule A,
the amortization schedule set forth below, and the payment of interest at a rate
of 6.50% per annum on the outstanding principal amount of the Class A-1
Certificates. The Class A-1 Certificates will amortize on each Distribution Date
on a level yield basis. The Class A-1 Certificateholders generally will not be
entitled to any allocation of any principal payments received on the Underlying
Securities.
Interest on the Class A-1 Certificates will be calculated on a 30/360
basis and will accrue from and including the prior Distribution Date (or, in the
case of the first interest accrual period, from and including December 15, 1997)
to but excluding the current Distribution Date.
The Class A-2 Certificates
The aggregate "Certificate Principal Amount" of the Class A-2 Certificates
on any determination date will equal the aggregate principal amount of the
Underlying Securities in the Trust as of such date. The Certificate Principal
Amount of any Class A-2 Certificate will represent a pro rata portion of the
then-current aggregate Certificate Principal Amount of all outstanding Class A-2
Certificates and will equal the principal amount of Underlying Securities that
the holder of such Class A-2 Certificate is entitled to receive as an in-kind
distribution on December 15, 2017. The Class A-2 Certificates will be issued
with an aggregate Certificate Principal Amount of $65,775,000 and will not be
entitled to distributions of interest. With the exception of an occurrence of a
redemption at the option of the Underlying Securities Issuer or an advance of
maturity date based upon the Underlying Securities Issuer's conditional right to
shorten maturity or optional redemption of the Underlying Securities upon the
occurrence of a Tax Event, and subject to the occurrence of certain defaults on
the Underlying Securities, no cash distributions will be made to the Class A-2
Certificateholders. Instead, on December 15, 2017, the holders of the Class A-2
Certificates outstanding will be entitled to a distribution of all of the
Underlying Securities held by the Trust as of such date. On or prior to the 60th
day preceding December 15, 2017, the Trustee shall request instructions from the
registered Class A-2 Certificateholders regarding the account or accounts to
which transfer of the Underlying Securities should be made, and other
information relevant to such transfer.
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<PAGE>
SCHEDULE A
AMORTIZATION SCHEDULE--CLASS A-1 CERTIFICATES
<TABLE>
<CAPTION>
Total Interest Outstanding
Plus Principal Principal on
Closing Date or Interest Payable on Principal Amortization Payable on Closing Date or
Distribution Date Distribution Date on Distribution Date Distribution Date1 Distribution Date2
- ----------------- ----------------- -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
March 30, 1998............... $ 50,694,774
June 15, 1998................ $ 1,647,580 $ 635,101 $ 2,282,681 50,059,673
December 15, 1998............ 1,626,939 655,742 2,282,681 49,403,931
June 15, 1999................ 1,605,628 677,053 2,282,681 48,726,878
December 15, 1999............ 1,583,624 699,058 2,282,681 48,027,820
June 15, 2000................ 1,560,904 721,777 2,282,681 47,306,043
December 15, 2000............ 1,537,446 745,235 2,282,681 46,560,808
June 15, 2001................ 1,513,226 769,455 2,282,681 45,791,353
December 15, 2001............ 1,488,219 794,462 2,282,681 44,996,891
June 15, 2002................ 1,462,399 820,282 2,282,681 44,176,608
December 15, 2002............ 1,435,740 846,941 2,282,681 43,329,667
June 15, 2003................ 1,408,214 874,467 2,282,681 42,455,200
December 15, 2003............ 1,379,794 902,887 2,282,681 41,552,313
June 15, 2004................ 1,350,450 932,231 2,282,681 40,620,082
December 15, 2004............ 1,320,153 962,529 2,282,681 39,657,553
June 15, 2005................ 1,288,870 993,811 2,282,681 38,663,742
December 15, 2005............ 1,256,572 1,026,110 2,282,681 37,637,633
June 15, 2006................ 1,223,223 1,059,458 2,282,681 36,578,174
December 15, 2006............ 1,188,791 1,093,891 2,282,681 35,484,284
June 15, 2007................ 1,153,239 1,129,442 2,282,681 34,354,842
December 15, 2007............ 1,116,532 1,166,149 2,282,681 33,188,693
June 15, 2008................ 1,078,633 1,204,049 2,282,681 31,984,644
December 15, 2008............ 1,039,501 1,243,180 2,282,681 30,741,464
June 15, 2009................ 999,098 1,283,584 2,282,681 29,457,880
December 15, 2009............ 957,381 1,325,300 2,282,681 28,132,580
June 15, 2010................ 914,309 1,368,372 2,282,681 26,764,208
December 15, 2010............ 869,837 1,412,845 2,282,681 25,351,363
June 15, 2011................ 823,919 1,458,762 2,282,681 23,892,601
December 15, 2011............ 776,510 1,506,172 2,282,681 22,386,429
June 15, 2012................ 727,559 1,555,122 2,282,681 20,831,307
December 15, 2012............ 677,017 1,605,664 2,282,681 19,225,643
June 15, 2013................ 624,833 1,657,848 2,282,681 17,567,795
December 15, 2013............ 570,953 1,711,728 2,282,681 15,856,068
June 15, 2014................ 515,322 1,767,359 2,282,681 14,088,709
December 15, 2014............ 457,883 1,824,798 2,282,681 12,263,910
June 15, 2015................ 398,577 1,884,104 2,282,681 10,379,806
December 15, 2015............ 337,344 1,945,338 2,282,681 8,434,469
June 15, 2016................ 274,120 2,008,561 2,282,681 6,425,908
December 15, 2016............ 208,842 2,073,839 2,282,681 4,352,068
June 15, 2017................ 141,442 2,141,239 2,282,681 2,210,829
December 15, 2017............ 71,852 2,210,829 2,282,681 0
</TABLE>
- --------
1 Amounts shown reflect aggregate amounts of interest to be received by the
Trust in respect of the Underlying Securities on the related Distribution Date,
less ordinary Trustee's fees and scheduled expenses due to the Trustee on such
Distribution Date.
2 Principal Amount on the Closing Date or on the Distribution Date after all
scheduled distributions have been made.
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<PAGE>
Registration and Denomination
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants in minimum principal amounts of $100,000 and integral multiples
of $1,000 in excess thereof in the case of both the Class A-1 Certificates and
Class A-2 Certificates. A single Class A-1 Certificate may be issued in an
amount in excess of $100,000 that is not an integral multiple of $1,000. Each
class 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 voting rights. DTC may take conflicting actions with
respect to voting rights, to the extent that Participants whose holdings of
Certificates evidences such voting rights, authorize divergent action.
Definitive Certificates
Definitive Certificates will be issued to Certificateholders or their
nominees, respectively, rather than to DTC or its nominee, only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Clearing Agency with respect to
the Certificates and the Depositor is unable to locate a qualified successor or
(ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and receipt of
instructions for re-registration, the Trustee will reissue such Certificates as
Definitive Certificates issued in the respective principal amounts owned by the
individual owners of such Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as Certificateholders
under the Trust Agreement.
Listing on the New York Stock Exchange
The Class A-1 and Class A-2 Certificates have been authorized for listing,
upon official notice of issuance, with the NYSE. There can be no assurance that
the Certificates, once listed, will continue to be eligible for trading on the
NYSE.
Collections and Distributions
Except as otherwise provided herein (see "--Default on Underlying
Securities" and "--Distributions upon Optional Redemption or Conditional
Shortening of Maturity Date" below), collections on the Underlying Securities
that are received by the Trustee for a given Collection Period pursuant to the
collection procedures described herein and in the Prospectus and deposited from
time to time into the Certificate Account will be applied by the Trustee on each
applicable Distribution Date to the following distributions in the following
order of priority, solely to the extent of Available Funds (as defined below) on
such Distribution Date:
(a) to the Trustee, the Trustee's Fee, Necessary Third Party Expenses
(as defined in the Trust Agreement) due to the Trustee on such
Distribution Date and reimbursement for any Extraordinary Expenses
incurred by the Trustee in accordance with the Trust Agreement pursuant to
instructions of not less than 100% of the Certificateholders;
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<PAGE>
(b) to the holders of the Class A-1 Certificates, interest at the
rate of 6.50% per annum on the principal amount of the Class A-1
Certificates and principal distributable on such Class A-1 Certificates on
such Distribution Date; and
(c) to the holders of the Class A-2 Certificates, on the Final
Scheduled Distribution Date only, a distribution of all Underlying
Securities held by the Trust as of such date.
"Available Funds" for any Distribution Date means the sum of all amounts
received on or with respect to the Underlying Securities during the preceding
Collection Period.
If the Trustee has not received payment on the Underlying Securities on
or prior to a Distribution Date, such distribution will be made upon receipt of
payment on the Underlying Securities. No additional amounts will accrue on the
Certificates or be owed to Certificateholders as a result of any such delay;
provided, however, that any additional interest owed and paid by the Underlying
Securities Issuer as a result of such delay shall be paid to the Class A-1
Certificateholders. In the event of a default on the Underlying Securities,
approved Extraordinary Expenses (see "Description of the Trust Agreement--The
Trustee" herein) of the Trustee may be reimbursed to the Trustee out of
Available Funds before any distributions to Certificateholders are made.
All amounts received on or with respect to the Underlying Securities,
which are not distributed to Certificateholders on the date of receipt, shall be
invested by the Trustee in Eligible Investments. Income on such investments will
constitute property of the Trust. "Eligible Investments" means, with respect to
the Certificates, those investments consistent with the Trust's status as a
grantor trust for federal income tax purposes and acceptable to the Rating
Agencies as being consistent with the rating of such Certificates, as specified
in the Trust Agreement. Generally, Eligible Investments must be limited to
obligations or securities that mature not later than the business day prior to
the next succeeding Distribution Date.
There can be no assurance that collections received from the Underlying
Securities over a specified period will be sufficient to make all required
distributions to the Certificateholders. To the extent Available Funds are
insufficient to make any such distributions due to any Class of Certificate, any
shortfall will be carried over and will be distributable on the next
Distribution Date on which sufficient funds exist to pay such shortfalls.
Exchange of Certificates
On each Distribution Date, or the next succeeding Business Day if such
Distribution Date is not a Business Day, the Depositor or any affiliate of the
Depositor may, if its holds Class A-2 Certificates of a certain principal amount
and Class A-1 Certificates representing a like percentage of the outstanding
principal amount thereof, notify the Trustee, not less than at least 30 (or such
shorter period acceptable to the Trustee) but not more than 45 days prior to
such Distribution Date, that it intends to tender such Certificates to the
Trustee on such Distribution Date; provided that such distribution will not be
made if it would cause the Trustee or Depositor to fail to satisfy the
applicable requirements for exemption under Rule 3a-7 or other applicable
exemption under the Investment Company Act of 1940. See "Optional Exchange" in
the Prospectus. Upon such tender, the Trustee will deliver Underlying Securities
having a principal amount equal to the principal amount of the Class A-2
Certificates being tendered to such Certificateholder. The right of the
Depositor or any affiliate to effect any such exchange is subject to substantial
restrictions as to timing, amount and other matters, as set forth in the Trust
Agreement.
Default on Underlying Securities
In the event of the occurrence of a payment default on the Underlying
Securities or an acceleration of the maturity of the Underlying Securities in
connection with a default thereon, the Trustee will distribute the Underlying
Securities to the Certificateholders in accordance with the Allocation Ratio
within 30 days of the occurrence of such default. If, as a result of the minimum
denominations of the Underlying Securities, the Trustee cannot distribute the
Underlying Securities to the Certificateholders in accordance with the
Allocation Ratio, the Trustee will be permitted to sell, in accordance with the
Sales Procedures (as defined in "The Market Agent Agreement-Sale of the
Underlying Securities"), such amount of the Underlying Securities as will be
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<PAGE>
necessary in order that the Underlying Securities, together with the proceeds
received from the sale of any portion thereof, may be distributed in accordance
with the Allocation Ratio.
As used herein, "Allocation Ratio" means the ratio of the Class A-1
Allocation to the Class A-2 Allocation. The "Class A-1 Allocation" means the
present value (discounted at the rate of 6.861% per annum) of the unpaid
interest coupons due or to become due on the Underlying Securities on or prior
to the Final Scheduled Distribution Date. The "Class A-2 Allocation" means the
sum of the present values (discounted at the rate of 6.861% per annum) of (i)
the unpaid interest coupons due or to become due on the Underlying Securities
after the Final Scheduled Distribution Date and (ii) the principal amount of the
Underlying Securities (in each case assuming that the Underlying Securities were
paid when due and were not redeemed prior to their stated maturity).
Distributions upon Optional Redemption or Conditional Shortening of Maturity
Date
In the event of an optional redemption of the Underlying Securities or an
early payment as a result of an advance of the maturity date of the Underlying
Securities to a date prior to the Final Scheduled Distribution Date upon the
occurrence of a Tax Event (see "Description of the Underlying Securities--
Conditional Right to Shorten Maturity or Optional Redemption upon the Occurrence
of a Tax Event" and "Description of the Underlying Securities--Redemption at the
Option of the Underlying Securities Issuer" herein), the proceeds of such
redemption or early payment will be allocated between the Class A-1
Certificateholders and the Class A-2 Certificateholders in accordance with the
Allocation Ratio. Schedule B, which shows the percentages of such payment that
would be distributable to the Class A-1 and Class A-2 Certificateholders,
respectively, if the redemption or early payment occurred on any semiannual
Distribution Date on or prior to December 15, 2017, is set forth below.
S-26
<PAGE>
SCHEDULE B
SCHEDULE--RELATIVE PERCENTAGES DISTRIBUTABLE UPON
CONDITIONAL SHORTENING OF MATURITY DATE
OR OPTIONAL REDEMPTION
<TABLE>
<CAPTION>
Closing Date or Class A-1 Class A-2
Distribution Date Certificates Certificates Sum
- ----------------- ------------ ------------ ---
<S> <C> <C> <C>
March 30, 1998..................... 74.03% 25.97% 100%
June 15, 1998...................... 73.14% 26.86% 100%
December 15, 1998.................. 72.22% 27.78% 100%
June 15, 1999...................... 71.27% 28.73% 100%
December 15, 1999.................. 70.28% 29.72% 100%
June 15, 2000...................... 69.26% 30.74% 100%
December 15, 2000.................. 68.21% 31.79% 100%
June 15, 2001...................... 67.12% 32.88% 100%
December 15, 2001.................. 65.99% 34.01% 100%
June 15, 2002...................... 64.82% 35.18% 100%
December 15, 2002.................. 63.62% 36.38% 100%
June 15, 2003...................... 62.37% 37.63% 100%
December 15, 2003.................. 61.08% 38.92% 100%
June 15, 2004...................... 59.75% 40.25% 100%
December 15, 2004.................. 58.37% 41.63% 100%
June 15, 2005...................... 56.94% 43.06% 100%
December 15, 2005.................. 55.46% 44.54% 100%
June 15, 2006...................... 53.93% 46.07% 100%
December 15, 2006.................. 52.35% 47.65% 100%
June 15, 2007...................... 50.72% 49.28% 100%
December 15, 2007.................. 49.03% 50.97% 100%
June 15, 2008...................... 47.28% 52.72% 100%
December 15, 2008.................. 45.48% 54.52% 100%
June 15, 2009...................... 43.61% 56.39% 100%
December 15, 2009.................. 41.68% 58.32% 100%
June 15, 2010...................... 39.68% 60.32% 100%
December 15, 2010.................. 37.61% 62.39% 100%
June 15, 2011...................... 35.47% 64.53% 100%
December 15, 2011.................. 33.26% 66.74% 100%
June 15, 2012...................... 30.97% 69.03% 100%
December 15, 2012.................. 28.60% 71.40% 100%
June 15, 2013...................... 26.16% 73.84% 100%
December 15, 2013.................. 23.63% 76.37% 100%
June 15, 2014...................... 21.01% 78.99% 100%
December 15, 2014.................. 18.30% 81.70% 100%
June 15, 2015...................... 15.50% 84.50% 100%
December 15, 2015.................. 12.61% 87.39% 100%
June 15, 2016...................... 9.61% 90.39% 100%
December 15, 2016.................. 6.52% 93.48% 100%
June 15, 2017...................... 3.31% 96.69% 100%
December 15, 2017.................. 0.00% 100.00% 100%
</TABLE>
S-27
<PAGE>
THE DEPOSITOR
Lehman ABS Corporation (the "Depositor") was incorporated in the State of
Delaware on January 29, 1988. The Depositor is a wholly owned, special purpose
subsidiary of Lehman Commercial Paper Inc. ("LCPI"), which is itself a wholly
owned subsidiary of Lehman Brothers Inc. ("Lehman Brothers"), which is a wholly
owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings"). None of Lehman
Brothers, LCPI, Holdings or the Depositor, nor any affiliate of the foregoing,
has guaranteed or is otherwise obligated with respect to the Certificates.
The principal executive offices of the Depositor are located at Three
World Financial Center, New York, New York 10285 (Telephone: (212) 526-4428).
See "The Depositor" in the Prospectus.
DESCRIPTION OF THE TRUST AGREEMENT
General
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement. A Current Report on
Form 8-K relating to the Certificates containing a copy of the Trust Agreement
as executed will be filed by the Depositor with the Commission following the
issuance and sale of the Certificates. The Trust created under the Trust
Agreement (including the Series 1998-ADM-1 Supplement) will consist of (i) the
Underlying Securities and (ii) all payments on or collections in respect of the
Underlying Securities due after the Closing Date. Reference is made to the
Prospectus for important information in addition to that set forth herein
regarding the Trust, the terms and conditions of the Trust Agreement and the
Certificates. The following summaries of certain provisions of the Trust
Agreement do not purport to be complete and are subject to the detailed
provisions contained in the form of Trust Agreement, to which reference is
hereby made for a full description of such provisions, including the definition
of certain terms used herein.
The discussions in the Prospectus under "Description of the Trust
Agreement--Advances in Respect of Delinquencies," "--Certain Matters Regarding
the Administrative Agent and the Depositor" (to the extent the discussion
relates to the Administrative Agent), "--Administrative Agent Termination
Events; Rights Upon Administrative Agent Termination Event," and "--Evidence as
to Compliance" are not applicable to the Certificates.
The Trustee
The Bank of New York, a New York banking corporation, will act as trustee
(the "Trustee") for the Certificates and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at 101 Barclay Street, New York,
New York 10286 and its telephone number is (212) 815-5098.
Pursuant to the Trust Agreement, the Trustee shall receive compensation at
the rate set forth in the Trust Agreement payable from Available Funds on each
Distribution Date (the "Trustee Fee").
The Trust Agreement provides that the Trustee may not take any action
which, in the Trustee's opinion, would or might cause it to incur Extraordinary
Expenses that would be payable out of the Trust property, unless (i) the Trustee
is satisfied that it will have adequate security or indemnity in respect of such
costs, expenses and liabilities and (ii) the Trustee has been instructed to do
so by Certificateholders representing not less than 100% of the aggregate voting
rights of each class of Certificates then outstanding. Extraordinary Expenses so
incurred may be reimbursed to the Trustee out of Available Funds on any
Distribution Date before any distributions to Certificateholders on such
Distribution Date are made.
"Extraordinary Expenses" are defined in the Trust Agreement as any and all
costs, expenses or liabilities arising out of the establishment, existence or
administration of the Trust, other than (i) Ordinary Expenses and (ii) costs and
expenses payable by a particular Certificateholder, the Trustee or the Depositor
pursuant to the Trust Agreement.
S-28
<PAGE>
"Ordinary Expenses" are defined in the Trust Agreement and are generally
described as the Trustee's ordinary expenses and overhead in connection with its
services as Trustee, including (i) the costs and expenses of preparing, sending
and receiving all reports, statements, notices, filings, solicitations of
consent or instructions, (ii) the costs and expenses of holding and making
ordinary collection or payments on the assets of the Trust and of determining
and making payments of interest or principal, and (iii) any other costs and
expenses that are or reasonably should have been expected to be incurred in the
ordinary course of administration of the Trust.
Events of Default
An event of default with respect to the Certificates under the Trust
Agreement (an "Event of Default") will consist of (i) a default in the payment
of any interest on any Underlying Security after the same becomes due and
payable (subject to any applicable grace period); (ii) a default in the payment
of the principal of or any installment of principal of any Underlying Security
when the same becomes due and payable; and (iii) any other event specified as an
"Event of Default" in the Underlying Securities Indenture.
The Trust Agreement will provide that, within 30 days after the occurrence
of an Event of Default in respect of the Certificates, the Trustee will give
notice to the Certificateholders, transmitted by mail, of all such uncured or
unwaived Events of Default known to it. However, except in the case of an Event
of Default relating to the payment of principal of or interest on any of the
Underlying Securities, the Trustee will be protected in withholding such notice
if in good faith it determines that the withholding of such notice is in the
interest of the Certificateholders.
No Certificateholder will have the right to institute any proceeding with
respect to the Trust Agreement, unless (i) such Certificateholder previously has
given to the Trustee written notice of a continuing breach, (ii)
Certificateholders evidencing not less than the Required Percentage--Remedies of
the aggregate Voting Rights have requested in writing that the Trustee institute
such proceeding in its own name as Trustee, (iii) such Certificateholder or
Certificateholders have offered the Trustee reasonable indemnity, (iv) the
Trustee has for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to the Trustee during such
15-day period by Certificateholders evidencing not less than the Required
Percentage--Remedies of the aggregate Voting Rights. "Required
Percentage--Remedies" shall mean 66 2/3% of the Voting Rights.
Voting Rights
At all times, 100% of all Voting Rights will be allocated between the
Class A-1 Certificates and the Class A-2 Certificates in accordance with the
Allocation Ratio. Within each such class, Voting Rights shall be allocated among
Certificateholders in proportion to the then outstanding principal amounts of
their respective Certificates. The "Required Percentage--Amendment" of Voting
Rights necessary to consent to such modification or amendment shall be 66 2/3%.
Notwithstanding the foregoing, in addition to the other restrictions on
modification and amendment, the Trustee will not enter into any amendment or
modification of the Trust Agreement which would adversely affect in any material
respect the interests of the holders of a class of Certificates without the
consent of the holders of 100% of such class of Certificates; provided, however,
that no such amendment or modification will be permitted which would alter the
status of the Trust as a grantor trust for Federal Income tax purposes. See
"Description of the Trust Agreement--Modification and Waiver" in the Prospectus.
Further, no amendment will be permitted which would adversely affect in any
material respect the interests of Certificateholders of any class without
confirmation by each Rating Agency that such amendment will not result in a
downgrading or withdrawal of its rating of such Certificates.
S-29
<PAGE>
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 outstanding principal amounts of the
Certificates) as the Certificates of the Trust were actually voted or not voted
by the Certificateholders thereof as of a date determined by the Trustee prior
to the date on which such consent or vote is required, after weighting the votes
of the Class A-1 Certificateholders and the votes of the Class A-2
Certificateholders according to the Allocation Ratio; provided, however, that,
notwithstanding anything to the contrary, the Trustee shall at no time vote or
consent to any matter (i) unless such vote or consent would not (based on an
opinion of counsel) alter the status of the Trust as a grantor trust for Federal
income tax purposes, (ii) which would alter the timing or amount of any payment
on the Underlying Securities, including, without limitation, any demand to
accelerate the Underlying Securities, except in the event of an Underlying
Securities event of default or an event which with the passage of time would
become an Underlying Securities event of default and with the unanimous consent
of all outstanding Class A-1 and Class A-2 Certificateholders, or (iii) which
would result in the exchange or substitution of any of the outstanding
Underlying Securities pursuant to a plan for the refunding or refinancing of
such Underlying Securities except in the event of a default under the Indenture
and only with the consent of Certificateholders representing 100% of the
outstanding Class A-1 and Class A-2 Certificates. The Trustee shall have no
liability for any failure to act resulting from Certificateholders' late return
of, or failure to return, directions requested by the Trustee from the
Certificateholders.
In the event that an offer is made by the Underlying Securities Issuer to
issue new obligations in exchange and substitution for any of the Underlying
Securities, pursuant to a plan for the refunding or refinancing of the
outstanding Underlying Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Class A-1 and Class A-2
Certificateholders of such offer as promptly as practicable. The Trustee must
reject any such offer unless the Trustee is directed by the affirmative vote of
all of the holders of the Class A-1 and Class A-2 Certificates to accept such
offer and the Trustee has received the tax opinion described above.
If an event of default under the Indenture occurs and is continuing and if
directed by all of the outstanding Class A-1 and Class A-2 Certificateholders,
the Trustee shall vote the Underlying Securities in favor of directing, or take
such other action as may be appropriate to direct, the Underlying Securities
Trustee to declare the unpaid principal balance of the Underlying Securities and
any accrued and unpaid interest thereon to be due and payable. In connection
with a vote concerning whether to declare the acceleration of the Underlying
Securities, the interests of the Certificateholders may differ from each other
and from those of other holders of outstanding Debt Securities issued by the
Underlying Securities Issuer.
Termination of the Trust
The Trust shall terminate upon the earliest to occur of (i) the payment in
full or sale of the Underlying Securities by the Trust after a payment default
on or an acceleration of the Underlying Securities, (ii) the distribution in
full of all amounts due to the Class A-1 and Class A-2 Certificateholders and
(iii) the Final Scheduled Distribution Date. See "Description of the Trust
Agreement--Termination" in the Prospectus.
S-30
<PAGE>
THE MARKET AGENT AGREEMENT
Market Agent
Pursuant to the Market Agent Agreement, dated as of the Closing Date,
between Lehman Brothers Inc., solely in its capacity as Market Agent (the
"Market Agent"), and the Trust (the "Market Agent Agreement"), the Market Agent
shall: (a) act on behalf of the Trust in connection with the sale of such
portion, if any, of the Underlying Securities after a payment default on or an
acceleration of the Underlying Securities as provided in the Trust Agreement
representing fractional interests in the Underlying Securities which cannot be
distributed to Certificateholders in kind; and (b) perform its other duties and
comply with the provisions set forth in the Market Agent Agreement. The Market
Agent is entitled to a customary fee for any sale of the Underlying Securities.
The Market Agent Agreement provides that the Market Agent has no liability
for any act or omission except as results from the Market Agent's negligence or
willful misconduct. The Market Agent may assign any and all of its duties,
obligations and rights as Market Agent to any organization controlled by or
under common control with Lehman Brothers Inc. The Market Agent may at any time
resign and be discharged of the duties and obligations created by the Market
Agent Agreement by providing at least 30 days notice to the Trustee.
Sale of the Underlying Securities
Upon receiving notice of a payment default on or an acceleration of the
Underlying Securities, the Trustee will be permitted to direct the Market Agent
to sell in compliance with the Sale Procedures such amount of the Underlying
Securities as will be necessary in order that the Underlying Securities,
together with the proceeds received from the sale of any portion thereof, may be
distributed in accordance with the Allocation Ratio. The sale and settlement of
the liquidation of such portion of the Underlying Securities will occur as soon
as practicable after the date of receipt of such notice by the Trustee, and the
liquidation proceeds will be deposited into the Certificate Account maintained
by the Trustee. Deliveries of the Underlying Securities by the Trust to the
Purchaser of such Underlying Securities will only be made against payment in
same day funds.
"Sale Procedures" means, in connection with any sale of a portion of the
Underlying Securities, the sale of such Underlying Securities to the highest of
not less than three solicited bidders for such Underlying Securities (one of
which bidders may include Lehman Brothers Inc. or any one of its affiliates;
provided, however, that neither Lehman Brothers Inc. nor any of its affiliates
are obligated to bid, and that such bidders need not be limited to recognized
broker dealers). In the sole judgment of the Market Agent, bids may be evaluated
on the basis of bids for all or a portion of the Underlying Securities being
sold or any other basis selected in good faith by the Market Agent. No assurance
can be given as to whether the Market Agent will be successful in soliciting
bids to purchase the Underlying Securities. The Market Agent shall, prior to any
sale of Underlying Securities to Lehman Brothers, Inc. or any of its affiliates,
certify in writing to the Trustee that any such purchaser submitted the highest
of at least three bids and shall identify the other bidders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of certain of the material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by an initial holder of Certificates.
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
Certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. Dollar and
investors in pass-through entities. Furthermore, no authority exists concerning
the tax treatment of some aspects of the Certificates, and there can be no
assurance that the Treasury Department will not issue regulations under Section
1286 of the Code which would modify the treatment described below. Accordingly,
the ultimate Federal income tax treatment of the Certificates may differ
S-31
<PAGE>
substantially from that described below. Investors should consult their own tax
advisors to determine the Federal, state, local and other tax consequences of
the purchase, ownership and disposition of the Certificates.
The Trust, as discussed below, will be provided with an opinion of Weil,
Gotshal & Manges LLP, special Federal tax counsel to the Depositor ("Federal Tax
Counsel"), regarding the tax status of the Trust for Federal income tax
purposes. An opinion of Federal Tax Counsel, however, is not binding on the
Internal Revenue Service (the "Service") or the courts. Prospective investors
should note that no rulings have been or will be sought from the Service with
respect to any of the Federal income tax consequences discussed below, and no
assurance can be given that the Service will not take contrary positions.
THE TAX DISCUSSION CONTAINED HEREIN ASSUMES THAT THE AGGREGATE DEEMED
PURCHASE PRICE OF THE CERTIFICATES (AS DESCRIBED HEREIN) WILL AT LEAST EQUAL THE
STATED PRINCIPAL BALANCE OF THE UNDERLYING SECURITIES AND THAT THE UNDERLYING
SECURITIES CONSTITUTE INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
Tax Status of Trust
In the opinion of Federal Tax Counsel, the Trust will be classified as a
grantor trust, and not as an association (or publicly traded partnership)
taxable as a corporation, for Federal income tax purposes. Accordingly, each
owner of a Certificate (a "Certificateholder") will be subject to Federal income
taxation as if it owned directly the portion of the Underlying Securities
allocable to such Certificates and as if it paid directly its share of expenses
paid by the Trust.
Income of Certificateholders
In General. The proper Federal income tax treatment of the Class A-1
Certificates is unclear. Under Code Section 1286, on the date a Certificate is
purchased, the security backing the Certificate will be treated as newly issued.
The Trust intends to take the position that the Class A-1 Certificates represent
interests in a newly-issued self amortizing debt obligation maturing on the
Final Scheduled Distribution Date. Payments on the Certificates made on each
Distribution Date will represent partially a return of principal and partially
interest on the principal amount of such instrument. Certificateholders under
the cash method of accounting would include in income upon receipt that portion
of the payment representing interest calculated based upon the Certificate's
yield to maturity. The Service, however, could take the position that a Class
A-1 Certificate represents an interest in 40 separate newly-issued debt
instruments, each consisting of an interest payment stripped from the Underlying
Securities and maturing on its respective Distribution Date. Were the Service to
take this position, the debt instruments represented by the Class A-1
Certificates would be considered to be issued with original issue discount
("OID") and the holders would be required to accrue income based upon the
constant yield method without respect to the receipt of cash. Class A-1
Certificateholders are urged to seek advice of their own tax counsel regarding
the effect on them of the purchase of Certificates.
With respect to the Class A-2 Certificate, under Section 1286, the
Underlying Security will be treated as newly issued and will be issued with OID
equal to the difference between (i) its stated redemption price at maturity
(generally all payments made with respect to the Underlying Securities to the
Class A-2 Certificate) and (ii) the Certificate's purchase price (less accrued
interest, if any, on the Underlying Securities on the Closing Date to which the
Class A-2 Certificateholder may be entitled). Each Class A-2 Certificateholder,
regardless of its normal method of accounting, will accrue income, prior to the
receipt of cash, in respect of its interest in the Underlying Securities under
the rules relating to OID under a method described below that takes account of
the compounding of interest, based on the particular Certificateholder's
expected yield to maturity.
OID. A holder of a Class A-2 Certificate (or of the Underlying Securities
after the Final Scheduled Maturity Date or redemption of the Certificates),
whether using the cash or accrual method of accounting, generally will be
required to include OID in income in advance of the receipt of some or all of
the related cash payments. The amount of OID includable in income by such holder
is the sum of the "daily portions" of OID with respect to each day during the
taxable year or portion of the taxable year in which such holder held such
obligation ("accrued OID"). The daily portion is determined by allocating to
each day in any "accrual period" a pro rata portion of the OID allocable to the
accrual period. Under the Treasury Regulations, the "accrual period" for each
S-32
<PAGE>
obligation may be of any length and may vary in length over the term of the
obligation, provided that each accrual period is no longer than one year and
each scheduled payment occurs on either the first or last day of an accrual
period. The amount of OID allocable to any accrual period is an amount equal to
the product of each obligation's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and properly adjusted for the length of the
accrual period). If all accrual periods are of equal length except for either an
initial short period or an initial and final short period, the amount of OID
allocable to the initial short accrual period may be computed under any
reasonable method. The "adjusted issue price" of an interest in an Underlying
Security at the start of any accrual period is equal to its purchase price
(generally, the purchase price of the Certificate, less any purchased accrued
interest) increased by the accrued OID for each prior accrual period and reduced
by the amount of any cash payments.
Because the purchase of a Certificate would be treated as the original
issuance on the purchase date of an obligation to make the distributions on the
portion of the amounts collected on the Underlying Securities allocable to the
Certificates, such purchase should not result in acquisition premium, bond
premium or market discount.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the Underlying
Securities, including advancing their maturity date following a Tax Event, or a
substitution of other assets for the Underlying Securities following a default
on the Underlying Securities or following a Tax Event, would be a taxable event
to Certificateholders on which they would recognize gain or loss.
Deductibility of Trust's Fees and Expenses
In computing its Federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its share of
reasonable administrative fees, trustee fees and other fees paid or incurred by
the Trust as provided in Section 162 or 212 of the Code. If a Certificateholder
is an individual, estate or trust, the deduction for its share of fees will be a
miscellaneous itemized deduction that may be disallowed in whole or in part.
Purchase and Sale of a Certificate
A Certificateholder's tax basis in a Certificate generally will equal the
cost of such Certificate (A) increased by any amounts of OID and (B) reduced by
any payments other than of qualified stated interest on the Underlying
Securities made on such Certificate.
If a Certificate or Underlying Security is sold or redeemed for cash, gain
or loss will be recognized in an amount equivalent to the difference between the
proceeds of sale or redemption allocable to the Certificateholder (other than
amounts allocable to accrued but unpaid interest, if any) and the
Certificateholder's adjusted basis in its Certificate or its portion thereof
representing its interest in the foregoing. Any gain or loss will be a capital
gain or loss if the Certificate was held as a capital asset.
Distributions on Class A-2 Certificates; Distributions of Underlying Securities
to Class A-1 and Class A-2 Certificateholders
The distribution of the Underlying Securities to the Class A-2
Certificateholders upon a default of the Underlying Securities or on the Final
Scheduled Distribution Date should not constitute a taxable transaction to the
recipients. Similarly, a redemption by the Trust of Certificates in exchange for
the Underlying Securities upon the tender by a Certificateholder of Class A-2
Certificates of a certain principal amount and Class A-1 Certificates
representing a like percentage of the outstanding principal amount thereof
should not constitute a taxable transaction to the Certificateholder. It is
unclear, however, whether the receipt of a portion of the Underlying Securities
by the Class A-1 Certificateholders in accordance with the Allocation Ratio
upon a default of the Underlying Securities constitutes a taxable transaction to
either the Class A-1 or Class A-2 Certificateholders. Certificateholders are
urged to consult their own tax advisers with respect to the consequences to them
of such a distribution.
S-33
<PAGE>
Backup Withholding
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
Foreign Certificateholders
To the extent that amounts paid to Certificateholders 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) 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), (ii) is not a "related controlled foreign
corporation," and (iii) fulfills certain certification requirements with respect
to the Underlying Securities Issuer. Under such requirements, the holder must
certify, under penalties of perjury, that it is not a "United States person" and
provide its name and address.
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or any political subdivision thereof, an estate the income of
which is includable in gross income for 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
U.S. fiduciaries have the authority to control all of its substantial decisions.
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.
Under a "look-through rule" set forth in Section 2510.3-101 of the United
States Department of Labor ("DOL") regulations (the "Regulation"), a Plan's
assets may include an interest in the underlying assets of an entity (such as a
trust) for certain purposes under ERISA if the Plan acquires an equity interest
in such entity. Thus, unless an exception to the look-through rule applies, an
investment in Certificates by a Plan might result in the assets of the Trust
being deemed to constitute Plan assets, which in turn might mean that certain
aspects of such investment, including the operation of the Trust, might be
subject to the prohibited transaction provisions under ERISA and the Code.
If assets of the Trust were deemed to be Plan assets, transactions
involving the Depositor, Underwriter, Trustee, Market Agent, Underlying
Securities Trustee and the Company might constitute non-exempt prohibited
transactions with respect to a Plan holding a Certificate unless (i) one or more
prohibited transaction class exemptions ("PTCEs") applies or (ii) in the case of
the Company, it is not a disqualified person or party in interest with respect
to such Plan. Plans maintained or contributed to by the Depositor, Underwriter,
Trustee, Market Agent, Underlying Securities Trustee and the Company, or any of
their affiliates ("Excluded Plans"), should not acquire or hold any Certificate.
S-34
<PAGE>
If the Trust is deemed to hold Plan assets, the Underlying Securities
would appear to be an indirect loan between the Company and any Plan owning
Certificates; however, such loan, by itself, would not constitute a prohibited
transaction unless the Company is a party in interest or disqualified person
with respect to such Plan.
The Underwriter is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and customarily purchases and sells securities
for its own account in the ordinary course of its business as a broker-dealer.
Accordingly, the sale of Certificates by the Underwriter to Plans may be exempt
under PTCE 75-1 if the following conditions are satisfied: (i) the Underwriter
is not a fiduciary with respect to the Plan and is a party in interest or
disqualified person solely by reason of Section 3(14)(B) of ERISA or Section
4975(e)(2)(B) of the Code or a relationship to a person described in such
Sections, (ii) the transaction is at least as favorable to the Plan as an
arm's-length transaction with an unrelated party and is not a prohibited
transaction within the meaning of Section 503(b) of the Code, and (iii) the Plan
maintains for at least six years such records as are necessary to determine
whether the conditions of PTCE 75-1 have been met.
The custodial and other services rendered by the Trustee, Market Agent and
Underlying Securities Trustee might be exempt pursuant to Section 408(b)(2) of
ERISA and Section 4975(d)(2) of the Code, which exempt services necessary for
the establishment or operation of a Plan under a reasonable contract or
arrangement and for which no more than reasonable compensation is paid. An
arrangement would not be treated as reasonable unless it can be terminated upon
reasonably short notice under the circumstances without penalty. The Trustee and
the Market Agent may each be terminated upon 60 days prior notice and the
approval of Certificateholders owning more than 66 2/3% of the aggregate
beneficial interest of Certificates. The Depositor believes the compensation of
the Trustee and Market Agent is reasonable under the circumstances. The
statutory exemption for services noted above does not provide exemptive relief
from prohibited transactions described in Section 406(b) of ERISA or Section
4975(c)(1)(E) or (F) of the Code. In that regard, a fiduciary with respect to a
Plan should consider whether a sale of a portion of the Underlying Securities by
the Market Agent to Lehman Brothers Inc. or its affiliates might constitute a
non-exempt prohibited transaction by reason of the relationship between the
Market Agent and any such purchaser, notwithstanding the sale procedure to
accept the highest bid submitted and the certification of the highest bid and
identity of bidders to the Trustee, or the possibility that the Market Agent may
not solicit Lehman Brothers Inc. and its affiliates to avoid the possibility of
a non-exempt prohibited transaction. The Market Agent shall, prior to any sale
of Underlying Securities to Lehman Brothers Inc. or any of its affiliates,
certify in writing to the Trustee that any such purchaser submitted the highest
of at least three bids and shall identify the other bidders.
Other prohibited transaction class exemptions could apply to the
acquisition and holding of Certificates by Plans, and the operation of the
Trust, including, but not limited to: 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) or PTCE 95-60 (an exemption for
certain transactions involving insurance company general accounts).
By acquiring and holding a Certificate, a Plan shall be deemed to have
represented and warranted to the Depositor, Trustee, Market Agent and
Underwriter that such acquisition and holding of a Certificate does not involve
a non-exempt prohibited transaction with respect to such Plan, including with
respect to the activities of the Trust.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated March 30, 1998 (the "Underwriting Agreement"), the Depositor
has agreed to sell to Lehman Brothers Inc., (an affiliate of the Depositor) (the
"Underwriter"), and the Underwriter has agreed to purchase, the Certificates.
The Depositor has been advised by the Underwriter that the Underwriter
proposes to offer the Certificates from time to time in negotiated transactions
or otherwise at varying prices to be determined at the time of sale. The
Underwriter may effect such transactions by selling Certificates to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter and any purchasers of
Certificates for whom they may act as agents. The Underwriter and any dealers
that participate with the Underwriter in the distribution of Certificates may be
deemed to be underwriters, and any
S-35
<PAGE>
profit on the resale of Certificates by them may be deemed to be underwriting
discounts, or commissions under the Securities Act. Discounts and concessions to
dealers will vary but will not exceed 2.5% of the face amount of the
Certificates.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriter may be required
to make in respect thereof.
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.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and the Underwriter by Weil, Gotshal & Manges LLP, New York, New
York.
RATINGS
It is a condition to the issuance of the Certificates that the
Certificates have ratings assigned by Moody's Investors Service, Inc.
("Moody's") and by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P") equivalent to the ratings of the Underlying Securities, which, as
of the date of this Prospectus Supplement, were "Aa3" by Moody's and "AA-" by
S&P. It is expected that the ratings of the Certificates will change if the
ratings of the Underlying Securities Change.
The rating of the Certificates by Moody's addresses the likelihood that
Certificateholders will receive the timely payment of interest and principal on
a semi-annual basis beginning on June 15, 1998 and lasting until the Final
Scheduled Distribution Date. The rating of the Certificates by S&P addresses the
likelihood of timely receipt of interest on the Class A-1 Certificates or any
Underlying Securities distributed in respect of the Class A-2 Certificates and
ultimate receipt of principal on any Underlying Securities distributed in
respect of the Class A-2 Certificates. The ratings address the likelihood of the
receipt by Certificateholders of payments required under the Trust Agreement,
and are based primarily on the credit quality of the Underlying Securities. The
rating on the Certificates does not, however, constitute a statement regarding
the occurrence or frequency of redemptions or prepayments on, or extensions of
the maturity of, the Underlying Securities, and the corresponding effect on
yield to investors.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning Rating
Agency. Each security rating should be evaluated independently of similar
ratings on different securities.
The Depositor has not requested a rating on the Certificates by any rating
agency other than the Rating Agencies. However, there can be no assurance as to
whether any other rating agency will rate the Certificates, or, if it does, what
rating would be assigned by any such other rating agency. A rating on the
Certificates by another rating agency, if assigned at all, may be lower than the
ratings assigned to the Certificates by the Rating Agencies.
S-36
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
accrued OID................................................................................. S-32
adjusted issue price........................................................................ S-33
Administrative or Judicial Action........................................................... S-9, S-20
Allocation Ratio............................................................................ S-4, S-26
Attributable Debt........................................................................... S-15
Available Funds............................................................................. S-25
Business Day................................................................................ S-6
capital assets.............................................................................. S-30
CEDE........................................................................................ S-24
Certificate Principal Amount................................................................ S-21, S-22
Certificateholder........................................................................... S-1, S-32
Certificates................................................................................ S-1, S-3
Class A-1 Allocation........................................................................ S-4, S-26
Class A-1 Certificateholders................................................................ S-1, S-4
Class A-2 Allocation........................................................................ S-4, S-26
Class A-2 Certificateholders................................................................ S-1, S-4
Clearing Agency............................................................................. S-24
Closing Date................................................................................ S-1, S-3
Code........................................................................................ S-31
Company..................................................................................... S-1, S-3, S-8, S-13
Comparable Treasury Issue................................................................... S-18
Comparable Treasury Price................................................................... S-19
Consolidated Net Tangible Assets............................................................ S-15
CUSIP Numbers............................................................................... S-1, S-6
Debt Securities............................................................................. S-14
Depositary.................................................................................. S-20
Depositor................................................................................... S-1, S-3, S-28
disqualified persons........................................................................ S-34
Distribution Date........................................................................... S-1, S-4, S-22
DOL......................................................................................... S-34
DTC......................................................................................... S-2, S-6, S-20
EDGAR....................................................................................... S-11, S-14
Eligible Investments........................................................................ S-25
ERISA....................................................................................... S-7, S-34
Event of Default............................................................................ S-29
Events of Default........................................................................... S-17
Excluded Plans.............................................................................. S-34
Extraordinary Expenses...................................................................... S-28
Federal Tax Counsel......................................................................... S-32
Final Scheduled Distribution Date........................................................... S-1, S-3, S-4
Foreign Certificate Owners.................................................................. S-34
Funded Debt................................................................................. S-15
Global Security............................................................................. S-20
Holdings.................................................................................... S-28
Indenture................................................................................... S- 8, S-10, S-14
Independent Investment Banker............................................................... S-18
IRA......................................................................................... S-7
Keogh....................................................................................... S-7
LCPI........................................................................................ S-28
Lehman Brothers............................................................................. S-28
Market Agent................................................................................ S-31
Market Agent Agreement...................................................................... S-31
Moody's..................................................................................... S-1, S-6, S-36
Mortgage.................................................................................... S-15
NYSE........................................................................................ S-1, S-6
S-37
<PAGE>
Obligation.................................................................................. S-14
OID......................................................................................... S-32
Ordinary Expenses........................................................................... S-29
Participants................................................................................ S-2
participants................................................................................ S-20
parties in interest......................................................................... S-34
Plan........................................................................................ S-7, S-34
Primary Treasury Dealer..................................................................... S-19
Principal Domestic Manufacturing Property................................................... S-15
Principal Subsidiary........................................................................ S-14
PTCEs....................................................................................... S-34
Purchase Money Lien......................................................................... S-14
Record Dates................................................................................ S-6
Reference Treasury Dealer................................................................... S-19
Reference Treasury Dealer Quotations........................................................ S-19
Regulation.................................................................................. S-34
Remaining Scheduled Payments................................................................ S-19
Required Percentage--Amendment............................................................... S-28
Required Percentage--Remedies................................................................ S-28
Restricted Subsidiary....................................................................... S-16
S&P......................................................................................... S-1, S-6, S-36
Sale Procedures............................................................................. S-31
SEC......................................................................................... S-10, S-14
Series Supplement........................................................................... S-3, S-13
Service..................................................................................... S-32
Specified Currency.......................................................................... S-6, S-21
Standard Terms.............................................................................. S-3, S-13
Subsidiary.................................................................................. S-16
Tax Event................................................................................... S-9, S-20
Treasury Rate............................................................................... S-18
Trust....................................................................................... S-1, S-3
Trust Agreement............................................................................. S-3, S-13
Trust Assets................................................................................ S-3
Trustee..................................................................................... S-1, S-3, S-28
Trustee Fee................................................................................. S-3, S-28
Underlying Securities....................................................................... S-1, S-3
Underlying Securities CUSIP Number.......................................................... S-10
Underlying Securities Interest Payment Dates................................................ S-8
Underlying Securities Interest Rate......................................................... S-8
Underlying Securities Issuer................................................................ S-1, S-3, S-8, S-13
Underlying Securities Maturity Date......................................................... S-8
Underlying Securities Original Issue Date................................................... S-8
Underlying Securities Prospectus............................................................ S-8, S-14
Underlying Securities Record Dates.......................................................... S-10
Underlying Securities Trustee............................................................... S-8, S-10, S-14
Underwriter................................................................................. S-1, S-35
Underwriting Agreement...................................................................... S-35
United States person........................................................................ S-34
</TABLE>
S-38
<PAGE>
PROSPECTUS
Trust Certificates
(Issuable in Series)
Lehman ABS Corporation
Depositor
The Trust Certificates (the "Certificates") offered hereby and by
supplements (each a "Prospectus Supplement") to this Prospectus will be offered
from time to time in one or more series (each a "Series") and in one or more
classes within each such Series (each a "Class"), denominated in dollars or in
one or more foreign or composite currencies, including the European Currency
Unit ("ECU"). Certificates of each respective Series and Class will be offered
on terms to be determined at the time of sale as described in the related
Prospectus Supplement accompanying the delivery of this Prospectus. Certificates
may be sold for United States dollars or for one or more foreign or composite
currencies, and the principal of, premium on, if any, and any interest to be
distributed in respect of Certificates may be payable in United States dollars
or in one or more foreign or composite currencies. Each Series and Class of
Certificates may be issuable as individual securities in registered form without
coupons ("Registered Certificates") or in bearer form with or without coupons
attached ("Bearer Certificates") or as one or more global securities in
registered or bearer form (each a "Global Security").
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
or a pool of such debt securities (the "Underlying Securities"), together with
certain other assets described herein and in the related Prospectus Supplement
(such assets, together with the Underlying Securities, the "Deposited Assets"),
to be deposited in a trust (the "Trust") for the benefit of holders of
Certificates of such Series ("Certificateholders") by Lehman ABS Corporation
(the "Depositor") pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") among the
Depositor, the administrative agent, if any (the "Administrative Agent") and the
trustee (the "Trustee") named in the related Prospectus Supplement. The
Underlying Securities will be purchased by the Depositor in the secondary market
(either directly or through an affiliate of the Depositor), and will not be
acquired from the issuer thereof as part of any distribution by or pursuant to
any agreement with such issuer. The Underlying Securities discussed herein and
in the related Prospectus Supplement represent the obligation of one or more
corporations, banking organizations or insurance companies organized under the
laws of the United States or any State, which are subject to the information
requirements of the Securities Exchange Act of 1934, as amended, and which, in
accordance therewith, file reports and other information with the Securities
Exchange Commission. If so specified in the related Prospectus Supplement, the
Trust for a Series of Certificates may also include, or the Certificateholders
of such Certificates may have the benefit of, any combination of insurance
policies, letters of credit, reserve accounts and other types of rights or
assets designed to support or ensure the servicing and distribution of amounts
due in respect of the Deposited Assets (collectively, "Credit Support").
See "Description of Certificates" and "Description of Deposited Assets and
Credit Support."
Each Class of Certificates of any Series will represent the right,
which may be senior to those of one or more of the other Classes of such Series,
to receive specified portions of payments of principal, interest and certain
other amounts on the Deposited Assets in the manner described herein and in the
related Prospectus Supplement. A Series may include two or more Classes
differing as to the timing, sequential order or amount of distributions of
principal, interest or premium and one or more Classes within such Series may be
subordinated in certain respects to other Classes of such Series.
Except as otherwise provided herein and in the applicable Prospectus
Supplement, the Depositor's only obligations with respect to each Series of
Certificates will be, pursuant to certain representations and warranties
concerning the Deposited Assets, to assign and deliver the Deposited Assets and
certain related documents to the applicable Trustee and, in certain cases, to
provide for the Credit Support, if any. The principal obligations of an
Administrative Agent, if any is 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 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be offered and sold to or through underwriters,
through dealers or agents or directly to purchasers, as more fully described
under "Plan of Distribution" and in the related Prospectus Supplement. This
Prospectus may not be used to consummate sales of Certificates offered hereby
unless accompanied by a Prospectus Supplement.
LEHMAN BROTHERS
December 12, 1997
<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 in the Prospectus Supplement), 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.
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.
2
<PAGE>
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; Notices."
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. The Depositor, on behalf of each
Trust, will cause to be filed with the Commission such periodic reports as are
required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Certificate in the Specified
Principal Currency for such Certificate. Currently, there are limited facilities
in the United States for conversion of U.S. dollars into foreign currencies and
vice versa, and banks do not currently offer non-U.S. dollar checking or savings
account facilities in the United States. However, if requested by a prospective
purchaser of a Certificate having a Specified Principal Currency other than U.S.
dollars, Lehman Brothers Inc. (the "Offering Agent") will arrange for the
exchange of U.S. dollars into such Specified Principal Currency to enable the
purchaser to pay for such Certificate. Such request must be made on or before
the fifth Business Day (as defined below) preceding the date of delivery of such
Certificate or by such later date as is determined by the Offering Agent. Each
such exchange will be made by the Offering Agent on such terms and subject to
such conditions, limitations and charges as the Offering Agent may from time to
time establish in accordance with its regular foreign exchange practice. All
costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$," "USD," "dollar" or "$"
are to the lawful currency of the United States.
3
<PAGE>
RISK FACTORS
Limited Liquidity. There will be no market for any Series (or Class
within such Series) of Certificates prior to the issuance thereof, and there can
be no assurance that a secondary market will develop or, if it does develop,
that it will provide Certificateholders with liquidity of investment or will
continue for the life of such Certificates.
Certain Legal Aspects. The applicable Prospectus Supplement may set
forth certain legal considerations that are applicable to a specific Series (or
Class or Classes within such Series) of Certificates being offered in connection
with that Prospectus Supplement or the assets deposited in or assigned to the
related Trust.
Limited Obligations and Interests. The Certificates will not represent
a recourse obligation of or interest in the Depositor or any of its affiliates.
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of each Series will not be insured or guaranteed by any government
agency or instrumentality, the Depositor, any person affiliated with the
Depositor or the 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 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,
4
<PAGE>
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, 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).
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 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
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
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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 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 Deposited Assets and
Credit Support--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
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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.
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 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
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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 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
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distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). If
the Specified Currency for a given Series or Class within such Series is other
than U.S. dollars, the Administrative Agent, if any, or otherwise the Trustee
will (unless otherwise specified in the applicable Prospectus Supplement)
arrange to convert all payments in respect of each Certificate of such Series or
Class to U.S. dollars in the manner described in the following paragraph. The
Certificateholder of a Registered Certificate of a given Series or Class within
such Series denominated in a Specified Currency other than U.S. dollars may (if
the applicable Prospectus Supplement and such Certificate so indicate) elect to
receive all distributions in respect of such Certificate in the Specified
Currency by delivery of a written notice to the Trustee and Administrative
Agent, if any, for such Series not later than fifteen calendar days prior to the
applicable Distribution Date, except under the circumstances described under
"Currency Risks--Payment Currency" below. Such election will remain in effect
until revoked by written notice to such Trustee and Administrative Agent, if
any, received by each of them not later than fifteen calendar days prior to the
applicable Distribution Date.
Unless otherwise specified in the applicable Prospectus Supplement, in
the case of a Registered Certificate of a given Series or Class within such
Series having a Specified Currency other than U.S. dollars, the amount of any
U.S dollar distribution in respect of such Registered Certificate will be
determined by the Exchange Rate Agent based on the highest firm bid quotation
expressed in U.S. dollars received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable Distribution Date (or, if no such rate is quoted on such date, the
last date on which such rate was quoted), from three (or, if three are not
available, then two) recognized foreign exchange dealers in The City of New York
(one of which may be the Offering Agent and another of which may be the Exchange
Rate Agent) selected by the Exchange Rate Agent, for the purchase by the quoting
dealer, for settlement on such Distribution Date, of the aggregate amount
payable in such Specified Currency on such payment date in respect of all
Registered Certificates. All currency exchange costs will be borne by the
Certificateholders of such Registered Certificates by deductions from such
distributions. If no such bid quotations are available, such distributions will
be made in such Specified Currency, unless such Specified Currency is
unavailable due to the imposition of exchange controls or to other circumstances
beyond the Depositor's control, in which case such distributions will be made as
described under "Currency Risks--Payment Currency" below. The applicable
Prospectus Supplement will specify such information with respect to Bearer
Certificates.
Unless otherwise provided in the applicable Prospectus Supplement and
except as provided in the succeeding paragraph, distributions with respect to
Certificates will be made (in the case of Registered Certificates) at the
corporate trust office or agency of the Trustee specified in the applicable
Prospectus Supplement in The City of New York 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
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Certificates of a given Series shall be entitled to receive such U.S. dollar
distributions by wire transfer of immediately available funds, but only if
appropriate wire transfer instructions have been received in writing by the
Trustee for such Series not later than fifteen calendar days prior to the
applicable Distribution Date. Simultaneously with the election by any
Certificateholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such Certificateholder shall provide appropriate
wire transfer instructions to the Trustee for such Series, and all such payments
will be made by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States.
Except as otherwise specified in the applicable Prospectus Supplement,
"Business Day" with respect to any Certificate means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in (a) The City of New
York or (b) if the Specified Currency for such Certificate is other than U.S.
dollars, the financial center of the country issuing such Specified Currency
(which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such Certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any Certificate means any day on which
dealings in deposits in the Specified Currency of such Certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a Series or Class of Registered Certificates shall be
specified as such in the applicable Prospectus Supplement.
Interest on the Certificates
General. Each Class of Certificates (other than certain Classes of
Strip Certificates) of a given Series may have a different Pass-Through Rate,
which may be a Fixed or Variable Pass-Through Rate, as described below. In the
case of Strip Certificates with no or, in certain cases, a nominal Certificate
Principal Balance, such distributions of interest will be in an amount (as to
any Distribution Date, "Stripped Interest") described in the related Prospectus
Supplement. For purposes hereof, "Notional Amount" means the notional principal
amount specified in the applicable Prospectus Supplement on which interest on
Strip Certificates with no or, in certain cases, a nominal Certificate Principal
Balance will be made on each Distribution Date. Reference to the Notional Amount
of a Class of Strip Certificates herein or in a Prospectus Supplement does not
indicate that such Certificates represent the right to receive any distribution
in respect of principal in such amount, but rather the term "Notional Amount" is
used solely as a basis for calculating the amount of required distributions and
determining certain relative voting rights, all as specified in the related
Prospectus Supplement.
Fixed Rate Certificates. Each Series (or, if more than one Class
exists, each Class within such Series) of Certificates with a Fixed Pass-Through
Rate ("Fixed Rate Certificates") will bear interest, on the outstanding
Certificate Principal Balance (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
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first Interest Reset Date (as defined below) for such Series or Class at the
initial Pass-Through Rate set forth on the face thereof and in the applicable
Prospectus Supplement ("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 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
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Certificates would otherwise be a day that is not a Business Day, such Interest
Reset Date will occur on a prior or succeeding Business Day, specified in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
interest payable in respect of Floating Rate Certificates shall be the accrued
interest from and including the Original Issue Date of such Series or Class or
the last Interest Reset Date to which interest has accrued and been distributed,
as the case may be, to but excluding the immediately following Distribution
Date.
With respect to a Floating Rate Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such Certificate
(or, in the case of a Strip Certificate with no or a nominal Certificate
Principal Balance, the Notional Amount specified in the applicable Prospectus
Supplement) by an accrued interest factor. Such accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. Unless otherwise specified in
the applicable Prospectus Supplement, the interest factor (expressed as a
decimal calculated to seven decimal places without rounding) for each such day
is computed by dividing the Pass-Through Rate in effect on such day by 360, in
the case of LIBOR Certificates, Commercial Paper Rate Certificates, Federal
Funds Rate Certificates and CD Rate Certificates or by the actual number of days
in the year, in the case of Treasury Rate Certificates. For purposes of making
the foregoing calculation, the Variable Pass-Through Rate in effect on any
Interest Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Pass-Through Rate on a
Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest
one-hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series (or Class within such Series) of Floating Rate
Certificates will be distributable on the Distribution Dates and for the
interest accrual periods as and to the extent set forth in the applicable
Prospectus Supplement.
Upon the request of the holder of any Floating Rate Certificate of a
given Series or Class, the Calculation Agent for such Series or Class will
provide the Pass-Through Rate then in effect and, if determined, the Pass-
Through Rate that will become effective on the next Interest Reset Date with
respect to such Floating Rate Certificate.
(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
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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 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 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
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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.
(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.
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(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).
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
17
<PAGE>
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.
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
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<PAGE>
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;
(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
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Certificateholder, the Trustee for such Certificate must receive, at least 30
(or such shorter period acceptable to the Trustee) but not more than 45 days
prior to an Optional Exchange Date (i) such Certificate with the form entitled
"Option to Elect Exchange" on the reverse thereof duly completed or (ii) in the
case of Registered Certificates, a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc., the Depositary (in accordance with its
normal procedures) or a commercial bank or trust company in the United States
setting forth the name of the holder of such Registered Certificate, the
Certificate Principal Balance or Notional Amount of such Registered Certificate
to be exchanged, the certificate number or a description of the tenor and terms
of such Registration Certificate, a statement that the option to elect exchange
is being exercised thereby and a guarantee that the Registered Certificate to be
exchanged with the form entitled "Option to Elect Exchange" on the reverse of
the Registered Certificate duly completed will be received by such Trustee not
later than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Certificate and form duly
completed must be received by such Trustee by such fifth Business Day. Any
tender of a Certificate by the holder for exchange shall be irrevocable. The
exchange option may be exercised by the holder of a Certificate for less than
the entire Certificate Principal Balance of such Certificate provided that the
Certificate Principal Balance or Notional Amount, as applicable, of such
Certificate remaining outstanding after redemption is an authorized denomination
and all other exchange requirements set forth in the related Prospectus
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for the remaining Certificate
Principal Balance thereof shall be issued (which, in the case of any Registered
Certificate, shall be in the name of the holder of such exchanged Certificate).
Unless otherwise specified in the applicable Prospectus Supplement,
because initially and until Definitive Certificates are issued, each Certificate
will be represented by a Global Security, the Depositary's nominee will be the
Certificateholder of such Certificate and therefore will be the only entity that
can exercise a right of exchange. In order to ensure that the Depositary's
nominee will timely exercise a right of exchange with respect to a particular
Certificate, the beneficial owner of such Certificate must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Certificate to notify the Depositary of its desire to exercise a right of
exchange. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Certificate in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise provided in the applicable Prospectus Supplement, upon
the satisfaction of the foregoing conditions and any applicable conditions with
respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Certificateholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series (and Class within such Exchangeable Series) of the
Certificate being exchanged, in the manner and to the extent described in such
Prospectus Supplement. Alternatively, to the extent so specified in the
applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
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
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<PAGE>
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 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
Administrative Agent, if any, the Trustee for such Certificates, any paying
agent or the Certificate registrar for such Certificates will have
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
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The Depositor expects that the Depositary for Certificates of a given
Class and Series, upon receipt of any distribution of principal, premium or
interest in respect of a definitive Global Security representing any of such
Certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Depositor also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants. 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 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
"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").
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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.
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
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securities must, take such action as it may deem appropriate to protect and
enforce the rights of the security holders. Certain indentures provide that the
indenture trustee or a specified percentage of the holders of the outstanding
securities have the right to declare all or a portion of the principal and
accrued interest on the outstanding securities immediately due and payable upon
the occurrence of certain events of default, subject to the issuer's right to
cure, if applicable. Generally, an indenture will contain a provision entitling
the trustee thereunder to be indemnified by the security holders prior to
proceeding to exercise any right or power under such indenture with respect to
such securities at the request of such security holders. An indenture is also
likely to limit a security holder's right to institute certain actions or
proceedings to pursue any remedy under the indenture unless certain conditions
are satisfied, including 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 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
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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 Interest
Accrual Periods"); and the dates on which such interest will be payable
("Underlying Securities Payment Dates"); (vii) the obligation, if any, of the
Underlying Securities Issuer to redeem the Outstanding Debt Securities pursuant
to any sinking fund or analogous provisions, or at the option of a holder
thereof, and the periods within which or the dates on which, the prices at which
and the terms and conditions upon which such debt securities may be redeemed or
repurchased, in whole or in part, pursuant to such obligation; (viii) the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such debt securities may be redeemed, if any, in whole
or in part, at the option of the Underlying Securities Issuer; (ix) whether the
Underlying Securities were issued at a price lower than the principal amount
thereof; (x) if other than United States dollars, the foreign or composite
currency in which such debt securities are denominated, or in which payment of
the principal of (and premium, if any) or any interest on such Underlying
Securities will be made (the "Underlying Securities Currency"), and the
circumstances, if any, when such currency of payment may be changed; (xi)
material events of default or restrictive covenants provided for with respect to
such Underlying Securities; (xii) the rating thereof, if any; and (xiii) any
other material terms of such Underlying Securities.
With respect to a Trust comprised of a pool of Underlying Securities,
the related Prospectus Supplement will describe the composition of the
Underlying Securities pool as of the Cut-off Date, certain 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,
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and will describe the existence and type of certain information that is made
publicly available by each obligor regarding such Underlying Security or
Underlying Securities and will disclose where and how prospective purchasers of
the Certificates may obtain such publicly available information with respect to
each such obligor. Such publicly available information will typically consist of
the quarterly and annual reports filed under the Exchange Act by such issuer
with, and which are available from, the Commission.
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, the Depositor, on behalf of the Trust,
will continue to be subject to the reporting requirements of the Exchange Act,
but certain information with respect to such issuer may be unavailable.
Other Deposited Assets
In addition to the Underlying Securities, the Depositor may also
deposit into a given Trust, or the Trustee on behalf of the Certificateholders
of a Trust may enter into an agreement constituting or providing for the
purchase of, to the extent described in the related Prospectus Supplement,
certain assets related or incidental to one or more of such Underlying
Securities or to some other asset deposited in the Trust, including hedging
contracts and other similar arrangements (such as puts, calls, interest rate
swaps, currency swaps, floors, caps and collars), cash and assets ancillary or
incidental to the foregoing or to the Underlying Securities (including assets
obtained through foreclosure or in settlement of claims with respect thereto)
and direct obligations of the United States (all such assets for any given
Series, together with the related Underlying Securities, the "Deposited
Assets"). The applicable Prospectus Supplement will, to the extent appropriate,
contain analogous disclosure with respect to the foregoing assets as referred to
above with respect to the Underlying Securities.
Unless otherwise specified in the related Prospectus Supplement, the
Deposited Assets for a given Series of Certificates and the related Trust will
not constitute Deposited Assets for any other Series of Certificates and the
related Trust and the Certificates of each Class of a given Series possess an
equal and ratable undivided ownership interest in such Deposited Assets. The
applicable Prospectus Supplement may, however, specify that certain assets
constituting a part of the Deposited Assets relating to any given Series may be
beneficially owned solely by or deposited solely for the benefit of one Class or
a group of Classes within such Series. In such event, the other Classes of such
Series will not possess any beneficial ownership interest in those specified
assets constituting a part of the Deposited Assets.
Credit Support
As specified in the applicable Prospectus Supplement for a given Series
of Certificates, the Trust for any Series of Certificates may include, or the
Certificateholders of such Series (or any Class or group of Classes within such
Series) may have the benefit of, Credit Support for any Class or group of
Classes within such Series. Such Credit Support may be provided by any
combination of the following means described below or any other means described
in the applicable Prospectus Supplement. The applicable Prospectus Supplement
will set forth whether the Trust for any Class or group of Classes of
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
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support to those Certificateholders of those other Classes. For example, if
losses are realized during a given period on the Deposited Assets relating to a
Series of Certificates such that the collections received thereon are
insufficient to make all distributions on the Certificates of such Series, those
realized losses would be allocated to the Certificateholders of any Class of any
such Series that is subordinated to another Class, to the extent and in the
manner provided in the related Prospectus Supplement. In addition, if so
provided in the applicable Prospectus Supplement, certain amounts otherwise
payable to Certificateholders of any Class that is subordinated to another Class
may be required to be deposited into a reserve account. Amounts held in any
reserve account may be applied as described below under "--Reserve Accounts" and
in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Credit Support
for any Series or Class of Certificates may include, in addition to the
subordination of certain Classes of such Series and the establishment of a
reserve account, any of the other forms of Credit Support described below. Any
such other forms of Credit Support that are solely for the benefit of a given
Class will be limited to the extent necessary to make required distributions to
the Certificateholders of such Class or as otherwise specified in the related
Prospectus Supplement. In addition, if so provided in the applicable Prospectus
Supplement, the obligor of any other forms of Credit Support may be reimbursed
for amounts paid pursuant to such Credit Support out of amounts otherwise
payable to one or more of the Classes of the Certificates of such Series.
Letter of Credit; Surety Bond. The Certificateholders of any Series (or
Class or group of Classes of Certificates within such Series) may, if specified
in the applicable Prospectus Supplement, have the benefit of a letter or letters
of credit (a "Letter of Credit") issued by a bank (a "Letter of Credit Bank") or
a surety bond or bonds (a "Surety Bond") issued by a surety company (a
"Surety"). In either case, the Trustee or such other person specified in the
applicable Prospectus Supplement will use its reasonable efforts to cause the
Letter of Credit or the Surety Bond, as the case may be, to be obtained, to be
kept in full force and effect (unless coverage thereunder has been exhausted
through payment of claims) and to pay timely the fees or premiums therefor
unless, as described in the related Prospectus Supplement, the payment of such
fees or premiums is otherwise provided for. The Trustee or such other person
specified in the applicable Prospectus Supplement will make or cause to be made
draws under the Letter of Credit or the Surety Bond, as the case may be, under
the circumstances and to cover the amounts specified in the applicable
Prospectus Supplement. Any amounts otherwise available under the Letter of
Credit or the Surety Bond will be reduced to the extent of any prior
unreimbursed draws thereunder. The applicable Prospectus Supplement will provide
the manner, priority and source of funds by which any such draws are to be
repaid.
Unless otherwise specified in the applicable Prospectus Supplement, in
the event that the Letter of Credit Bank or the Surety, as applicable, ceases to
satisfy any credit rating or other applicable requirements specified in the
related Prospectus Supplement, the Trustee or such other person specified in the
applicable Prospectus Supplement will use its reasonable efforts to obtain or
cause to be obtained a substitute Letter of Credit or Surety Bond, as
applicable, or other form of credit enhancement providing similar protection,
that meets such requirements and provides the same coverage to the extent
available for the same cost. There can be no assurance that any Letter of Credit
Bank or any Surety, as applicable, will continue to satisfy such requirements or
that any such substitute Letter of Credit, Surety Bond or similar credit
enhancement will be available providing equivalent coverage for the same cost.
To the extent not so available, the credit support otherwise provided by the
Letter of Credit or the Surety Bond (or similar credit enhancement) may be
reduced to the level otherwise available for the same cost as the original
Letter of Credit or Surety Bond.
Reserve Accounts. If so provided in the related Prospectus Supplement,
the Trustee or such other person specified in the Prospectus Supplement will
deposit or cause to be deposited into an account maintained with an eligible
institution (which may be the Trustee) (a "Reserve Account") any combination of
cash or permitted investments in specified amounts, which will be applied and
maintained in the manner and under the conditions specified in such Prospectus
Supplement. In the alternative or in 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
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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 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.
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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).
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
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procedures, if any, as it would follow with respect to comparable financial
assets that it held for its own account, provided that such procedures are
consistent with the Trust Agreement and any related instrument governing any
Credit Support (collectively, the "Credit Support Instruments") and provided
that, except as otherwise expressly set forth in the applicable Prospectus
Supplement, it shall not be required to expend or risk its own funds or
otherwise incur personal financial liability.
Sub-Administration. Any Trustee or Administrative Agent may delegate
its obligations in respect of the Deposited Assets to third parties they deem
qualified to perform such obligations (each, a "Sub-Administrative Agent"), but
the Trustee or Administrative Agent will remain obligated with respect to such
obligations under the Trust Agreement. Each Sub-Administrative Agent will be
required to perform the customary functions of an administrator of comparable
financial assets, including, if applicable, collecting payments from obligors
and remitting such collections to the Trustee; maintaining accounting records
relating to the Deposited Assets, attempting to cure defaults and delinquencies;
and enforcing any other remedies with respect thereto all as and to the extent
provided in the applicable Sub-Administration Agreement (as defined below).
The agreement between any Administrative Agent or Trustee and a
Sub-Administrative Agent (a "Sub- Administration Agreement") will be consistent
with the terms of the Trust Agreement and such assignment to the
Sub-Administrator by itself will not result in a withdrawal or downgrading of
the rating of any Class of Certificates issued pursuant to the Trust Agreement.
With respect to any Sub-Administrative Agreement between an Administrative Agent
and a Sub-Administrative Agent, although each such Sub-Administration Agreement
will be a contract solely between such Administrative Agent and the
Sub-Administrative Agent, the Trust Agreement pursuant to which a Series of
Certificates is issued will provide that, if for any reason such Administrative
Agent for such Series of Certificates is no longer acting in such capacity, the
Trustee or any successor Administrative Agent must recognize the
Sub-Administrative Agent's rights and obligations under such Sub-Administration
Agreement.
The Administrative Agent or Trustee, as applicable, will be solely
liable for all fees owed by it to any Sub-Administrative Agent, irrespective of
whether the compensation of the Administrative Agent or Trustee, as applicable,
pursuant to the Trust Agreement with respect to the particular Series of
Certificates is sufficient to pay such fees. However, a Sub-Administrative Agent
may be entitled to a Retained Interest in certain Deposited Assets to the extent
provided in the related Prospectus Supplement. Each Sub-Administrative Agent
will be reimbursed by the Administrative Agent, if any, or otherwise the Trustee
for certain expenditures which it makes, generally to the same extent the
Administrative Agent or Trustee, as applicable, would be reimbursed under the
terms of the Trust Agreement relating to such Series. See "--Retained Interest;
Administrative Agent Compensation and Payment of Expenses."
The Administrative Agent or Trustee, as applicable, may require any
Sub-Administrative Agent to agree to indemnify the Administrative Agent or
Trustee, as applicable, for any liability or obligation sustained by the
Administrative Agent or Trustee, as applicable, in connection with any act or
failure to act by the Sub- Administrative Agent.
Realization upon Defaulted Deposited Assets. Unless otherwise specified
in the applicable Prospectus Supplement, as administrator with respect to the
Deposited Assets, the Trustee, on behalf of the Certificateholders of a given
Series (or any Class or Classes within such Series), will present claims under
each applicable Credit Support Instrument, and will take such reasonable steps
as are necessary to receive 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
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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.
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
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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 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
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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).
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
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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 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.
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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;
(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
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(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 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
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Trustee in connection therewith and the furnishing of such evidence and
indemnity as such Trustee may require. Mutilated Certificates must be
surrendered before new Certificates will be issued (Section 5.05).
Termination
The obligations created by the Trust Agreement for each Series of
Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account or by an
Administrative Agent, if any, and required to be paid to them pursuant to the
Trust Agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the Trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related Prospectus Supplement. In no event, however, will any trust
created by the Trust Agreement continue beyond the respective date specified in
the related Prospectus Supplement. Written notice of termination of the
obligations with respect to the related Series of Certificates under the Trust
Agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices--Notices," and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee which will be specified in the notice of termination
(Section 9.01).
Any such purchase of Deposited Assets and property acquired in respect
of Deposited Assets evidenced by a Series of Certificates shall be made at a
price approximately equal to the aggregate fair market value of all the assets
in the Trust (as determined by the Trustee, the Administrative Agent, if any,
and, if different than both such persons, the person entitled to effect such
termination), in each case taking into account accrued interest at the
applicable interest rate to the first day of the month following such purchase
or, to the extent specified in the applicable Prospectus Supplement, a specified
price as determined therein (such price, a "Purchase Price"). The exercise of
such right will effect early retirement of the Certificates of that Series, but
the right of the person entitled to effect such termination is subject to the
aggregate principal balance of the outstanding Deposited Assets for such Series
at the time of purchase being less than the percentage of the aggregate
principal balance of the Deposited Assets at the Cut-off Date for that Series
specified in the related Prospectus Supplement (Section 9.01).
Duties of the Trustee
The Trustee makes no representations as to the validity or sufficiency
of the Trust Agreement, the Certificates of any Series or any Deposited Asset or
related document and is not accountable for the use or application by or on
behalf of any Administrative Agent of any funds paid to such Administrative
Agent or its designee in respect of such Certificates or the Deposited Assets,
or deposited into or withdrawn from the related Certificate Account or any other
account by or on behalf of such Administrative Agent (Section 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.
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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.
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
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necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Certificate. Depreciation of the Specified Currency for a
Certificate against the U.S. dollar would result in a decrease in the effective
yield of such Certificate below its Pass-Through Rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a Specified Currency for making distributions in respect of
Certificates denominated in such currency. At present, the Depositor has
identified the following currencies in which distributions of principal, premium
and interest on Certificates may be made: Australian dollars, Canadian dollars,
Danish kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and
ECU. However, Certificates distributable with Specified Currencies other than
those listed may be issued at any time. There can be no assurance that exchange
controls will not restrict or prohibit distributions of principal, premium or
interest in any Specified Currency. Even if there are no actual exchange
controls, it is possible that, on a Distribution Date with respect to any
particular Certificate, the currency in which amounts then due to be distributed
in respect of such Certificate are distributable would not be available. In that
event, such payments will be made in the manner set forth above under
"Description of Certificates--General" or as otherwise specified in the
applicable Prospectus Supplement.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN CERTIFICATES DENOMINATED
IN A CURRENCY OTHER THAN U.S. DOLLARS. SUCH CERTIFICATES ARE NOT AN APPROPRIATE
INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
The information set forth in this Prospectus is directed to prospective
purchasers of Certificates who are United States residents. The applicable
Prospectus Supplement for certain issuances of Certificates may set forth
certain information applicable to prospective purchasers who are residents of
countries other than the United States with respect to matters that may affect
the purchase or holding of, or receipt of distributions of principal, premium or
interest in respect of, such Certificates.
Any Prospectus Supplement relating to Certificates having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a description of such
currency, any exchange controls affecting such currency and any other required
information concerning such currency.
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
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equivalent of the ECU in U.S. dollars, determined as described below, as of the
second Business Day prior to the date on which such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined for the Certificates of any Series and Class by
the applicable Trustee on the following basis. The component currencies of the
ECU for this purpose (the "Components") shall be the currency amounts that were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
Trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable Prospectus
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
All determinations referred to above made by the applicable Trustee
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the related Certificateholders of
such Series.
Foreign Currency Judgments
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates will be governed by and construed in accordance with the law of the
State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Series of Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such Certificates and
the proceeds to the Depositor from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or 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
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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 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.
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No dealer, salesman or other person has been
authorized to give any information or to make any
representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made,
such information or representation must not be relied
upon as having been authorized by the depositor or
Lehman Brothers. This Prospectus Supplement and the
Prospectus do not constitute an offer of any securities
other than those to which they relate or an offer to sell,
or a solicitation of an offer to buy, to any person in any
jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus
Supplement and the Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that the information contained herein is
correct as of any time subsequent to their respective
dates.
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TABLE OF CONTENTS
Page
Prospectus Supplement
Summary.............................................. S-3
Risk Factors......................................... S-12
The Trust............................................ S-13
Description of the Underlying Securities............. S-13
Description of the Certificates...................... S-21
The Depositor........................................ S-28
Description of the Trust Agreement................... S-28
The Market Agent Agreement........................... S-31
Certain Federal Income Tax Consequences.............. S-31
ERISA Considerations................................. S-34
Method of Distribution............................... S-35
Legal Matters........................................ S-36
Ratings.............................................. S-36
Index of Defined Terms............................... S-37
Prospectus
Prospectus Supplement................................ 2
Available Information................................ 2
Incorporation of Certain Documents by
Reference......................................... 3
Reports to Certificateholders........................ 3
Important Currency Information....................... 3
Risk Factors......................................... 4
Use of Proceeds...................................... 6
Formation of the Trust............................... 6
Maturity and Yield Considerations.................... 7
Description of Certificates.......................... 8
Description of Deposited Assets and Credit
Support........................................... 22
Description of the Trust Agreement................... 28
Limitations on Issuance of Bearer Certificates....... 38
Currency Risks....................................... 38
Plan of Distribution................................. 40
Legal Opinions....................................... 41
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$65,775,000
CORPORATE
BOND-BACKED
CERTIFICATES
Series 1998-ADM-1
(Underlying Securities
will be 6.95% Debentures
due December 15, 2097 issued by
Archer-Daniels-Midland Company)
LEHMAN ABS CORPORATION
(DEPOSITOR)
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PROSPECTUS SUPPLEMENT
March 27, 1998
- -------------------------------------------------------------
LEHMAN BROTHERS
- -------------------------------------------------------------
- -------------------------------------------------------------
