As filed with the Securities and Exchange Commission on November 8, 1999
Registration No. 333-32105
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO THE
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LEHMAN ABS CORPORATION
(Exact name of Registrant as specified in governing instruments)
DELAWARE 13-3447441
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Address of principal executive offices)
TED JANULIS
LEHMAN ABS CORPORATION
3 WORLD TRADE CENTER
NEW YORK, NEW YORK 10285
(212) 526-5594
(Name and address of agent for services)
Copy to:
SCOTT KIMMEL, ESQ. WALTER G. MCNEILL, ESQ.
LEHMAN BROTHERS INC. WEIL, GOTSHAL & MANGES LLP
3 WORLD FINANCIAL CENTER 767 FIFTH AVENUE
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10153
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS DETERMINED BY
MARKET CONDITIONS.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT
OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR
INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE
FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT THEREAFTER SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE>
EXPLANATORY NOTE
This registration statement includes a basic prospectus with a
corresponding form of prospectus supplement for offering series of certificates
representing the entire beneficial ownership interest in various trusts to be
created from time to time, the assets of which will consist primarily of a
publicly issued, fixed income debt security or pool of such debt securities
together with certain other assets as described herein deposited in trust by
Lehman ABS Corporation.
2
<PAGE>
Subject to Completion Dated ______________, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus Dated _______________, 1999)
TRUST CERTIFICATES, SERIES 1999 - [ ]
LEHMAN ABS CORPORATION
DEPOSITOR
----------
<TABLE>
<CAPTION>
PRINCIPAL NOTE PRICE TO UNDERWRITING
BALANCE RATE PUBLIC DISCOUNT
<S> <C> <C> <C> <C>
[Class __ certificate] $____________ [%] [Variable] Pass 100.00% ___%
Through Rate
[Class __ certificate] $____________ [%] [Variable] Pass 100.00% ___%
Through Rate
</TABLE>
----------
THE CERTIFICATES REPRESENT NON-RECOURSE OBLIGATIONS OF THE TRUST ONLY AND DO NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF LEHMAN ABS [THE INDENTURE TRUSTEE]
[THE FISCAL AGENT], OR ANY OF THEIR AFFILIATES.
The Trust
o is a Delaware business trust formed pursuant to a Trust agreement between
Lehman ABS and __________________.
o will issue ____ classes of certificates, [all of which [except the class
[ ]] are offered hereby.
The certificates
o are principally secured by the assets of the Trust, which consist
[primarily] of a [pool of] [security] [securities] that are described
herein.
o currently have no trading market.
o [are not insured or guaranteed by any governmental agency.]
YOU SHOULD REVIEW THE INFORMATION IN "RISK FACTORS" ON PAGE S-__ OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE ___ IN THE PROSPECTUS.
For complete information about the offered certificates, read both this
prospectus supplement and the prospectus. This prospectus supplement must be
accompanied by the prospectus if it is being used to offer and sell the offered
certificates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE CERTIFICATES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Subject to the satisfaction of certain conditions, the underwriters named below
will purchase the offered certificates from Lehman ABS. See "Underwriting" in
this prospectus supplement. The offered certificates will be issued in
book-entry form only on or about _____________, 1999.
------------------------
LEHMAN BROTHERS
____________, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange is effective. This prospectus is not an offer to sell
and it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate documents
that progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
certificates and (b) this prospectus supplement, which describes the specific
terms of your series of certificates.
If the terms of your series of certificates vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
We include cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials where you can find further related
discussions. The following table of contents and the table of contents included
in the accompanying prospectus provide the pages on which these captions are
located.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary of Principal Economic Terms.........................................S-3
Summary of Prospectus Supplement............................................S-7
Formation of the Trust......................................................S-10
Risk Factors................................................................S-10
Description of the Deposited Assets.........................................S-10
Description of Credit Support...............................................S-19
Yield on the Certificates...................................................S-20
Description of the Certificates.............................................S-20
Description of the Trust Agreement..........................................S-23
Certain Legal Aspects of the Deposited Assets...............................S-26
Certain Federal Income Tax Consequences.....................................S-26
Certain State Tax Consequences..............................................S-35
ERISA Considerations........................................................S-35
Method of Distribution......................................................S-36
Ratings.....................................................................S-36
Legal Opinions..............................................................S-37
Index of Terms for Prospectus Supplement....................................S-38
PROSPECTUS
Prospectus Supplement........................................................1
Where You Can Find Additional Information....................................4
Incorporation of Certain Documents by Reference..............................4
Reports to Certificateholdlers...............................................4
Important Currency Information...............................................4
Risk Factors.................................................................5
Lehman ABS...................................................................7
Use of Proceeds..............................................................8
Formation of the Trust.......................................................8
Maturity and Yield Considerations............................................9
Description of the Certificates..............................................11
Description of Deposited Assets and Credit Support...........................27
Description of the Trust Agreement...........................................38
Limitation on Issuance of Bearer Certificates................................48
Currency Risks...............................................................49
Plan of Distribution.........................................................51
Legal Opinions...............................................................52
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the accompanying prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-35 in
this document.
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES, INCLUDING OVER-ALLOTMENT,
STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES AND THE
IMPOSITION OF PENALTY BIDS, IN EACH CASE IN CONNECTION WITH THE OFFERING OF THE
CERTIFICATES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "METHOD OF
DISTRIBUTION" HEREIN.
------------------------
<PAGE>
For 90 days following the date of this prospectus supplement, all dealers
selling the offered certificates will deliver a prospectus supplement and
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters of the offered certificates and with
respect to their unsold allotments or subscriptions.
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the offered certificates in any state where the offer is not
permitted.
We do not claim that the information in this prospectus supplement and
prospectus is accurate as of any date other than the dates stated on the
respective covers.
S-2
<PAGE>
SUMMARY OF PRINCIPAL ECONOMIC TERMS
This summary highlights the principal economic terms of the
certificates being issued by the Trust and of the Underlying Securities. It does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
certificates, you should read carefully this prospectus supplement and the
accompanying prospectus in full. Certain capitalized terms used in this
prospectus supplement are defined on the pages indicated in the "Index of
Terms".
THE CERTIFICATES
- ----------------
The Trust...............Lehman ABS and the Trustee will form the
Series 1999-[ ]Trust.
Securities
Offered.................[Asset-Backed] [Trust] certificates,
Series 1999-[ ], consisting of class [ ]
certificates[,] [and] class [ ]
certificates [and specify others].
[Initial certificate
Principal Balance]
[Notional
Amount].................Class [ ]: [$] [ ].
Class [ ]: [$] [ ].
Final Scheduled Distribution
Date....................Class [ ].
Class [ ].
Pass-Through
Rates...................[The Variable Pass-Through Rates
applicable to the calculation of the
interest distributable on any Distribution
Date on the certificates [(other than the
class [ ] certificates)] are equal to
[describe method for determining variable
rates]. The initial Variable Pass-Through
Rates for the class [ ] certificates [,]
[and] the class [ ] certificates [and
specify others] are approximately __% [,]
[and] ___% [and ___%] per annum,
respectively.] [The Pass-Through Rate
applicable to the calculation of the
interest distributable on any Distribution
Date on the [specify classes] certificates
is fixed at ___% [and ___%, respectively,]
per annum.]
Deposited
Assets..................The Deposited Assets will consist of the
Underlying Securities [and describe any
assets which relate to the Underlying
Securities]. See "-The Underlying
Securities" [, "-Other Deposited Assets"]
and "Description of the Deposited Assets"
below.
Original Issue
Date....................[ ].
Cut-off Date............[ ].
Distribution Date.......[ ], commencing [ ].
Record Date.............The [ ] day immediately preceding each
Distribution Date.
S-3
<PAGE>
Denominations;
Specified
Currency................The class [ ]certificates [,] [and] class
[ ] certificates [and specify others] will
be denominated and payable in [U.S.
dollars] [ ] (the "Specified Currency")
and will be available for purchase in
minimum denominations of [$][ ] and
[multiples of [$][ ]].
Interest Accrual
Periods.................[Monthly] [Quarterly] [Semi-annually] (or,
in the case of the first Interest Accrual
Period, from and including the Original
Issue Date to but excluding the first
Distribution Date).
Form of
Security................[Book-entry certificates with The
Depository Trust Company]. See
"Description of the Certificates -
Definitive Certificates." Distributions
will be settled in [immediately available
(same-day)] [clearinghouse (next-day)]
funds.
Trustee.................[ ], as trustee.
Ratings.................[ ] by [ ] [and [ ] by [ ]]. [Specify
specific ratings requirements for
particular classes, including the extent
to which the issuance of the certificates
of a given class is conditioned upon
satisfaction of the ratings of each other
class of certificates.] See "Ratings."
Collection Period.......With respect to a Distribution Date, the
period beginning on [ ] and ending at the
close of business on [ ].
THE UNDERLYING SECURITIES
- -------------------------
Underlying Securities.................[A [ ]%] [floating rate] [publicly traded
debt security due [ ] [A pool of publicly
issued [debt securities of various
issuers] [preferred securities of trusts
organized to issue trust-originated
preferred securities] [term preferred
stock having an investment grade rating]
[United States treasury securities] debt
securities of various United States
government sponsored entities] [debt
securities of various foreign government
issuers], exclusive of the Retained
Interest [in/having] an aggregate
principal amount of [$][ ].
S-4
<PAGE>
Underlying Securities Issuer..........[Specify issuer] [Pool of various domestic
corporations, limited liability companies,
banking organizations and insurance
companies.] [A trust or other legal entity
organized under the laws of ______________
to issue trust preferred securities.] [A[
]%]-[floating rate] [United States
treasury securities] [debt securities of
various United States government sponsored
entities] [Government Trust Certificates
("GTCs") [provided that such GTCs,
together with any AID-Guaranteed
Underlying Securities (as defined below),
shall not account for 20% or more of the
aggregate cash flows on the Underlying
Securities securing any series of
certificates]] [obligations guaranteed by
the Unites States Agency for International
Development ("Aid-Guaranteed Underlying
Securities") [provided that such
Aid-Guaranteed Underlying Securities,
together with any GTCs, shall not account
for 20% or more of the aggregate cash
flows on the Underlying Securities
securing any series of certificates]]
[Pool of various foreign government
issuers.], exclusive of the Retained
Interest] [in/having] an aggregate
principal amount of [$][ ].
[Foreign Government Guarantor]........[Specify guarantor, if any.]
[GSE Issuer]..........................[Specify issuer] [Pool of various U.S.
government sponsored entity issuers].
Underlying Securities Original
Issue Date............................[ ].
Underlying Securities Final
Payment Date..........................[ ].
Amortization..........................[Describe amortization schedule, if any].
Denominations; Underlying
Securities Currency...................The Underlying Securities are denominated
and payable in [U.S. dollars] [ ] and are
available in minimum denominations of [$][
] and [multiples thereof] [multiples of
[$][ ]].
Underlying Securities Payment [ ], commencing [ ].
Dates.................................
Underlying Securities
Rate..................................[% per annum.] [A [Weighted Average] rate
per annum equal to [specify interest rate
formula for debt security].]
Underlying Securities Interest
Accrual Periods.......................[Monthly] [Quarterly] [Semi-annually].
Priority..............................[Describe senior or subordinated status or
liquidation preference of any of
Underlying Securities].
Security..............................[Describe existence of any security for
obligations or state that Underlying
Securities are unsecured].
Redemption/Put/Other Features.........[Describe existence of any redemption, put
or other material features applicable to
the Underlying Securities].
Form of Security......................Book-entry debt securities with DTC
[listed on the [New York] [American] Stock
Exchange [specify other listing]].
[Underlying Securities Trustee].......[ ]. The Underlying Securities have
been issued pursuant to an indenture
between _______________ and the issuer of
the Underlying Securities].
S-5
<PAGE>
[Fiscal and Paying Agent].............[ ] [The Underlying Securities have
been issued pursuant to a fiscal and
paying agency agreement, between
_______________ and the issuer of the
Underlying Securities] [specify other
agreement].
Ratings...............................[ ] by [ ] [and [ ] by [ ]]. See
"Description of the Underlying
Securities-Ratings of Underlying
Securities."
OTHER DEPOSITED ASSETS
- ----------------------
[Provide similar tabular summary description of the principal economic terms of
any credit support or other ancillary or incidental asset].
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary highlights selected information from this
prospectus supplement and is qualified by reference to the detailed information
appearing elsewhere herein and in the prospectus.
Depositor.............................Lehman ABS Corporation, an indirect
wholly-owned subsidiary of Lehman Brothers
Inc. See "Lehman ABS" in the prospectus.
Certificates..........................The certificates will be issued pursuant
to the Trust agreement. The certificates
will consist of [ ] classes, designated as
class [ ] certificates [and] [,] class [ ]
certificates [and [specify other
classes]], [all] of which [all but the
class [ ] certificates] are being offered
hereby.
The Certificate Principal Balance of a
certificate outstanding at any time
represents the maximum amount that the
certificate holder is entitled to receive
as distributions allocable to principal.
The Certificate Principal Balance of a
certificate will decline to the extent
distributions allocable to principal are
made to holders. [The Notional Amount of
the class [ ] certificates as of any date
of determination is equal to [specify].
Reference to the Notional Amount of the
class [ ] certificates is solely for
convenience in determining the basis on
which distributions on the class [ ]
certificates are calculated [and
determining the relative voting rights of
certificateholders of class [ ]
certificates for purposes of voting on a
class-by-class basis or otherwise. The
Notional Amount does not represent the
right to receive any distributions
allocable to principal.]
[The class [ ] certificates, which are not
being offered hereby, have in the
aggregate an initial Certificate Principal
Balance of [$] (approximate) and a
[Variable] Pass-Through Rate [of __%]. The
class [ ] certificates represent the right
to receive distributions in respect of
their Certificate Principal Balance and
interest thereon at their applicable
Pass-Through Rate.] Shortfalls in
collections with respect to the Deposited
Assets will be allocated solely to the
class [ ] certificates to the extent
provided in this prospectus supplement
and, thereafter, will be allocated among
the certificates and the class [ ]
certificates, as provided in this
prospectus supplement. [The class [ ]
certificates will be transferred by Lehman
ABS to an affiliate on or about , [1999]
(the "Closing Date"), and may be sold at
any time in accordance with any
restrictions in the Trust agreement.]]
The Underlying Securities.............[Interest] [Dividends] on the Underlying
Securities accrue[s] at the Underlying
Securities Rate for each Underlying
Securities Accrual Period and is payable
on each Underlying Securities Payment
Date. The entire principal amount of the
Underlying Securities will be payable on
the Underlying Securities Final Payment
Date. [The Underlying Securities have a
remaining term to maturity of
approximately ___ years.] [As of the
Cut-off Date, the pool of Underlying
Securities have a `weighted average
[interest] [dividend] rate of % and a
weighted average remaining term to
maturity of approximately years.
[Approximately % [specify if greater than
10%] of such Underlying Securities consist
of debt securities of [name issuer].]
[United States treasury securities]
S-7
<PAGE>
[Name such obligor] is a [U.S.
government-sponsored entity] [specify
other] whose principal executive offices
are located at [specify address]. The
obligor [makes available to the public
upon request certain annual financial and
other information].
[Name such obligor] is [a U.S. corporation
whose principal executive offices are
located at [specify address]]. [Identify
nature of foreign government] [The obligor
is subject to the informational
requirements of the Exchange Act and in
accordance therewith files reports and
other information (including financial
information) with the SEC]. [The obligor
makes available to the public upon request
certain annual financial and other
information.] See "Description of the
Deposited Assets."
[Other Deposited Assets and Credit
Support...............................The Deposited Assets will also include
[direct obligations of the United States]
[describe any assets that are incidental
or relate to the Underlying Securities,
including hedging contracts such as puts,
calls, interest rate and other basis
swaps, currency swaps, credit spread
options, floors, caps and collars]
[describe any credit derivatives] (such
assets, together with the Underlying
Securities, the "Deposited Assets"). See
"Description of the [Deposited Assets]
[Underlying Securities]."
[The certificateholders of the [specify
particular classes] certificates will have
the benefit of [describe credit support]
to support or ensure the [servicing and]
[timely] [ultimate] distribution of
amounts due with respect to the Deposited
Assets, including providing certain
coverage with respect to losses.
Distributions.........................Holders of the certificates will be
entitled to receive on each Distribution
Date, to the extent of available funds,
after payment of the expenses of the
Trustee and its respective agents up to
the Allowable Expense Amount,
o [in the case of each class of
certificates other than the class [ ]
certificates,] distributions allocable
to interest at the applicable Pass-
Through Rate on the applicable
Certificate Principal Balance,
o [in the case of each class of
certificates other than the class [ ]
certificates,] distributions allocable
to principal, and
o [in the case of each class of
certificates other than the class [ ]
certificates,] distributions allocable
to premium (if any) in an amount equal
to all payments of premium (if any)
received on the Underlying Securities
for the applicable Collection Period.
Distributions will be made to
certificateholders only if, and to the
extent that, payments are made with
respect to the Deposited Assets or are
otherwise covered by any credit support.
[The holders of the class [ ] certificates
will be entitled to receive on each
Distribution Date distributions allocable
to interest in an amount equal to
[describe Stripped Interest].] [The
holders of the class [ ] certificates will
not be entitled to receive any
distributions allocable to principal or
premium (if any).] See "Description of the
Certificates--Distributions."
Special Distribution Dates............If a payment with respect to the
Underlying Securities is made to the
Trustee after the Underlying Securities
Payment Date on which payment was due,
then the Trustee will distribute any such
amounts received on the next occurring
Business Day (a "Special
S-8
<PAGE>
Distribution Date") as if the funds had
constituted Available Funds on the
Distribution Date immediately preceding
such Special Distribution Date; provided,
however, that the Record Date for such
Special Distribution Date shall be [five
Business Days (as such term is defined in
the prospectus, "Business Day") prior to
the day on] which the related payment was
received from the Underlying Securities
Trustee.
Subordination.........................[The rights of the holders of the class []
certificates [and specify other classes]
to receive distributions of principal,
premium (if any), and interest with
respect to the Deposited Assets will be
subordinated to the rights of the holders
of the other classes of certificates with
respect to losses attributable to
principal, premium (if any) and interest
realized on a Deposited Asset (such
losses, "Realized Losses"). See
"Description of the
Certificate--Allocation of Losses;
Subordination."]
Optional Termination..................[Lehman ABS] may purchase at a price equal
to the [principal amount] [liquidation
preference amount] of the Underlying
Securities all the Deposited Assets in the
Trust on any Distribution Date on which
the aggregate [principal amount]
[liquidation preference amount] of the
Underlying Securities remaining in the
Trust is less than [10%] of the aggregate
[principal amount] [liquidation preference
amount] of the Deposited Assets as of the
Cut-off Date. This would cause the
termination of the Trust and early
retirement of the certificates. [Specify
any other purchase or repurchase option of
Lehman ABS.] See "Description of the Trust
Agreement-Termination" herein and
"Description of Trust
Agreement-Termination" in the prospectus.
Certain Federal Income Tax
Consequences..........................In the opinion of tax counsel to the
Trust, the Trust will be classified for
Federal income tax purposes [as a grantor
trust] [as a partnership] [as a financial
asset securitization investment trust
("FASIT")] [other] and not as an
association taxable as a corporation. See
"Certain Federal Income Tax Consequences."
Ratings...............................It is a condition to the issuance of the
certificates that the certificates have
the ratings specified above under "Summary
of Principal Economic Terms--The
Certificates-Ratings." A security rating
is not a recommendation to buy, sell or
hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating agency. A security rating
does not address the occurrence or
frequency of redemptions or prepayments
on, or extensions of the maturity of, the
Deposited Assets, the corresponding effect
on yield to investors [or whether
investors in the class [ ] certificates
may fail to recover fully their initial
investment]. See "Ratings."
ERISA Considerations..................An employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended, and an individual
retirement account (each, a "Plan") may
purchase certificates of any class if
either (i) Lehman ABS is able to confirm
the existence of at least 100 independent
purchasers of such class or (ii) the Plan
can represent that its purchase of the
certificates would not be prohibited under
ERISA or the Code. See "ERISA
Considerations."
S-9
<PAGE>
FORMATION OF THE TRUST
The Trust will be formed pursuant to the Trust agreement (including
the series [ ] supplement) between Lehman ABS and the Trustee. At the time of
the execution and delivery of the series [ ] supplement, Lehman ABS will deposit
the Underlying Securities in the Trust. The Trustee, on behalf of the Trust,
will accept such Underlying Securities and will deliver the certificates in
accordance with the instructions of Lehman ABS.
The Underlying Securities will be purchased by Lehman ABS in the
secondary market (either directly or through an affiliate of Lehman ABS). The
Underlying Securities (other than Underlying Securities which are issued by the
United States of America) will not be acquired from [name of the issuer] as part
of any distribution by or pursuant to any agreement with such issuer. [name of
issuer] is [not] participating in this offering and will not receive any of the
proceeds of the sale of the Underlying Securities to Lehman ABS or the issuance
of the certificates. [Neither Lehman ABS nor any of its affiliates participated
in the initial public offering of the Underlying Securities] [Lehman Brothers
Inc., an affiliate of Lehman ABS, participated in the initial public offering of
the Underlying Securities as a [co-underwriter] [underwriter]].
RISK FACTORS
[Describe risk factors applicable to the specific Underlying
Securities, other Deposited Assets and any credit derivative arrangements and
the particular structure of the certificates being offered, including factors
relating to the yield on the certificates and risks associated with the
Deposited Assets (including any material risks as a result of any repurchase
option or put and the inclusion in the Deposited Assets of GTCs or
AID-Guaranteed Underlying Securities) and the terms thereof, as described
elsewhere herein.] See "Risk Factors" and "Maturity and Yield Considerations" in
the prospectus.
[The Underlying Securities are not guaranteed by the federal
government or any agency or instrumentally thereof, other than the issuer of the
Underlying Securities.]
DESCRIPTION OF THE DEPOSITED ASSETS
GENERAL
This prospectus supplement sets forth the relevant terms with respect
to the Underlying Securities, but does not provide detailed information with
respect to the Underlying Securities. This prospectus supplement relates only to
the certificates offered hereby and does not relate to the Deposited Assets. All
disclosure contained herein with respect to the Underlying Securities is derived
from publicly available documents. [Describe publicly available documents.]
[The] [Each] issuer of the Underlying Securities is [not] subject to the
information reporting requirements of the Exchange Act. Although Lehman ABS has
no reason to believe the information concerning the Underlying Securities, [name
of issuer] [or each Underlying Securities prospectus related to the Underlying
Securities] and other publicly available information is not reliable, neither
Lehman ABS nor any of the underwriters has participated in the preparation of
such documents, or made any due diligence inquiry with respect to the
information provided therein. Events affecting the Underlying Securities or [or
name of issuer] may have occurred and may have not yet been publicly disclosed.
This would affect the accuracy or completeness of the publicly available
documents described above.
[Use the following where the Underlying Securities consist of a pool of
obligations of multiple obligors.]
[The Deposited Assets will consist primarily of the Underlying
Securities, which are a pool of [treasury securities] [and] publicly traded debt
securities, trust preferred securities or term preferred stock of [domestic
corporations, limited liability companies, banking organizations and insurance
companies] [U.S. government-sponsored entities ("GSEs")] [Government Trust
Certificates ("GTCs")] [obligations guaranteed by the United States Agency for
International Development ("AID-Guaranteed Underlying Securities")]. [The
Deposited Assets will consist primarily of the Underlying Securities, which are
a pool of publicly issued debt securities of foreign governments, foreign
political subdivisions or agencies and instrumentalities thereof]. The
Underlying Securities will be purchased by Lehman ABS in the secondary market
(either directly or through an affiliate of Lehman ABS) and will be deposited
into the Trust. The Underlying Securities will not be acquired either from the
respective obligors on the Underlying Securities or pursuant to any distribution
by or agreement with such obligors.
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The composition of the Underlying Securities pool and the
distribution by ratings, remaining term to maturity and interest rate of the
Underlying Securities as of the Cut-off Date are as set forth below:
COMPOSITION OF THE UNDERLYING SECURITIES POOL
AS OF THE CUT-OFF DATE
Number of Underlying Securities:
Aggregate Principal Balance: [$]
Average Principal Balance: [$]
Largest Balance: [$]
Weighted Average Interest Rate: %
Weighted Average Original Term
to Maturity: years
Weighted Average Remaining Term
to Maturity: years
Longest Remaining Term
to Maturity: years
DISTRIBUTION BY INDUSTRY CLASSIFICATION
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Industry Principal Principal
Classification Number Balance Balance
- -------------- ------ ------- -------
------ ------- -------
Total ====== ======= =======
===============================================================================
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DISTRIBUTION BY RATINGS OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Rating Number Balance Balance
------ ------ ------- -------
------ ------- -------
Total ====== ======= =======
DISTRIBUTION BY REMAINING TERM TO MATURITY
OF THE UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Remaining Term Principal Principal
To Maturity Number Balance Balance
----------- ------ ------- -------
------ ------- -------
Total ====== ======= =======
DISTRIBUTION BY INTEREST RATE OF THE
UNDERLYING SECURITIES POOL AS OF THE CUT-OFF DATE
Percent of
Aggregate Aggregate
Principal Principal
Interest Rate Range Number Balance Balance
----------- ------ ------- -------
% to % [$] %
Greater Than % ------ ------- -------
[$] 100%
Total ====== ======= =======
[The Underlying Securities consist of debt securities of [domestic
corporate issuers [specify other]]. [The Underlying Securities consist of debt
securities issued or guaranteed by foreign governments, foreign political
subdivisions or agencies and instrumentalities thereof]. [The Underlying
Securities consist of [treasury securities] [debt securities of U.S.
government-sponsored entities] [GTCs [provided that such GTCs, together with any
AID-Guaranteed Underlying Securities, shall not account for 20% or more of the
aggregate cash flows on the Underlying Securities securing any series of
certificates]] [AID-Guaranteed Underlying Securities [ provided that such
AID-Guaranteed Underlying Securities, together with any GTCs shall not account
for 20% or more of the aggregate cash flows on the Underlying Securities
securing any series of certificates]]. As of the Cut-off Date, [all of]
[approximately % of] the Underlying Securities were rated [investment grade]
[specify particular rating] by at least one nationally recognized rating agency,
and, based on publicly available information, no obligor of any Underlying
Security was in default in the payment of any installments of principal,
interest or premium (if any) with respect thereto. Any rating of any of the
Underlying Securities is not a recommendation to purchase, hold or sell such
Underlying Security or the certificates, and a rating may not remain for any
given period of time or may be lowered or withdrawn entirely by a rating agency
in the future. See "Ratings" herein and "Risk Factors--Ratings of the
Certificates" in the accompanying prospectus regarding considerations applicable
to the ratings of the Certificates.]
UNDERLYING SECURITIES
The Underlying Securities have been issued pursuant to [an]
agreement[s] (specify other)) between the [various] [issuer[s] of the Underlying
Securities and Underlying Securities [trustee[s]] [fiscal agent[s]] [a
certificate
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of designation]. The following summary describes certain general terms of such
[indenture[s]] [fiscal agency agreement[s]] [certificates of designation]
[pooling and servicing agreements], but investors should refer to the
indenture[s] [fiscal agency agreement[s]] [certificate[s] of designation]
[pooling and servicing agreement[s]] [itself] [themselves] for all the terms
governing the Underlying Securities.
[Each of] the indenture[s] [fiscal agency agreement[s]]
[certificate[s] of designation] [pooling and servicing agreement[s]] limits the
ability of the [respective] issuer[s] of the Underlying Securities to engage in
certain activities and transactions and requires that the issuer[s] of the
Underlying Securities perform certain obligations with respect to the Underlying
Securities. [Describe material restrictive, financial and other covenants on the
issuer[s] of the Underlying Securities contained in the relevant document].
[The following is a summary of the typical Underlying Security Events
of Default for each series of Outstanding Debt Securities. [Any additional
Underlying Security Events of Default unique to a Concentrated Underlying
Security have been described following the summary]:
o failure to make payments of principal (and premium, if any) and
interest to holders of the Outstanding Debt Securities when the
same shall be due;
o material breaches of certain representations, warranties or
covenants or failure to observe or perform in any material
respect any covenant or agreement continuing for a specified
period of time after notice thereof is given to the issuer of the
Underlying Securities [or GSE issuer] by [the Underlying
Securities trustee or] the holders of not less than a specified
percentage of the Outstanding Debt Securities;
o [failure by the issuer of the Underlying Securities 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 of the Underlying Securities or the acceleration by
or on behalf of the holders thereof of such securities;]
o certain events of bankruptcy or insolvency relating to the issuer
of the [Underlying Securities] [GSE issuer]; and
o [describe any additional common events of default with respect to
the pool of Underlying Securities].]
As of the Cut-off Date, [all of] [approximately __% of] the
Underlying Securities were [subject to [describe any put, call or other
conversion or redemption options applicable to the Underlying Securities [and
[all of] [approximately ___% of] the Underlying Securities were [describe the
nature of the obligation represented by such Underlying Securities (i.e.,
senior, subordinate, secured) and describe commonalities with respect to any
subordination or security provisions or collateral].]
The [pool of] Underlying Securities, together with any other assets
described below and any credit support described under "Description of Credit
Support," represent the sole assets of the Trust that are available to make
distributions in respect of the certificates.]
[Use the following with respect to each obligor the Underlying
Securities of which represent more than 10% of the total Underlying Securities
available to make distributions in respect of the certificates-only a single
obligor is referred to for purposes of this section of the form of prospectus
supplement.]
[A significant portion of] [Virtually all of] [All of] the Deposited
Assets of the Trust will consist of the [___%] [floating rate] [specify publicly
issued security] due _________ of [specify issuer][, exclusive of the interest
therein retained by [Lehman ABS] as described below (the "Retained Interest")],
having an [aggregate principal amount] [aggregate liquidation preference amount]
outstanding as of the Cut-off Date of approximately [$][specify currency] (the
"Underlying Securities"). The Underlying Securities [(other than Underlying
Securities which are issued by the United States of America)] will be purchased
by Lehman ABS in the secondary market (either directly or through an affiliate
of Lehman ABS) and will be deposited into the Trust. The Underlying Securities
will not be acquired either from [name such obligor] or pursuant to any
distribution by or agreement with [name such obligor]. [Describe any put, call
or other conversion or redemption options applicable to the Underlying
Securities, as well as the nature of the obligation represented by such
Underlying Securities (i.e., senior, subordinate, secured)]. As of the Cut-off
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<PAGE>
Date, the foregoing security comprising [ %] of the Underlying Securities was
rated [specify investment grade rating] [investment grade] by [specify
nationally recognized rating agency or agencies], and, based on publicly
available information, the obligor thereon was not in default in the payment of
any installments of principal, interest or premium (if any) with respect
thereto. Any such rating of such Underlying Securities is not a recommendation
to purchase, hold or sell such Underlying Securities or the certificates, and a
rating may not remain for any given period of time or may be lowered or
withdrawn entirely by a rating agency in the future. See "Ratings" herein and
"Risk Factors-Ratings of the Certificates" in the accompanying prospectus
regarding certain considerations applicable to the ratings of the certificates.
[According to [name such issuer]'s publicly available documents,
[name such issuer] is a [identify form of domestic corporation trust banking
organization or insurance company] whose principal executive offices are located
at [specify address]. Lehman ABS is not an affiliate of [name such issuer].
[Name such obligor] is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information (including
financial information) with the SEC [and makes available to the public upon
request certain annual reports containing financial and other information]. You
can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the SEC's public reference rooms. In addition,
such reports and other information [can be inspected at the offices of the [New
York Stock Exchange at 20 Broad Street, New York, New York 10005] [American
Stock Exchange, 86 Trinity Place, New York, New York 10013]] [may be obtained
from [name such obligor], according to its most recent annual report, upon
written or oral request to [name such obligor]].]
[THE FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Federal National Mortgage Association ("Fannie Mae") is a
federally chartered and stockholder-owned corporation organized and existing
under the Federal National Mortgage Association Charter Act, 12 U.S.C. ss. 1716
et seq. It is the largest investor in home mortgage loans in the United States.
Fannie Mae originally was established in 1938, as a United States government
agency to provide supplemental liquidity to the mortgage market and was
transformed into a stockholder-owned and privately managed corporation by
legislation enacted in 1968. Fannie Mae provides funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing their funds for
additional lending. Fannie Mae acquires funds to purchase loans from many
capital market investors that ordinarily may not invest in mortgage loans,
thereby expanding the total amount of funds available for housing. Operating
nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus
to capital-short areas. Fannie Mae also issues mortgaged-backed securities.
Fannie Mae receives guaranty fees for its guaranty of timely payment of
principal of and interest on mortgaged-backed securities. Fannie Mae issues
mortgaged-backed securities primarily in exchange for pools of mortgage loans
from lenders. The issuance of mortgaged-backed securities enables Fannie Mae to
further its statutory purpose of increasing the liquidity of residential
mortgage loans.
Fannie Mae prepares an information statement annually which describes
Fannie Mae, its business and operations and contains Fannie Mae's audited
financial statements. From time to time Fannie Mae prepares supplements to its
information statement which include certain unaudited financial data and other
information concerning the business and operations of Fannie Mae. These
documents can be obtained without charge from Paul Paquin, Senior Vice President
- - Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016. Fannie Mae is not subject to the periodic reporting requirements of the
Exchange Act.]
[THE FEDERAL HOME LOAN MORTGAGE CORPORATION
The Federal Home Loan Mortgage Corporation ("Freddie Mac") is a
publicly held government-sponsored enterprise created on July 24, 1970 pursuant
to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency
Home Finance Act of 1970, as amended. Freddie Mac's statutory mission is to
provide stability in the secondary market for home mortgages, to respond
appropriately to the private capital market and to provide ongoing assistance to
the secondary market for home mortgages (including mortgages secured by housing
for low-and moderate-income families involving a reasonable economic return to
Freddie Mac) by increasing the liquidity of mortgage investments and improving
the distribution of investment capital available for home mortgage financing.
The principal activity of Freddie Mac consists of the purchase of first lien,
conventional, residential mortgages and participation interests in such
mortgages from mortgage lending institutions and the resale of the mortgages so
purchased in the form of guaranteed mortgage securities. Freddie Mac generally
matches and finances its purchases or mortgages with sales of guaranteed
securities. Mortgages retained by Freddie Mac are financed with short-and
long-term debt, cash temporarily held pending disbursement to security holders,
and equity capital.
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<PAGE>
Freddie Mac prepares an information statement annually which
describes Freddie Mac, its business and operations and contains Freddie Mac's
audited financial statements. From time to time Freddie Mac prepares supplements
to its information statement which include certain unaudited financial data and
other information concerning the business and operations of Freddie Mac. These
documents can be obtained from Freddie Mac by writing or calling Freddie Mac's
Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia 22102.
Freddie Mac is not subject to the periodic reporting requirements of the
Exchange Act.]
[THE STUDENT LOAN MARKETING ASSOCIATION
The Student Loan Marketing Association ("Sallie Mae") is a
stockholder-owned corporation established by the 1972 amendments to the Higher
Education Act of 1965, as amended, to provide liquidity, primarily through
secondary market and warehousing activities, for lenders participating in the
Federal Family Education Loan program and the Health Education Assistance Loan
Program. Under the Higher Education Act, Sallie Mae is authorized to purchase,
warehouse, sell and offer participations or pooled interests in, or otherwise
deal in, student loans, including, but not limited to, loans insured under the
FFEL program, and to make commitments for any of the foregoing. Sallie Mae is
also authorized to buy, sell, hold, underwrite and otherwise deal in obligations
of eligible lenders, if such obligations are issued by such eligible lender for
the purpose of making or purchasing federally guaranteed student loans under the
Higher Education Act. As a federally chartered corporation, Sallie Mae's
structure and operational authorities are subject to revision by amendments to
the Higher Education Act of other federal enactments.
Sallie Mae prepares an information statement annually which describes
Sallie Mae, its business and operations and contains Sallie Mae's audited
financial statements. From time to time Sallie Mae prepares supplements to its
information statement which include certain unaudited financial data and other
information concerning the business and operations of Sallie Mae. These
documents can be obtained without charge upon written request to the Corporate
and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street,
N.W., Washington, D.C. 20007. Sallie Mae is not subject to the periodic
reporting requirements of the Exchange Act.]
[THE RESOLUTION FUNDING CORPORATION
The Resolution Funding Corporation is a mixed-ownership government
corporation established by Title V of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (the "FIRRE Act"). The sole purpose of the
Resolution Funding Corporation is to provide financing for the Resolution Trust
Corporation. The Resolution Funding Corporation is to be dissolved, as soon as
practicable, after the maturity and full payment of all obligations issued by
it. The Resolution Funding Corporation is subject to the general oversight and
direction of the Oversight Board, which is comprised of the Secretary of the
Treasury, the Chairman of the Federal Reserve Board of Governors, the Secretary
of Housing and Urban Development and two independent members from different
political parties to be appointed by the President with the advice and consent
of the Senate. The day-to-day operations of the Resolution Funding Corporation
are under the management of a three-member Directorate comprised of the Director
of the Office of Finance of the Federal Home Loan Banks and two members selected
by the Oversight Board from among the presidents of twelve Federal Home Loan
Banks.
The Resolution Trust Corporation was established by the FIRRE Act to
manage and resolve cases involving failed savings and loan institutions pursuant
to policies established by the Oversight Board. The Resolution Trust Corporation
manages and resolves cases for which a receiver or conservator was appointed
between January 1, 1989 through August 9, 1992. The Resolution Trust Corporation
is authorized to issue nonvoting capital certificates to Resolution Funding
Corporation in exchange for the funds transferred from the Resolution Funding
Corporation to the Resolution Trust Corporation. The Resolution Trust
Corporation will terminate on or before December 31, 1996. The FIRRE Act limits
the aggregate principal amount of interest bearing obligations which may be
issued by the Resolution Funding Corporation to $30 billion, which amount of
obligations was issued in 1989. Pursuant to the FIRRE Act, the net proceeds of
these obligations are used to purchase nonvoting capital certificates issued by
the Resolution Trust Corporation or to retire previously issued Resolution
Funding Corporation obligations.
Information concerning Resolution Funding Corporation may be obtained
from the Resolution Funding Corporation, Suite 850, 655 Fifteenth Street, N.W.,
Washington, D.C. 20005. Resolution Funding Corporation is not subject to the
periodic reporting requirements of the Exchange Act.]
[THE FEDERAL HOME LOAN BANKS
The Federal Home Loan Banks constitute a system of twelve federally
chartered corporations. The mission of each Federal Home Loan Bank is to enhance
the availability of residential mortgage credit by providing a
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readily available, low-cost source of funds to its member institutions. A
primary source of funds for the Federal Home Loan Banks is the proceeds from the
sale to the public of debt instruments issued by the Federal Housing Finance
Board, which are the joint and several obligations of all of the Federal Home
Loan Banks. The Federal Home Loan Banks are supervised and regulated by the
Federal Housing Finance Board, which is an independent federal agency in the
executive branch of the United States government, but obligations of the Federal
Home Loan Banks are not obligations of the United States government.
The Federal Home Loan Bank System produces annual and quarterly
financial reports in connection with the original offering and issuance by the
Federal Housing Finance Board of consolidated bonds and consolidated notes of
the Federal Home Loan Banks. Questions regarding the Federal Home Loan Banks
Combined Financial Statement should be directed to the Deputy Director,
Financial Reporting and Operations Divisions, Federal Housing Finance Board,
1777 F Street, N.W., Washington, D.C. 20006. Copies of the Financial Reports
will be furnished upon request to the Capital Markets Divisions, Office of
Finance.]
[TENNESSEE VALLEY AUTHORITY
TVA is a wholly owned corporate agency and instrumentality of the
United States of America established pursuant to the Tennessee Valley Authority
Act of 1933, as amended. TVA's objective is to develop the resources of the
Tennessee Valley region in order to strengthen the regional and national economy
and the national defense. The programs of TVA consist of power and nonpower
programs. [For the fiscal year ending September 30, 1994, TVA received $140
million in congressional appropriations from the federal government for the
nonpower programs.] The power program is required to be self-supporting from
revenues it produces. The TVA Act authorizes TVA to issue evidences of
indebtedness that may only be used to finance its power program.
TVA prepares an information statement annually which describes TVA,
its business and operations and contains TVA's audited financial statements.
From time to time TVA prepares supplements to its information statement which
include certain unaudited financial data and other information concerning the
business and operations of TVA. These documents can be obtained upon written
request directed to Tennessee Valley Authority, 400 West Summit Hill Drive,
Knoxville, Tennessee 37902, Attention: Vice President and Treasurer.]
[FEDERAL FARM CREDIT BANKS
The Farm Credit System is a nationwide system of lending institutions
and affiliated service and other entities. Through its banks and related
associations, the Farm Credit System provides credit and related services to
farmers, ranchers, producers and harvesters of aquatic products, rural
homeowners, certain farm-related businesses, agricultural and aquatic
cooperatives and rural utilities. System institutions are federally chartered
under the Farm Credit Act of 1971, as amended, and are subject to regulation by
a Federal agency, the Farm Credit Administration. The Farm Credit Banks and
associations are not commonly owned or controlled. They are cooperatively owned,
directly or indirectly, by their respective borrowers. Unlike commercial banks
and other financial institutions that lead to the agricultural sector in
addition to other sectors of the economy, under the Farm Credit Act the Farm
Credit System institutions are restricted solely to making loans to qualified
borrowers in the agricultural sector and to certain related businesses.
Moreover, the Farm Credit System is required to make credit and other services
available in all areas of the nation. In order to fulfill its broad statutory
mandate, the Farm Credit System maintains lending units in all 50 states and the
Commonwealth of Puerto Rico.
The Farm Credit System obtains funds for its lending operations
primarily from the sale of debt securities issued under Section 4.2(d) of the
Farm Credit Act ("Systemwide Debt Securities"). The Farm Credit Banks are
jointly and severally liable on all Systemwide Debt Securities. Systemwide Debt
Securities are issued by the Farm Credit Banks through the Federal Farm Credit
Banks Funding Corporation, as agent for the Farm Credit Banks. Each Farm Credit
Bank determines its participation in each issue of Systemwide Debt Securities
based on its funding and operating requirements, subject to the availability of
eligible collateral, to determinations by the Funding Corporation as to
conditions of participation and terms of each issuance, and to Farm Credit
Administration approval.
Important information regarding the Farm Credit Banks and the Farm
Credit System, including combined financial information, is contained in
disclosure information made available by the Farm Credit Banks Funding
Corporation. This information consists of the most recent Farm Credit System
annual information statement and any quarterly information statements issued
subsequent thereto and certain press releases issued from time to time by the
Funding Corporation. Such information and the Farm Credit System Annual Report
to Investors for the current and two preceding fiscal years are available for
inspection at the Federal Farm Credit Banks Funding Corporation,
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Investment Banking Services Department, 10 Exchange Place, Suite 1401, Jersey
City, New Jersey 07302. Upon request, the Farm Credit Banks Funding Corporation
will furnish, without charge, copies of the above information.]
[GOVERNMENT TRUST CERTIFICATES
Government Trust Certificates ("GTCs") consist of certificates
evidencing undivided fractional interests in a trust, the assets of which
consist of promissory notes (the "Notes"), payable in U.S. Dollars, of a certain
foreign government, backed by a full faith and credit guaranty issued by the
United States of America, acting through the Defense Security Assistance Agency
of the Department of Defense, of the due and punctual payment of 90% of all
payments of principal and interest due on the Notes and a security interest in
collateral, consisting of non-callable securities issued or guaranteed by the
United States government or agencies thereof, sufficient to pay the remaining
10% of all payments of principal and interest due on the Notes.
Many issuances of GTCs were undertaken pursuant to Title III of the
Foreign Operations, Export Financing and Related Programs Appropriations Acts
(the "Appropriations Acts"), which permit borrowers to prepay certain eligible
high-interest loans made by the Federal Financing Bank under the Foreign
Military Sales Credit Program. The Appropriations Acts permit prepayment of the
Foreign Military Sales loans with the proceeds of new loans and authorize the
issuance of a United States government guaranty covering no more and no less
than ninety percent (90%) of the payments due on each such new loan, in
accordance with the requirements of the Arms Export Control Act, as amended. It
is a condition to the issuance of certificates under such program that the
Defense Security Assistance Agency approve the refinancing of any such Foreign
Military Sales loan.
Although 90% of all payments of principal and interest on the Notes
are guaranteed by the United States government or agencies thereof, and 10% of
such payments are secured by securities of the United States government or
agencies thereof, the GTCs themselves are not so guaranteed. In the event of a
default on the Notes, the Trustee of the Trust would be required by the
operative documents to make a claim against the United States government or an
agency thereof or would be required to liquidate the collateral securing the
Notes.
Payments Under the Guaranty. If the borrower under the Notes (the
"Borrower") fails to deposit with the related trustee all amounts due on the
Notes on any Note payment date (each, a "Note Payment Date"), the Trustee will
first notify the Borrower and, one business day thereafter, will send a notice
to the Director of the Defense Security Assistance Agency and to the related
depositary (the "Depositary") setting forth the amounts due on the Notes on such
Note Payment Date and the amounts, if any, received from the Borrower. On the
[11th calendar day] following the Note Payment Date, if any amounts due on a
Note remain unpaid, the Trustee will demand payment from the Defense Security
Assistance Agency on the applicable Guaranty in accordance with its terms. On
the day the Trustee receives such payment, it will instruct the Depositary
immediately to deliver sufficient funds to pay the amounts remaining unpaid on
the Note.
On the occurrence of an event of default (as defined in the related
loan agreement), the Trustee in its discretion may proceed to protect and
enforce the rights of the GTC holders under the Declaration of Trust by a suit,
action or other proceeding. As provided in the loan agreement, the Guaranty and
the Depositary Agreement, the Trustee has the legal power to exercise all the
rights, powers and privileges of a holder of the Note.
The Trustee is required to take all necessary action, as permitted by
the Declaration of Trust and applicable law (i) to enforce payments due from the
Defense Security Assistance Agency under the Guaranty and (ii) to take
possession of collateral maturing or paying interest on or prior to the Note
payment date on which default occurred, and to apply such funds in accordance
with the Declaration of Trust for the benefit of holders of GTCs. The Trustee is
required to notify the Borrower upon taking the foregoing actions. Neither the
Trust holding a Note nor the Defense Security Assistance Agency has the right to
accelerate payment of the Note, notwithstanding any failure of the Borrower to
make payment on the Note or other event of default with respect to the Note.
[The applicable prospectus supplement will specify, to the extent
GTCs are included as Underlying Securities, the waiting period that must elapse
before reimbursement for a default on the Notes, and the delay between payment
on the Notes and payment on the GTCs that is built into the GTCs to protect
against a delay in reimbursement.
In addition, the related prospectus supplement will specify, to the
extent applicable: (i) the aggregate principal amount of such GTCs; (ii) the
coupon, if any, borne by such GTCs; (iii) the stated maturity of each GTC; (iv)
the identity of each underlying obligor; and (v) the conditions under which, and
the terms on which, any underlying obligation may be prepaid or redeemed prior
to the stated maturity of the obligation.]]
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[AID-GUARANTEED UNDERLYING SECURITIES
General. AID-Guaranteed Underlying Securities consist of notes,
bonds, credit facilities and other debt instruments which are issued or arranged
by intermediary financial institutions ("IFIs") and guaranteed in whole or in
part by AID. Most AID guarantees are established under the auspices of the
Private Sector Investment Program (the "Investment Program"), created in 1983
under Section 108 of the Foreign Assistance Act of 1961 and administered by AID.
The Investment Program seeks to promote sustainable economic development by
strengthening the private sector in developing countries, primarily through the
facilitation of small business financing needs. In 1988 Congress provided the
Investment Program with loan guarantee authority, and guarantees have become the
Investment Program's principal financing instrument. AID guarantees are backed
by the full faith and credit of the United States government.
AID Housing Guaranty Program. The Housing Guaranty Program (the
"Housing Program") is administered by the AID Office of Housing and Urban
Programs. The Housing Program facilitates collaboration between AID and
host-country housing institution borrowers in both the public and private
sectors. Under the Housing Program AID participates in the planning, structuring
and execution of a housing or shelter finance program. Through the conclusion of
"implementation Agreements" the Housing Program aids developing countries in
securing favorable terms in U.S. capital markets for a U.S.
government-guaranteed loan.
Payments under the AID Guarantees. Pursuant to the fiscal agency
agreement, if the Borrower does not deposit with the Fiscal Agent thereunder at
or before 12 o'clock noon, New York City time, on any date on which a payment of
principal, interest or maturity amount on the guaranteed AID-Guaranteed
Underlying Securities is due (each, an "AID-Guaranteed Underlying Security
Payment Date"), immediately available funds in an amount sufficient to pay in
full any interest and principal, and any maturity amount, due on such
AID-Guaranteed Underlying Security Payment Date with respect to the guaranteed
AID-Guaranteed Underlying Securities, the Fiscal Agent, acting on behalf of the
holders of the guaranteed AID-Guaranteed Underlying Securities, is obligated to
make a demand upon AID, not later than 2 o'clock p.m., New York City time, on
such AID-Guaranteed Underlying Security Payment Date for payment pursuant to the
guarantees.
Pursuant to the guarantees, AID is required, not later than three (3)
Business Days following receipt of such demand, to pay to the demanding
AID-Guaranteed Underlying Securityholders the applicable guaranteed amount.
Upon receipt by the fiscal agent of payments from AID pursuant to the
guarantees, the fiscal agent will be required, if such payments are received at
or prior to 12 o'clock noon, New York City time, on any Business Date, to remit
such payments to the registered holders of the guaranteed AID-Guaranteed
Underlying Securities entitled thereto on such Business Day and, if such
payments are received after such time, to remit such payments to such registered
holders on the next such Business Day.
Each AID-Guaranteed Underlying Securityholder is deemed by the
acceptance of a guaranteed AID-Guaranteed Underlying Security to have
irrevocably appointed the fiscal agent as its agent for the purpose of making a
demand for payment upon AID pursuant to the guarantees and receiving any payment
to an AID-Guaranteed Underlying Securityholder by AID pursuant to the
guarantees. The Regulations also provide that any AID-Guaranteed Underlying
Securityholder may make demand for payment on AID under a Guarantee on its own
behalf immediately upon the failure of the Borrower to make any payment when due
under such AID-Guaranteed Underlying Securityholder's guaranteed AID-Guaranteed
Underlying Security. All payments made by AID to the fiscal agent pursuant to
the guarantees will be held in trust by the fiscal agent solely for the benefit
of the registered holders of the guaranteed AID-Guaranteed Underlying Securities
until remitted to such holders. AID will be discharged from its obligations to
make a payment pursuant to the guarantees upon the making of such payment to the
fiscal agent on behalf of the AID-Guaranteed Underlying Securityholders,
provided that such discharge will be effective only as to such payment and to
the extent of the amount of such payment.
Events of Default. As provided by the terms of each AID-Guaranteed
Underlying Security, an event of default will be deemed to have occurred if the
borrower fails to make any payment on such AID-Guaranteed Underlying Security on
the applicable Payment Date. On the occurrence of an event of default, the
Trustee of such AID-Guaranteed Underlying Security (the "Underlying Trustee") or
the Trustee may make demand on AID under the guarantees. However, none of the
fiscal agent, the Trustee or AID may accelerate payment of any AID-Guaranteed
Underlying Security, notwithstanding any failure of the borrower to make payment
on the AID-Guaranteed Underlying Securities.
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[The related prospectus supplement will specify, to the extent
applicable: (i) the aggregate principal or notional principal amount of such
AID-Guaranteed Underlying Securities; (ii) the coupon, if any, borne by such
AID-Guaranteed Underlying Securities; (iii) the stated maturity of each
underlying obligation; (iv) the identity of each underlying obligor; (v) the
credit characteristics of such obligor; (vi) the rating, if any, assigned to
each such obligor, whether an actual or a shadow rating; (vii) the conditions
under which, and the terms on which, any underlying obligation may be prepaid or
redeemed prior to the stated maturity of the obligation; and (viii) the identity
of the fiscal agent.]
The Federal Credit Reform Act of 1990, Pub. Law 101-508, provides
that payments in respect of loan guarantee commitments made on or after October
1, 1991, including the guarantee commitments made by AID under the guarantees,
will be made by the U.S. Treasury from a "financing account" established under
Section 502(7) of the Credit Reform Act. Section 505(c) of the Credit Reform Act
authorizes the Secretary of the Treasury to lend or pay to the financing account
such amounts as may be necessary to make any payments required to discharge loan
guarantee obligations and commitments in the event funds in the financing
account are insufficient.]
The Trust will have no other significant assets [other than any
credit support or those assets referred to below] from which to make
distributions of amounts due in respect of the certificates. Consequently, the
ability of certificateholders to receive distributions in respect of the
certificates will depend [almost] entirely on the Trust's receipt of payments on
the foregoing Underlying Securities from [name such obligor]. Prospective
purchasers of the certificates should consider carefully [name such obligor]'s
financial condition and its ability to make payments in respect of such
Underlying Securities. This prospectus supplement relates only to the
certificates being offered hereby and does not relate to the Underlying
Securities of [name such obligor]. All information contained in this prospectus
supplement regarding [name such obligor] is derived from the publicly available
documents described in the preceding paragraph. Neither Lehman ABS nor [any of]
the underwriter[s] has participated in the preparation of such documents, or
takes any responsibility for the accuracy or completeness of the information
provided therein.
[The Deposited Assets will also include [direct obligations of the
United States of America][describe any assets which are ancillary or incidental
to the Underlying Securities, including hedging contracts such as puts, calls,
interest rate swaps, credit spread options, currency swaps, floors, caps and
collars, and any cash or other security pledged to support the Underlying
Securities] (such assets, together with the Underlying Securities, the
"Deposited Assets").]
[DESCRIPTION OF CREDIT SUPPORT]
For the benefit [solely] of the [Offered] [class [ ] certificates
[and the class [ ] certificates]], credit support will be obtained [and will
constitute part of the Trust to the extent provided below] to support or ensure
the [servicing and] [timely] [ultimate] distribution of amounts due with respect
to the Deposited Assets, in the form and amount described below.
[THE LETTER OF CREDIT
Simultaneously with Lehman ABS's assignment of the Deposited Assets
to the Trust, Lehman ABS will obtain the letter of credit from [ ] in favor of
the Trustee on behalf of the certificateholders. The letter of credit will be
irrevocable and will [support the [timely][ultimate] remittance of amounts due
with respect to the Deposited Assets]. [The maximum amount that the Trustee may
draw under the letter of credit will initially be equal to . The initial amount
of the letter of credit will be [$] . Thereafter, the amount of the letter of
credit with respect to any Distribution Date will equal [the lesser of (i) % of
the aggregate certificate Principal Balance outstanding on the preceding
Distribution Date (after giving effect to any payment of principal made on such
preceding Distribution Date) but in any event not less than [$] , and (ii)] the
amount of the letter of credit on the preceding Distribution Date, plus [(a)
reimbursement of certain advances under the letter of credit and (b) recoveries
on defaulted Deposited Assets] [describe other methods]. The letter of credit
expires on , 20__. The Trustee will be obligated, in the event of a drawing on
the letter of credit, to pursue appropriate remedies against the Deposited
Assets and other collateral, and any realization thereon shall be paid to the
letter of credit bank to the extent of any amounts owing, in the manner and
priority specified herein.]
[Add language regarding the letter of credit bank with respect to its
debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the letter of credit bank. In
addition, to the extent that the letter of credit will cover payment of 20% or
more of the aggregate
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principal amount of the certificates covered thereby, provide information of
financial and other matters with respect to the letter of credit bank, if
necessary.]]
[THE SURETY BOND
Simultaneously with Lehman ABS' assignment of the Deposited Assets to
the Trust, Lehman ABS will obtain the surety bond from [ ] in favor of the
Trustee on behalf of the certificateholders. The surety bond will guaranty
[timely] [ultimate] distributions of the principal of and premium (if any) and
interest with respect to the [Offered][class[ ]] certificates. The surety bond
expires on , 20__. The Trustee will be obligated, in the event of a drawing on
the surety bond, to pursue appropriate remedies against the Deposited Assets and
other collateral, and any realization thereon shall be paid to the surety to the
extent of any amounts owing, in the manner and priority specified herein.
[Add language regarding the issuer of the surety bond with respect to
its debt ratings, activities it engages in, regulatory authorities having
jurisdiction over it and the nature of such regulation, a narrative description
of its assets, liabilities (including deposits) and equity, and include an
address for further information concerning the surety. In addition, to the
extent that the surety bond will cover payment of 20% or more of the aggregate
principal amount of the certificates covered thereby, provide information of
financial and other matters with respect to the issuer of the surety bond, if
necessary.]]
[RESERVE ACCOUNT
Lehman ABS will deposit with trustee on the Closing Date cash,
letters of credit and short-term investments acceptable to the Rating Agency
initially rating the certificates in the amount of [$] . [Collections with
respect to the Deposited Assets not distributed with respect to the certificates
shall be deposited in the Reserve Account.] Amounts deposited in the Reserve
Account will be used by the Trustee to make payments of principal of and premium
(if any) and interest on the certificates to the extent that funds are not
otherwise available. Immediately after any Distribution Date, amounts in the
Reserve Account in excess of [indicate formula] [may be paid to Lehman ABS].]
YIELD ON THE CERTIFICATES
[Describe factors relating to the Deposited Assets, the terms thereof
and the manner and priority in which collections thereon are allocated to the
certificateholders of each class of the certificates, as described elsewhere
herein.] See "Maturity and Yield Considerations" in the prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will consist of [ ] classes of certificates,
designated as class [ ][,] [and] class [ ] [and class___] certificates. The
certificates will be denominated and distributions with respect thereto will be
payable in the Specified Currency. The certificates represent in the aggregate
the entire beneficial ownership interest in the related trust. The class [ ]
certificates have in the aggregate an initial [Certificate Principal Balance]
[Notional Amount] of [$]________ (approximate) and a [___%] [Variable]
Pass-Through Rate. The class [ ] certificates have in the aggregate an initial
[Certificate Principal Balance] [Notional Amount] of [$]________ (approximate)
and a [___%] [Variable] Pass-Through Rate. [The class [ ] certificates have in
the aggregate an initial [Certificate Principal Balance] [Notional Amount] of
[$]________ (approximate) and a [___%] [Variable] Pass-Through Rate.] [The class
[ ] certificates, which are not being offered hereby, will be transferred by
Lehman ABS to an affiliate on the Closing Date, and may be sold at any time by
Lehman ABS in accordance with the terms of the Trust agreement.]
The certificates [(other than the class [ ] certificates [and specify
others] (the "Definitive Classes"))] will be issued, maintained and transferred
on the book-entry records of DTC and its Participants in minimum denominations
of [$ ] and [integral multiples thereof] [multiples of [$ ] in excess thereof].
[The class [ ] certificates [and specify any others] will be offered in
registered, certificated form, in minimum percentage interests corresponding to
the initial Notional Amounts or Certificate Principal Balances, as applicable,
of [$ ] and integral multiples thereof, except that one certificate of each such
class may be issued with an initial Notional Amount or Certificate Principal
Balance, as applicable, equal to an integral multiple of [$ ] plus the excess of
the initial aggregate Notional Amount
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or Certificate Principal Balance, as applicable, of such class over the greatest
integral multiple of [$ ] that is not more than such initial aggregate Notional
Amount or Certificate Principal Balance, as applicable.]
The certificates [(other than the definitive classes of
certificates)] will each initially be represented by one or more global
certificates registered in the name of the nominee of DTC (together with any
successor clearing agency selected by Lehman ABS, the "Clearing Agency"), except
as provided below. Lehman ABS has been informed by DTC that DTC's nominee will
be CEDE & Co. No holder of any such certificate will be entitled to receive a
certificate representing such person's interest, except as set forth below under
"-Definitive Certificates." Unless and until definitive certificates are issued
under the limited circumstances described herein, all references to actions by
certificateholders with respect to any such certificates shall refer to actions
taken by DTC upon instructions from its Participants. See "-Definitive
Certificates" below and "Description of Certificates-Global Securities" in the
prospectus.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC will take action permitted to be taken by a
certificateholder under the Trust agreement only at the direction of one or more
Participants to whose DTC account such certificates are credited. Additionally,
DTC will take such actions with respect to specified Voting Rights only at the
direction and on behalf of Participants whose holdings of such certificates
evidence such specified Voting Rights. DTC may take conflicting actions with
respect to Voting Rights, to the extent that Participants whose holdings of
certificates evidence such Voting Rights, authorize divergent action.
DEFINITIVE CERTIFICATES
Definitive certificates will be issued to certificate owners or their
nominees, respectively, rather than to DTC or its nominee, only if (i) Lehman
ABS advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Clearing Agency with respect to each
class of certificates [(other than the definitive classes)] and Lehman ABS is
unable to locate a qualified successor or (ii) Lehman ABS, at its option, elects
to terminate the book-entry system through DTC.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee is required to notify all Participants of the
availability through DTC of definitive certificates. Upon surrender by DTC of
the definitive certificates representing the certificates [(other than the
definitive classes of certificates)] and receipt of instructions for
re-registration, the Trustee will reissue such certificates as definitive
certificates issued in the respective principal amounts owned by the individual
owners of the certificates. Thereafter the Trustee will recognize the holders of
the definitive certificates as certificateholders under the Trust agreement.
DISTRIBUTIONS
Collections on the Deposited Assets that are received by the Trustee
for a given Collection Period pursuant to the collection procedures described
herein and in the prospectus and deposited from time to time into the
Certificate Account will be applied by the Trustee on each applicable
Distribution Date to the following distributions in the following order of
priority, solely to the extent of Available Funds (as defined below) on such
Distribution Date:
o to the Trustee, all unpaid fees and expenses of the Trustee and
its respective agents, up to the Allowable Expense Amount (as
defined below) for the related Collection Period;
o to the [providers of credit support ("Credit Support Providers")]
[swap or derivative counterparty], any amounts required to be
paid or reimbursed to, or deposited with, any such person;]
o to the certificateholders of each class of such series, first, to
the payment of Required Interest [and on a pro rata basis to the
Credit Support Providers for the payment of any Credit Support
Payments], second, to the payment of Required Principal and
third, to the payment of Required Premium, in each case
applicable to such class, commencing with the most highly ranked
class and, to the extent Available Funds remain available, to
each other class in accordance with the ranking specified herein
under "-Allocation of Losses; Subordination";
o [to the Credit Support Providers, any credit support payments;]
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o to the Trustee, all its remaining unpaid fees and expenses and
those of its respective agents not otherwise paid pursuant to
clause (i) above;
o [all remaining amounts, if any, to Lehman ABS].
Collections received from the Deposited Assets and any applicable
credit support relating to the certificates over a specified period may not be
sufficient, after payment of all Allowable Expense Amounts [and payment of all
amounts required to be paid to the Credit Support Providers] for such period, to
make all required distributions to the certificateholders of the certificates.
To the extent Available Funds are insufficient to make any such distributions
due to any such series or class, any shortfall will be carried over and will be
distributable on the next Distribution Date on which sufficient funds exist to
pay the shortfall.
For purposes hereof, the following terms have the following
meanings:
["Allowable Expense Amount" means, for any given Collection
Period, the sum of (x) [$]__________ and (y) amounts in respect of
the Allowable Expense Amount from the preceding Collection Period
that have not been applied on the Distribution Date for such
preceding Collection Period.]
"Available Funds" for any Distribution Date means the sum
of (a) all amounts received on or with respect to the Deposited
Assets (including investment income on Eligible Investments) received
during the preceding Collection Period[,] [and] (b) amounts available
as of such Distribution Date pursuant to the credit support described
herein [and (c) any additional amount that [Lehman ABS] may remit to
the Trustee from time to time according to the terms of the Trust
agreement for application as Available Funds].
"Call Premium Percentage" for any given Distribution Date
means [a fixed percentage] [a percentage that varies depending on
[describe basis for variable formula, such as the applicable date or
other factors or indices]].
"Eligible Investments" means, with respect to the
certificates, those investments acceptable to the Rating Agency as
being consistent with the rating of such certificates, as specified
in the Trust agreement. Generally, Eligible Investments must be
limited to obligations or securities that mature not later than the
business day prior to the next succeeding Distribution Date.
"Required Interest" for the certificates or any class
thereof on any given Distribution Date means the accrued and unpaid
interest on the outstanding Certificate Principal Balance [or
Notional Amount] of such certificates, computed at the applicable
Pass-Through Rate.
"Required Premium" for the certificates or any class
thereof for any Distribution Date means an amount equal to the
product of (a) the Required Principal for such certificates on such
Distribution Date and (b) the Call Premium Percentage for such
Distribution Date.
"Required Principal" for the certificates or any class
thereof for any Distribution Date means the amount received on the
Deposited Assets attributable to principal payments thereon during
the related Collection Period, to the extent allocable to such
certificates. The Certificate Principal Balance of a certificate
outstanding at any time represents the maximum amount that the holder
thereof is entitled to receive as distributions allocable to
principal from the cash flow on the Underlying Securities, the other
assets in the Trust and any credit support obtained for the benefit
of such holder. The Certificate Principal Balance of any class of
certificates [(other than the class [ ] certificates)] as of any date
of determination is equal to the initial Certificate Principal
Balance thereof, reduced by the aggregate of (a) all amounts
allocable to principal previously distributed with respect to such
certificate and (b) any reductions in the Certificate Principal
Balance deemed to have occurred in connection with allocations of (i)
Realized Losses allocable to principal on the Deposited Assets and
(ii) Extraordinary Trust Expenses, as described herein. [The Notional
Amount of the class [ ] certificates as of any date of determination
is equal to [specify amount].] [Holders of the class [ ] certificates
are not entitled to receive any distributions allocable to
principal.]
[Notwithstanding the priorities described above, holders of the class
[ ] certificates and the class [ ] certificates will be entitled to receive on
any Distribution Date 100% of all principal collections received in the related
Collection Period with respect to the Deposited Assets, to be distributed [on a
pro rata basis] in reduction of the Certificate Principal Balance of the class [
] certificates and the class [ ] certificates, if any of the following
conditions
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shall be satisfied: [describe conditions, if any, by which a certain class is
given 100% of the principal cash flow other than pursuant to subordination that
is in effect from the Closing Date].]
[ADVANCES
Subject to the following limitations, the Trustee will be obligated
to advance or cause to be advanced on or before each Distribution Date its own
funds, or funds in the Certificate Account that are not included in the
Available Funds for the Distribution Date, in an amount equal to the aggregate
of payments of principal, premium (if any) and interest, net of that portion of
the Available Funds attributable to fees and expenses of the Trustee, that were
due during the related Collection Period and that were delinquent on the related
Determination Date (any such advance, an "Advance").
Advances are required to be made only to the extent they are deemed
by the Trustee to be recoverable from related late collections, insurance
proceeds, if any, or Liquidation Proceeds. The purpose of making such Advances
is to maintain a regular cash flow to the certificateholders, rather than to
guarantee or insure against losses. The Trustee will not be required to make any
Advances with respect to reductions in the amount of the payments on the
Deposited Assets due to bankruptcy proceedings with respect to the Deposited
Assets.
All Advances will be reimbursable to the Trustee from late
collections, insurance proceeds, if any, and any proceeds from the liquidation
of the Deposited Asset ("Liquidation Proceeds") as to which such unreimbursed
Advance was made. In addition, any Advances previously made in respect of any
Deposited Asset that are deemed by the Trustee to be nonrecoverable from related
late collections, insurance proceeds, if any, or Liquidation Proceeds may be
reimbursed to the Trustee out of any funds in the Certificate Account allocable
to any of the Deposited Assets prior to the distributions on the certificates.
ALLOCATION OF LOSSES; SUBORDINATION [SPECIFY IF NECESSARY]
[The subordination described herein provided by the class [ ]
certificates [and the class [ ] certificates] is designed to protect holders of
the remaining classes of certificates from certain losses and other shortfalls
with respect to the Deposited Assets. As a result, losses and other shortfalls
with respect to the Deposited Assets will be borne by the remaining classes of
certificates, to the extent described below, only if such losses and other
shortfalls are not so covered, or the coverage in respect thereof has been
exhausted.]
[Realized Losses and Extraordinary Trust Expenses will be allocated
on any Distribution Date as follows: [describe allocation among the various
classes].]
[An "Extraordinary Trust Expense" is an expense of a given trust in
excess of the Allowable Expense Amount, including certain reimbursements to
Lehman ABS described in the prospectus under "Description of
Certificates--[Certain Matters Regarding the Administrative Agent and Lehman
ABS"] and certain reimbursements to the Trustee described under "Description of
the Trust Agreement--The Trustee" herein.]
[RESTRICTIONS ON TRANSFER OF THE CLASS [ ] CERTIFICATES
Because the class [ ] certificates are subordinate to the class [ ]
certificates and the class [ ] certificates to the extent set forth herein, the
class [ ] certificates may not be purchased by or transferred to a Plan except
upon the delivery of an opinion of counsel as described herein. See "ERISA
Considerations."]
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The certificates will be issued pursuant to the Trust agreement, a
form of which is filed as an exhibit to the registration statement. A Current
Report on Form 8-K relating to the certificates containing a copy of the Trust
agreement as executed will be filed by Lehman ABS with the SEC following the
issuance and sale of the certificates. The Trust created under the Trust
agreement (including the Series 1999-[ ] supplement) will consist of:
o the Deposited Assets (exclusive of any Retained Interest, which
is not part of the Trust);
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o all payments on or collections in respect of the Deposited Assets
due after the Cut-off Date, together with any proceeds thereof[,]
[and];
o [any credit support in respect of any class or classes of
certificates] [and;
o the rights of Lehman ABS under the purchase agreement between
Lehman ABS and the Seller].
[In addition, the holders of the certificates may also have the benefit of
certain credit support discussed above. See "Description of Credit Support."]
Reference is made to the prospectus for important information in addition to
that set forth herein regarding the Trust, the terms and conditions of the Trust
agreement and the certificates. The following summaries of certain provisions of
the Trust agreement do not purport to be complete and are subject to the
detailed provisions contained in the form of Trust agreement, to which reference
is hereby made for a full description of such provisions, including the
definition of certain terms used herein.
THE TRUSTEE
[ ], a [ ] corporation, will act as trustee for the certificates and
the Trust pursuant to the Trust agreement. The Trustee's offices are located at
[ ] and its telephone number is [ ].
The Trust agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be indemnified by the Trust and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Trust agreement or the
certificates or the performance of the Trustee's duties under the Trust
agreement, other than any loss, liability or expense (i) that constitutes a
specific liability of the Trustee under the Trust agreement or (ii) incurred by
reason of willful misfeasance, bad faith or negligence in the performance of the
Trustee's duties under the Trust agreement or as a result of a breach, or by
reason of reckless disregard, of the Trustee's obligations and duties under the
Trust agreement.
EVENTS OF DEFAULT
An event of default (an "event of default")with respect to any class
of certificates under the Trust agreement, other than a class of certificates
representing an interest in preferred stock will consist of:
o [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);
o 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
o the occurrence and continuance of such other events specified in
the applicable series supplement.]
[Describe remedies available to certificateholders upon the
occurrence and continuance of an event of default, including, as applicable,
directing the Trustee to vote the Underlying Securities in favor of declaring
the principal balance of and any accrued interest on the Outstanding Debt
Securities to be immediately due and payable].
The Trust agreement will provide that, within 30 days after the
occurrence of an event of default in respect of the certificates of any class,
the Trustee will give to the holders of such certificates notice, transmitted by
mail, of all such uncured or unwaived events of default known to it. However,
except in the case of an event of default relating to the payment of principal
of or premium, if any, or interest on any of the Underlying Securities, the
Trustee will be protected in withholding such notice if in good faith it
determines that the withholding of such notice is in the interest of the holders
of the certificates of such class.
No holder of any certificate will have the right to institute any
proceeding with respect to the Trust agreement, unless (i) the holder previously
has given to the Trustee written notice of a continuing breach, (ii) the holders
of certificates of such series evidencing not less than the "Required
Percentage--Remedies" specified in the applicable series supplement of the
aggregate Voting Rights of such series have requested in writing that the
Trustee institute such proceeding in its own name as trustee, (iii) the holder
or holders have offered the Trustee reasonable indemnity, (iv) the Trustee has
for 15 days failed to institute such proceeding and (v) no direction
inconsistent with such
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written request has been given to the Trustee during such 15-day period by the
holders of certificates of such series evidencing not less than the Required
Percentage. ["Required Percentage-Remedies" shall mean [ %] of the Voting
Rights.]
VOTING RIGHTS
[At all times,] [Subject to the succeeding paragraph,] [ ]% of all
Voting Rights will be allocated among all holders of the class [ ]
certificates[,] [and] the class [ ] certificates [and specify other classes] in
proportion to the then outstanding Certificate Principal Balances [or Notional
Amounts] of their respective certificates and [ ]% of all Voting Rights will be
allocated among all holders of the class [ ] certificates in proportion to the
then outstanding [Certificate Principal Balances] [Notional Amounts] of their
respective certificates. [Specify whether and under what circumstances voting
will be class-by-class.]
[Specify conditions, if any, under which allocation of Voting Rights
might change from the foregoing percentages.] ["Required Percentage-Amendment"
of Voting Rights necessary to consent to amendment or modification of the Trust
shall be [ %].] ["Required Percentage-Waiver" shall mean [ %] [of the Voting
Rights].]
VOTING OF UNDERLYING SECURITIES, [MODIFICATION OF INDENTURE]
The Trustee, as holder of the Underlying Securities, has the right to
vote and give consents and waivers in respect of such Underlying Securities as
permitted by [DTC] [Federal Reserve Bank] and except as otherwise limited by the
Trust agreement. In the event that the Trustee receives a request from [DTC]
[Federal Reserve Bank] the [Underlying Securities trustee] [the fiscal agent]
[or the issuer of the Underlying Securities] [or GSE issuer] for its consent to
any amendment, modification or waiver of the Underlying Securities, [the
indenture] or any other document thereunder or relating thereto, or receives any
other solicitation for any action with respect to the Underlying Securities, the
Trustee shall mail a notice of such proposed amendment, modification, waiver or
solicitation to each certificateholder of record as of such date. The Trustee
shall request instructions from the certificateholders as to whether or not to
consent to or vote to accept such amendment, modification, waiver or
solicitation. The Trustee shall consent or vote, or refrain from consenting or
voting, in the same proportion (based on the relative Certificate Principal
Balances and Notional Amounts of the certificates, as applicable) as the
certificates of the Trust were actually voted or not voted by the
certificateholders thereof as of a date determined by the Trustee prior to the
date on which such consent or vote is required; provided, however, that,
notwithstanding anything to the contrary, the Trustee shall at no time vote or
consent to any matter (i) unless such vote or consent would not (based on an
opinion of counsel) alter the status of the Trust as a grantor trust for Federal
income tax purposes, (ii) which would alter the timing or amount of any payment
on the Underlying Securities, including, without limitation, any demand to
accelerate the Underlying Securities, except in the event of an event of default
with respect to the Underlying Securities or an event which with the passage of
time would become an event of default with respect to the Underlying Securities
and with the unanimous consent of all holders of outstanding certificates or
(iii) which would result in the exchange or substitution of any of the
outstanding Underlying Securities pursuant to a plan for the refunding or
refinancing of such Underlying Securities except in the event of a default under
the [indenture] [Underlying Securities] and only with the consent of
certificateholders representing 100% of the aggregate voting rights of each
outstanding class of the certificates. The Trustee will not be liable 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 [issuer of the Underlying
Securities] [or GSE issuer] to issue new obligations in exchange and
substitution for any of the Underlying Securities or any other offer is made for
the Underlying Securities, the Trustee will notify the certificateholders of
such offer as promptly as practicable. The Trustee must reject any such offer
unless an event of default under the indenture [Underlying Securities] has
occurred, the Trustee is directed by the affirmative vote of all of the
certificateholders to accept such offer and the Trustee has received the tax
opinion described above. Accordingly, a certificateholder generally would be
required to effect a withdrawal of Requested Underlying Securities from the
Trust in order to accept such offer. See "Description of Certificates--Optional
Exchange" in the prospectus.
[If an event of default under the [indenture] [Underlying Securities]
occurs and is continuing and if directed by all the holders of outstanding class
[ ] certificates and[, unless the class [ ] certificates are no longer
outstanding, by all the holders of outstanding class [ ] certificates,] the
Trustee will vote the Underlying Securities in favor of directing, or take such
other action as may be appropriate to direct, the Underlying Securities trustee
to declare the unpaid principal amount of the Underlying Securities and any
accrued and unpaid interest thereon to be due and payable. In connection with a
vote concerning whether to declare the acceleration of the Underlying
Securities, the
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certificateholders' interests of each class may differ and the interests of
either class may differ from holders of other outstanding debt securities of the
Underlying Securities issuer[s].]
TERMINATION
The circumstances under which the obligations created by the Trust
agreement will terminate in respect of the certificates are described in
"Description of Certificates--Termination" in the prospectus. [Describe
additional termination provisions.] Lehman ABS will have the right to purchase
all remaining Deposited Assets in the Trust and thereby effect early retirement
of the certificates on any Distribution Date, [(a)] once the aggregate principal
amount of the Deposited Assets at the time of any such purchase is less than
[10%] of the aggregate principal amount of the Deposited Assets as of the
Cut-off Date [and (b) at the option of Lehman ABS at [specify when and on what
terms any such option may be exercised]]; provided, however, that the right to
exercise any such option is contingent on such exercise being consistent with
Lehman ABS's continued satisfaction of the applicable requirements for exemption
under Rule 3a-7 under the Investment Company Act of 1940 and all applicable
rules, regulations and interpretations thereunder. In the event Lehman ABS
exercises any such option, the portion of the purchase price allocable to the
certificates of each class will be, to the extent of available funds, [100% of
their then aggregate outstanding certificate Principal Balance or Notional
Amount, as applicable, plus with respect to the certificates [one month's]
[three month's] [specify other period] interest thereon at the Fixed
Pass-Through Rate or the then applicable Variable Pass-Through Rate, as the case
may be, plus, with respect to each class of certificates, any previously accrued
but unpaid interest thereon.] [Specify alternative allocation method if
different from above.] In no event will the Trust created by the Trust agreement
for the certificates continue beyond the expiration of 21 years from the death
of the survivor of the person or persons named in the Trust agreement. See
"Description of Trust Agreement--Termination" in the prospectus.
CERTAIN LEGAL ASPECTS OF THE DEPOSITED ASSETS
[Describe any applicable legal aspects of the Deposited Assets or
relating to the enforceability by the certificateholders of the security
interest, if any, securing such Deposited Assets.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material Federal income
tax consequences of the purchase, ownership and disposition of the certificates
by an initial holder of certificates. Such consequences will depend on the terms
of the certificate, whether the Trust is treated as a grantor trust, as a
partnership or a FASIT for Federal income tax purposes, and the assets
collateralizing or otherwise supporting such certificate. The consequences of
owning certificates which are deemed for Federal income tax purposes to be
interests in a grantor trust, in a partnership or in a FASIT are discussed
separately below under the captions "Grantor Trust Certificates", "Partnership
Certificates" and "FASIT Certificates" respectively. The applicable Trust
agreement would include provisions appropriate to the particulars of the
transaction and to the relevant Federal income tax status of the Trust and
related certificates.
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and who do not hold their
certificates as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar and
investors in pass-through entities. Investors should consult their own tax
advisors to determine the Federal, state, local and other tax consequences of
the purchase, ownership and disposition of the certificates. [The prospectus
supplement for each series of certificates will describe the consequences that
relate to the specific certificates issued pursuant thereto.]
The Trust will be provided with an opinion of Weil, Gotshal & Manges
LLP (a limited liability partnership including professional corporations),
special Federal tax counsel to Lehman ABS ("Federal Tax Counsel") regarding
certain Federal income tax matters discussed below. An opinion of Federal Tax
Counsel, however, is not binding on the Internal Revenue Service (the "Service")
or the courts. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to any of the Federal income tax
consequences discussed below, and no assurance can be given that the Service
will not take contrary positions.
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TAX STATUS OF TRUST AS A GRANTOR TRUST
In the opinion of Federal Tax Counsel, the Trust will be classified
as a grantor trust and not as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes. Accordingly, each
owner of a certificate (a "certificate owner") will be subject to Federal income
taxation as if it owned directly the portion of the Deposited Assets allocable
to such certificates, and as if it paid directly its share of expenses paid by
the Trust. The following discussion assumes that the Underlying Securities were
not issued with original issue discount ("OID") and, accordingly, the
certificate owners will not realize OID except with respect to a "stripped
interest" (as defined below).
INCOME OF CERTIFICATE OWNERS
In General. A certificate owner will allocate the amount it pays for
its certificate among the Underlying Securities and the Deposited Assets in the
Trust other than the Underlying Securities (the "Other Deposited Assets")
allocable to such certificate, in proportion to their relative fair market
values on the date of purchase of the certificate. A certificate owner would
calculate separately its income, gain, loss or deduction realized with respect
to each such asset.
The Federal income tax treatment of a holder of a particular class of
certificates will depend upon whether the interest in the Underlying Securities
represented by such class will be considered, in whole or in part, to be a
"stripped bond" or "stripped coupon" (together, a "stripped interest") within
the meaning of Section 1286 of the Code. A class of certificates will not be
considered to represent a stripped interest in the Underlying Securities to the
extent the certificate is entitled to receive a proportionate amount of all
principal and interest on the Underlying Securities. A class of certificates
will be considered in its entirety to represent a stripped interest in the
underlying Underlying Securities if it is entitled to receive interest on the
Underlying Securities which is disproportionately less than the principal which
it is entitled to receive on the Underlying Securities, or if it is entitled to
receive all or part of the interest on the Underlying Securities but no
principal on the Underlying Securities. In addition, if a class of certificates
is entitled to receive interest and principal on the Underlying Securities, but
the interest it is entitled to receive on the Underlying Securities is
disproportionately more than the principal it is entitled to receive on the
Underlying Securities, it could be argued that the certificates represents (a)
an interest in the Underlying Securities that is not a stripped interest to the
extent it represents a proportional amount of all the principal and interest on
the Underlying Securities and (b) a stripped interest in the Underlying
Securities to the extent of any additional interest to which it is entitled on
the Underlying Securities. If a certificate represents in part a stripped
interest and in part not a stripped interest, such interests will be treated as
two separate items for tax purposes and a purchaser of certificates will be
required to allocate its purchase price among the two items (as well as any
other Deposited Assets) in proportion to their relative fair market values on
the date of purchase.
Tax Treatment of Certificates to the Extent They Are Not Stripped
Interests. To the extent a class of certificates does not represent a stripped
interest in the Underlying Securities, each certificate owner will be required
to report on its Federal income tax return, in a manner consistent with its
method of accounting, its share of the gross income of the Trust, including
interest and discount earned on the Underlying Securities, income derived from
the other Deposited Assets held by the Trust, and any gain or loss upon
collection or disposition of the Underlying Securities or other Deposited
Assets. The portion of each monthly payment to a certificate owner that is
allocable to principal on the Underlying Securities (other than amounts
representing discount, as described below) will represent a recovery of capital,
which will reduce the tax basis of such certificate owner's undivided interest
in the Underlying Securities.
To the extent that the portion of the purchase price of a certificate
allocated to a certificate owner's undivided interest in a Underlying Security
is greater than or less than the portion of the principal balance of the
Underlying Security allocable to the certificate, such interest in the
Underlying Security will have been acquired at a premium or discount, as the
case may be. In determining whether a certificate owner has purchased its
interest in the Underlying Securities at a premium or discount, a portion of the
purchase price for a certificate will be allocated to (i) the other Deposited
Assets (including any accrued interest thereon) held by the Trust and (ii) the
accrued interest on the Underlying Securities at the time of purchase as though
such accrued interest were a separate asset, thus, in each case, reducing the
portion of the purchase price allocable to the certificate owner's undivided
interest in the Underlying Securities (the "Allocated Purchase Price"). To the
extent that the allocated Purchase Price is less than the principal balance of
an Underlying Security, the certificate owner's interest in such Underlying
Security will be treated as purchased at a "market discount." The market
discount on a Underlying Security will, however, be considered to be zero if it
is less than a statutorily defined de minimis amount. Conversely, to the extent
that the allocated Purchase Price exceeds the principal balance of an Underlying
Security, the certificate owner's interest therein will be treated as purchased
with "bond premium." See the discussion below under "Bond Premium."
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For example, if the allocated Purchase Price paid by a certificate
owner who purchases a certificate in the initial public offering were equal or
almost equal to the portion of the principal balance of the Underlying Security
that is allocable to the certificate, there would be no significant amount of
discount or premium with respect to its interest in such Underlying Security.
Moreover, if the total purchase price of a certificate is equal to the principal
amount of the Underlying Securities allocable to the certificate, because a
portion of such purchase price will be allocated to the other Deposited Assets
of the Trust, in the aggregate a certificate owner's interest in the Underlying
Securities will have been purchased at a discount.
In general, under the market discount provisions of the Code,
principal payments received by the Trust, and all or a portion of the gain
recognized upon a sale or other disposition of an Underlying Security or upon
the sale or other disposition of a certificate, will be taxable as ordinary
income to the extent of accrued market discount, and a portion of the interest
deduction attributable to any indebtedness treated as incurred or continued to
purchase or carry an Underlying Security (or a certificate) must be deferred.
The ordinary income treatment on principal payments and dispositions and
deferral of interest deductions described in the preceding sentence will not
apply if a certificate owner elects to include market discount in income
currently as it accrues for each taxable year during which it holds the
certificate. Any such election will also apply to all debt instruments held by
the certificate owner during the year in which the election is made and all debt
instruments acquired thereafter. Market discount will accrue in the manner to be
provided in Treasury regulations, but the Conference Report accompanying the Tax
Reform Act of 1986 states that, until such regulations are issued, taxpayers may
elect to accrue market discount either (i) under a constant yield (economic
accrual) method or (ii) in the proportion that the stated interest paid on the
obligation for the current period bears to total remaining interest on the
obligation.
Tax Treatment of Certificates to the Extent They Are Stripped
Interests. To the extent a class of certificates represents a stripped interest
in the Underlying Securities, each such certificate will be subject to the OID
rules. The amount of OID on a stripped interest is equal to the excess of all
amounts payable on the stripped interest (other than qualified stated interest)
over the portion of the purchase price for the certificate allocable to the
stripped interest.
Under the Treasury regulations issued under Section 1286 of the Code
(the "Regulations"), the interest payable with respect to the stripped interest
will, in the appropriate circumstances, be treated as "qualified stated
interest" if it represents a fixed periodic payment on principal on the
Underlying Securities to which the stripped interest (i.e., the certificate
owner) is also entitled. If none of the amounts payable to a certificate owner
with respect to a stripped interest constitute qualified stated interest, then
the stripped interest will have OID in an amount equal to the excess of all
payments to be received on the stripped interest over the purchase price for the
certificate allocable to the stripped interest. Moreover, in determining the
amount paid for the stripped interest, a portion of the purchase price for a
certificate must be allocated to the certificate owner's share of other
Deposited Assets and to accrued interest.
The tax treatment of a certificate owner will depend upon whether the
amount of OID on the stripped interest represented by the certificate is less
than a statutorily defined de minimis amount. In general, under the Regulations,
the amount of OID with respect to the stripped interest will be de minimis if it
is less than 1/4 of one percent multiplied by the product of the "stated
redemption price at maturity" and the number of full years remaining after the
purchase date until the maturity of such stripped interest. However, if the
stripped interest provides for amortization of principal, the amount of OID will
be de minimis if it is less than 1/4 of one percent multiplied by the product of
the stated redemption price at maturity and the weighted average maturity (i.e.,
the sum of the amounts obtained by multiplying the amount of each payment under
the stripped interest (other than a payment of qualified stated interest) by a
fraction, the numerator of which is the number of complete years from the
purchase date until the payment is made and the denominator of which is the
stated redemption price at maturity) of the stripped interest. In general,
"stated redemption price at maturity" means the sum of all amounts payable on
the stripped interest other than qualified stated interest.
If the amount of OID on the stripped interest represented by the
certificate is de minimis under the rules discussed above, the stripped interest
would not be treated as having OID. Each certificate owner would be required to
report on its Federal income tax return its share of the gross income of the
Trust, including interest on the Underlying Securities and any gain upon sale or
disposition by the Trust of the Underlying Securities. Such gross income would
exceed the Pass-Through Rate on the certificate by an amount equal to the
certificate owner's share of the expenses of the Trust for the period during
which it owns a certificate. Each certificate owner would be required to include
the de minimis OID in income as each principal payment on the stripped interest
is received, in proportion to the amount that each principal payment bears to
the stated principal amount of the stripped interest; such income would be
capital gain, short-term or long-term depending upon the certificate owner's
holding period in the certificate. The certificate owner would be entitled to
deduct its share of expenses of the Trust to the extent described below. Any
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amounts received by a certificate owner from any credit support or any
subordination feature will be treated for Federal income tax purposes as having
the same characteristics as the payments they replace.
Except as described below, a certificate owner would report its share
of the income of the Trust under its usual method of accounting. Accordingly,
except as described below, interest on an Underlying Security would be
includible in a certificate owner's gross income when it accrues on the
Underlying Securities, or, in the case of certificate owners who are cash basis
taxpayers, when received by the administrative agent, if any, or otherwise the
Trustee on behalf of certificate owners. Because the interest collected on the
Underlying Securities generally is paid to certificate owners in the following
month, the amount of interest includible in a certificate owner's gross income
during any calendar month will not equal the interest distributed in that month.
If the OID with respect to the stripped interest in the Underlying
Securities represented by a certificate is not treated as being de minimis, a
certificate owner will be required to include in income, in addition to any
qualified stated interest on the stripped interest as described above, any OID
on the stripped interest. OID must be included in income as it accrues on a
daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield as described below. Such treatment could result in
the accrual of income by such certificate owner prior to the receipt of cash by
such certificate owner. Under the rules described below, the amounts includible
in income by a certificate owner on a stripped interest that has OID are lesser
in the early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
In general, if a stripped interest has OID the certificate owner will
be required, whether such certificate owner uses the cash or the accrual method
of tax accounting, to include in ordinary gross income the sum of the "daily
portions" of OID on the stripped interest for all days during the taxable year
that the certificate owner owns the certificate. The daily portions of OID on a
stripped interest are determined by allocating to each day in any "accrual
period" a ratable portion of the OID allocable to that accrual period. The
amount of OID on a stripped interest allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the stripped interest by a fraction, the numerator of which is the annual yield
to maturity of the stripped interest and the denominator of which is the number
of accrual periods in a year and (ii) subtracting from that product the amount
of qualified stated interest (if any) payable on the stripped interest during
(or allocable to) such accrual period.
An "accrual period" would generally be each period ending on an
interest payment date on the Underlying Securities, although Treasury
regulations allow a certificate owner to elect other accrual periods of no more
than a year in length, as long as each scheduled payment on the Underlying
Securities occurs at the end of an accrual period.
The "adjusted issue price" of a stripped interest at the beginning of
any accrual period is the purchase price for a certificate allocable to the
stripped interest (including accrued interest, if any) (i) increased by the
amount of OID allocable to all prior accrual periods and (ii) reduced by the
amount of all payments other than qualified stated interest payments (if any) in
all prior accrual periods. In addition, if an interval between payments of
qualified stated interest contains more than one accrual period, the adjusted
issue price at the beginning of each accrual period in the interval is increased
by the amount of qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the interval.
The Trustee intends to account for OID, if any, reportable by
certificate owners by reference to the price paid for a certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID.
Bond Premium. In the event that a certificate represents either an
unstripped interest in an Underlying Security, or a stripped interest which
includes qualified stated interest, and the stripped or unstripped interest is
treated as having been purchased at a premium (i.e., the purchase price of a
certificate allocable to the Underlying Security exceeds the total amount
payable on the Underlying Security to the certificateholder other than qualified
stated interest), such premium will be amortizable by the certificate owner as
an offset to interest income (with a corresponding reduction in the certificate
owner's basis) under a constant yield method over the term of the underlying
Underlying Security if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to all debt instruments
held by the certificate owner during the year in which the election is made and
all debt instruments acquired thereafter.
Election to Treat All Interest as Original Issue Discount. Any
certificate owner may elect to include in gross income all interest (including
stated interest, OID, de minimis OID, market discount and de minimis market
discount, as adjusted by any bond premium or acquisition premium) that accrues
on an unstripped or stripped interest
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using the constant yield method described above, treating the instrument as
having been issued on the certificate owner's acquisition date at an issue price
equal to such owner's adjusted basis with no interest payments being qualified
stated interest. Such an election with respect to a unstripped or stripped
interest having amortizable bond premium or market discount would constitute,
respectively, an election to apply the market discount rules or bond premium
rules with respect to all other debt instruments with market discount or
amortizable bond premium, as the case may be, of such certificate owner.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the Underlying
Securities, or a substitution of other assets for the Underlying Securities
following a default on the Underlying Securities, would be a taxable event to
certificate owners on which they would recognize gain or loss.
Foreign Tax Credits. Any foreign income taxes withheld from payments
to the Trust will be includible in the income of certificate owners and will
likewise be deductible to certificate owners, or, alternatively, certificate
owners may be eligible for a U.S. foreign tax credit subject to various
limitations.
OTHER DEPOSITED ASSETS OF THE TRUST
[Describe tax consequences of the other Deposited Assets.]
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a certificate owner
will be entitled to deduct, consistent with its method of accounting, its share
of reasonable administrative fees, trustee fees and other fees paid or incurred
by the Trust as provided in Section 162 or 212 of the Code and any allowable
amortization deductions with respect to certain other assets of the Trust. If a
certificate owner is an individual, estate or trust, the deduction for his share
of fees will be a miscellaneous itemized deduction that may be disallowed in
whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
A certificate owner's tax basis in a certificate generally will equal
the cost of such certificate, increased by any amounts of undistributed taxable
income (e.g., OID or market discount) and reduced by any amortized premium (each
as described above) and any payments other than payments of qualified stated
interest on an underlying Underlying Security made on such certificate.
If a certificate is sold, gain or loss will be recognized equal to
the difference between the proceeds of sale allocable to each of the assets of
the Trust and the certificate owner's adjusted basis in each of the foregoing.
Any gain or loss will be a capital gain or loss if the certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the certificate owner's interest in accrued
market discount not previously taken into income on Underlying Securities.
BACKUP WITHHOLDING
Payments made on the certificates and proceeds from the sale of the
certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the certificate owner fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
FOREIGN CERTIFICATE OWNERS
To the extent that amounts paid to certificate owners that are not
United States persons ("foreign certificate owners") are treated as interest
with respect to Underlying Securities originated after July 18, 1984, such
amounts generally will not be subject to the annual 30% withholding tax,
provided that such foreign certificate owner (i) fulfills certain certification
requirements, (ii) does not own at least 10% of the total combined voting power
of all classes of stock of the Underlying Securities Issuer (or 10% of the
capital or profits of an issuer which is a partnership for federal income tax
purposes) and (iii) is not a "related controlled foreign corporation." Under
such requirements, the holder must certify, under penalties of perjury, that it
is not a "United States person" and provide its name and address.
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[Describe the Federal income tax consequences to foreign certificate
owners of an interest in any other Deposited Assets of the Trust.]
A "United States person" means a citizen or resident of the U.S., a
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or any political subdivision thereof, or an estate the income
of which is includible in gross income for U.S. Federal income tax purposes,
regardless of its source, or a trust with respect to which a court within the
United States is able to exercise primary supervision over its administration
and one or more United States fiduciaries have the authority to control all of
its substantial decisions.
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
With respect to a trust intended to qualify as a partnership for
federal income tax purposes, Lehman ABS and the administrative agent, if any,
have agreed, and the certificate owners will agree by their purchase of
certificates, to treat the Trust as a partnership for purposes of Federal, state
and local income, franchise and any other tax measured in whole or in part by
income. However, the proper characterization of the arrangement involving the
Trust, the certificate owners, Lehman ABS and the administrative agent, if any,
is not entirely clear because there is no directly comparable authority.
If the Trust were deemed to be a "publicly traded partnership" it
could be subject to corporate income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the certificates (and certificate owners could be liable for any such
tax that is unpaid by the Trust). A publicly traded partnership is taxed in the
same manner as a corporation unless at least 90% of its gross income consists of
specified types of "qualifying income." Such qualifying income includes, among
other things, interest income not derived in the conduct of a financial or
insurance business, dividend income, and gain from the disposition of assets
producing such income. In the opinion of Federal Tax Counsel, because of the
nature of the income of the Trust, the Trust will not be a publicly traded
partnership taxable as a corporation.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to Federal income
tax, but each certificate owner will be required to separately take into account
such holder's allocable share of income, gains, losses, deductions and credits
of the Trust. The Trust's income will consist primarily of [ ] and any gain upon
collection or disposition [ ]. The Trust's deductions will consist primarily of
[ ].
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust agreement and related documents). The Trust agreement will
provide that each class of certificate owners will be allocated taxable income
of the Trust for each monthly period equal to the sum of (i) the amount payable
(or accruing) at the Pass-Through Rate on such class of certificates for such
month (to the extent such amount would not economically represent a return of
capital); (ii) an amount equivalent to interest that accrues during such month
on amounts previously due on such class of certificates but not yet distributed;
(iii) any Trust income for such month attributable to discount on the Underlying
Securities that corresponds to any excess of the principal amount of such class
of certificates over their initial issue price; and (iv) [any other income
economically accruing for such class of certificates during such month. [All
remaining taxable income of the Trust will be allocated to the [ ]]. It is
believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the Service would not
require a greater amount of income to be allocated to certificate owners.
Moreover, even under the foregoing method of allocation, holders may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders in effect
could be required to report income from the certificates on the accrual basis.
In addition, tax allocations and tax reporting will be done on a uniform basis
for all certificate owners, even though their certificates may have been
purchased at different times and at different prices.
An individual taxpayer's miscellaneous itemized deductions (which do
not include interest expense) are subject to limitations and as a result may be
disallowed in whole or in part. Those limitations, which also apply to estates
and trusts, would apply to a certificate owner's share of expenses of the Trust
(including fees to the administrative agent, if any) and might result in such
holder being taxed on an amount of income that exceeds the amount of cash
actually distributed to such holder over the life of the Trust.
If the Trust holds a large number of Underlying Securities, it
intends to make all tax calculations relating to income and allocations to
certificate owners on an aggregate basis. Were the Service to require that such
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calculations be made separately for each Underlying Security, the Trust might be
required to incur additional expense but Lehman ABS believes that there would
not be a material adverse effect on certificate owners.
A certificate owner would increase or decrease its tax basis in its
certificate for its allocable share of the Trust's income or loss, respectively.
Any cash distributions by the Trust to a certificate owner will constitute (i)
first, a return of capital to the extent of such certificate owner's tax basis
in the certificate (with a corresponding dollar-for-dollar reduction in such tax
basis), and (ii) thereafter, to the extent in excess thereof, gain on the sale
or exchange of such certificate owner's certificate. See "Disposition of
Certificates" below.
DISCOUNT AND PREMIUM
Lehman ABS believes that the Underlying Securities were not issued
with original issue discount ("OID") and, therefore, the Trust should not have
OID income. However, the purchase price paid by the Trust for the Underlying
Securities may be greater or less than the remaining principal balance of the
Underlying Securities at the time of purchase. If so, the Underlying Securities
will have been acquired at a premium or discount, as the case may be. (As
indicated above, if the Trust acquires a large number of Underlying Securities
it will make this calculation on an aggregate basis, but might be required to
recompute it on an instrument-by-instrument basis.)
The Trust will make an election that will result in any market
discount on the Underlying Securities being included in income currently as such
discount accrues over the life of the Underlying Securities. As indicated above
in the discussion of "Partnership Taxation," a portion of such market discount
income may be allocated to certificate owners.
MODIFICATION OR EXCHANGE OF UNDERLYING SECURITIES
Depending upon the circumstances, it is possible that a modification
of the terms of the Underlying Securities, or a substitution of other assets for
the Underlying Securities following a default on the Underlying Securities,
would be a taxable event to certificate owners on which they would recognize
gain or loss.
FOREIGN TAX CREDITS
Any foreign income taxes withheld from payments to the Trust will be
includible in the income of certificate owners and will likewise be deductible
to certificate owners, or, alternatively, certificate owners may be eligible for
a U.S. foreign tax credit subject to various limitations.
TAX CONSEQUENCES OF OTHER ASSETS HELD BY TRUST
The manner in which income with respect to the other assets of the
Trust should be accrued will depend on the nature of those assets.
[Discuss specific tax consequences of other assets.]
SECTION 708 TERMINATION
Under Section 708 of the Code, the Trust will be deemed to terminate
for Federal income tax purposes if 50% or more of the capital and profits
interests in the Trust are sold or exchanged within a 12-month period. Were such
a termination to occur, the Trust would be considered to have contributed its
assets to a new partnership and distributed the interests in the new partnership
in liquidation to the certificate owners. If any such constructive termination
occurs, the Trust does not intend to comply with certain technical requirements
that might be applicable for various reasons including the likely lack of
relevant data. As a result, the Trust may be subject to certain tax penalties
and may incur additional expenses. Moreover, the Schedule K-1 information
thereafter distributed to the certificate owners may be incorrect.
DISPOSITION OF CERTIFICATES
Generally, capital gain or loss will be recognized on a sale or other
disposition of certificates in an amount equal to the difference between the
amount realized and the seller's tax basis in the certificates sold. A
certificate owner's tax basis in a certificate will generally equal its cost,
increased by his share of trust income includible in his income (including for
the taxable year of sale) and decreased by his share of deductible trust losses
and
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any distributions received with respect to such certificate. In addition, both
his tax basis in, and the amount realized on a sale of, a certificate would
include the holder's share of liabilities of the Trust. A holder acquiring
certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such certificate and, upon sale or other disposition of
some of the certificates, allocate a pro rata portion of such aggregate tax
basis to the certificates sold (rather than maintaining a separate tax basis in
each certificate for purposes of computing gain or loss on a sale of that
certificate).
On the sale of a certificate, any gain attributable to the holder's
share of any accrued market discount on the Underlying Securities that has not
otherwise been included in the holder's income would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust does not expect to have any other assets that would give
rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust will elect to include market discount in
income as it accrues.
If a certificate owner is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the certificate.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month allocable to a
particular class of certificates will be apportioned among holders of such
certificates in proportion to the principal amount of such certificates owned by
them as of the first business day following the end of such month. As a result,
a holder purchasing certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If such a convention is not allowed (or only applies to transfers
of less than all of a partner's interest), taxable income or losses of the Trust
might be reallocated among the certificate owners. The Trustee is authorized to
revise the Trust's method of allocation between transferors and transferees to
conform to a method permitted by future regulations.
SECTION 754 ELECTION
In the event that a certificate owner sells its certificates at a
profit (loss), the purchasing certificate owner will have a higher (lower) basis
in the certificates than the selling certificate owner had. The tax basis of the
Trust's assets will not be adjusted to reflect that higher (or lower) basis
unless the Trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate accounting records, as well as potentially onerous information
reporting requirements, the Trust will not make such election. As a result
certificate owners might be allocated a greater or lesser amount of trust income
than would be appropriate based on their own purchase price for certificates.
ADMINISTRATIVE MATTERS
The Trustee is required to keep complete and accurate books of the
Trust. Such books will be maintained for financial reporting and tax purposes on
an accrual basis and the fiscal year of the Trust will be the calendar year. The
Trustee will file a partnership information return (Internal Revenue Service
Form 1065) with the IRS for each taxable year of the Trust and will report each
certificate owner's allocable share of items of trust income and expense to
holders and the Service on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the certificates. Generally, holders
must file tax returns that are consistent with the information return filed by
the Trust or be subject to penalties, unless the holder notifies the Service of
all such inconsistencies.
Under Code Section 6031, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is not a United States person, a tax-exempt entity, or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
certificates that were held, bought or sold on behalf of such person throughout
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the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
Lehman ABS, as the tax matters partner, will be responsible for
representing the certificate owners in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the certificate owners and, under
certain circumstances, a certificate owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a certificate owner's returns and adjustments of
items not related to the income (or loss) of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATE OWNERS
It is not clear whether the Trust would be considered to be engaged
in a trade or business in the United States for purposes of Federal withholding
taxes with respect to non-U.S. persons because there is no clear authority
dealing with that issue under facts substantially similar to those described
herein. [Although it is not expected that the Trust would be engaged in a trade
or business in the United States for such purposes, the Trust expects to
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign certificate
owners pursuant to Code Section 1446, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's nonforeign status, the Trust may rely on Form W-8, Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.]
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the Service and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the Service
a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. The Trust will cooperate in any such refund claim if it can
do so without incurring any out-of-pocket cost. No assurance can be given as to
whether any such refund claim would be granted.
The foregoing summary will be modified, as necessary, to reflect
differences caused by the precise nature of the Deposited Assets relating to a
given series of certificates.
BACKUP WITHHOLDING
Payments made on the certificates and proceeds from the sale of the
certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the certificate owner fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
TAX CHARACTERIZATION OF THE TRUST AS A FASIT
Upon the proposed issuance of certificates representing interests in
a FASIT and the promulgation of Treasury regulations relating to the federal
income taxation of FASITs and to the federal income tax consequences of the
ownership of FASIT interests, the prospectus supplement relating to such
certificates will describe the requirements for the classification of the Trust
as a FASIT and the consequences to a holder of owning such certificates.
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[CERTAIN STATE TAX CONSEQUENCES
[Describe any applicable state tax consequences that may arise,
including as a result of the specific nature of the Deposited Assets relating to
a given series of certificates or the degree of servicing required with respect
to such Deposited Assets.]]
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code or (c) any entity whose underlying assets are treated as
assets of any such plan by reason of such plan's investment in the entity (each
a "Plan").
In accordance with ERISA's fiduciary standards, before investing in a
certificate, a Plan fiduciary should determine whether such an investment is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its investment policy and the composition of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions involving the
assets of a Plan and persons who have specified relationships to the Plan
("parties in interest" within the meaning of ERISA or "disqualified persons"
within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering an investment in certificates should also consider whether such an
investment might constitute or give rise to a non-exempt prohibited transaction
under ERISA or the Code.
An investment in certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan assets which, in turn, might mean that
certain aspects of such investment, including the operation of the Trust, might
be non-exempt prohibited transactions under ERISA and the Code. Neither ERISA
nor the Code defines the term "plan assets." Under Section 2510.3-101 of the
United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include an interest in the underlying assets of an entity
(such as a trust) for certain purposes, including the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an "equity interest" in
such entity. The Regulation states that a beneficial interest in a trust is an
equity interest. Thus, if a Plan acquired a certificate of a particular class
the Plan might be considered to own its share of the underlying assets of the
Trust unless, among other exceptions set forth in the Regulation, (1) such
certificate is a "publicly-offered security" or (2) equity participation by
benefit plan investors in each class of equity interests is not "significant."
A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned at the conclusion
of the initial offering by 100 or more investors independent of the issuer and
of one another, and (3) either is (A) part of a class of securities registered
under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the Plan as a
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the SEC) after the end of the
fiscal year of the issuer during which such public offering occurred. Lehman ABS
does not anticipate that the certificates of any class will be considered
publicly-offered securities within the meaning of the Regulation.
Participation by benefit plan investors in any class of certificates
would not be significant if, immediately after the most recent acquisition of
any equity interest in the Trust (whether or not from Lehman ABS or an Agent or
Underwriter), less than 25 percent of the value of each class of equity interest
were held by benefit plan investors, which are defined as Plans and employee
benefit plans not subject to ERISA (for example, governmental plans). For
purposes of such less than 25 percent limit, the value of any equity interests
held by a person (other than a benefit plan investor) who has discretionary
authority or provides investment advice for a fee with respect to the assets of
the entity, or any affiliate thereof, shall be disregarded. There can be no
assurance that less than 25 percent of the value of any given class of
certificates will be held by benefit plan investors.
If assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust might be non-exempt prohibited transactions.
If, for example, an obligor with respect to any of the Deposited Assets were a
party in interest or disqualified person with respect to a Plan holding a
certificate, the acquisition of the certificate could be construed as a
prohibited indirect loan from the Plan to the obligor. Any such prohibited
transaction could be treated as exempt under ERISA and the Code if the
certificates were acquired pursuant to and in accordance with a prohibited
transaction class exemption ("PTCE") issued by the DOL, such as PTCE 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance
S-35
<PAGE>
company pooled separate accounts), PTCE 95-60 (an exemption for certain
transactions involving insurance company general accounts) and PTCE 96-23 (an
exemption for certain in-house asset managers).
Any Plan acquiring certificates should consult with its counsel
regarding the applicability of ERISA and Code Section 4975 to its acquisition
and holding of certificates. In addition, any Plan acquiring certificates shall
be deemed to have represented that its acquisition and holding of certificates
would not be prohibited under ERISA and the Code because an exemption is
applicable to the acquisition and holding of the certificates and the activities
of the Trust. To the extent an insurance company invests assets treated as
assets of a Plan, it will be required to make the foregoing representation as a
condition to the acquisition of a certificate.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of [ ], _______, Lehman ABS has agreed to sell and [Lehman
Brothers Inc. (an affiliate of Lehman ABS)] [each of the underwriters named
below, including Lehman Brothers Inc. (an affiliate of Lehman ABS)] [,] has
[severally] agreed to purchase, the [certificates] [the principal amount of each
class of certificates set forth below opposite its name].
Class [ ] Class [ ] Class [ ]
---------- ----------- -----------
Lehman Brothers Inc. . . . . . . $ $ $
---------- ----------- -----------
Total . . . . . . . . . . . . . . $ $ $
========== =========== ===========
[Lehman Brothers Inc. has] [The several underwriters have] agreed, subject to
the terms and conditions set forth in the underwriting agreement, to purchase
all certificates offered hereby if any of such certificates are purchased. [In
the event of default by any underwriter, the underwriting agreement provides
that, in certain circumstances, the purchase commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.]
Lehman ABS has been advised by the underwriter[s] that [it][they]
propose[s] to offer the certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The underwriter[s] may effect such transactions by selling certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the underwriter[s] and
any purchasers of certificates for whom they may act as agents. The
underwriter[s] and any dealers that participate with the underwriter[s] in the
distribution of certificates may be deemed to be underwriters, and any profit on
the resale of certificates by them may be deemed to be underwriting discounts,
or commissions under the Securities Act.
The underwriting agreement provides that Lehman ABS will indemnify
the underwriter[s] against certain civil liabilities, including liabilities
under the Securities Act, or will contribute to payments the underwriter[s] may
be required to make in respect thereof.
Lehman Brothers Inc. is an affiliate of Lehman ABS, and the
participation by Lehman Brothers Inc. in the offering of the certificates
complies with Section 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the issuance of the certificates that the
certificates be rated not lower than [specify ratings applicable to each class]
by [Standard & Poor's Corporation ("Standard & Poor's")][Moody's Investors
Service, Inc. ("Moody's")][Fitch Investors Service, L.P. ("Fitch")] [and] [Duff
& Phelps Credit Rating Company ("Duff & Phelps")](the
"Rating[Agency][Agencies]"). The ratings address the likelihood of the receipt
by the certificateholders of payments required under the Trust agreement, and
are based primarily on the credit quality of the Deposited Assets and any
providers of credit support, as well as on the relative priorities of the
certificateholders of each class of the certificates with respect to collections
and losses with respect to the Deposited Assets. The rating on the certificates
does not, however, constitute a statement regarding the occurrence or frequency
of redemptions or prepayments on, or
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extensions of the maturity of, the Deposited Assets, the corresponding effect on
yield to investors, or whether investors in the class [ ] certificates [specify
class with Notional Amount] may fail to recover fully their initial investment.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of any other security rating.
Lehman ABS has not requested a rating on the certificates by any
rating agency other than the Rating [Agency] [Agencies]. However, there can be
no assurance as to whether any other rating agency will rate the certificates,
or, if it does, what rating would be assigned by any such other rating agency. A
rating on the certificates by another rating agency, if assigned at all, may be
lower than the ratings assigned to the certificates by the Rating [Agency]
[Agencies].
LEGAL OPINIONS
Certain legal matters relating to the certificates will be passed
upon for Lehman ABS and the underwriter[s] by Weil, Gotshal & Manges LLP, New
York, New York.
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INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
----------------------------------------
[LIST DEFINED TERMS AND PAGE NUMBER
WHERE DEFINED IN THE PROSPECTUS SUPPLEMENT]
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<PAGE>
Subject to Completion, Dated __, 1999
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
LEHMAN ABS CORPORATION
DEPOSITOR
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 IN THIS PROSPECTUS.
Unless otherwise specified in the applicable prospectus supplement, the
certificates are not insured or guaranteed by any government agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of Lehman ABS or of the administrative
agent of the trust or any of their affiliates.
This prospectus may be used to offer and sell any series of certificates only if
accompanied by the prospectus supplement for that series.
THE TRUST -
o may periodically issue asset backed certificates in one or more series with
one or more classes; and
o will own -
o a publicly issued, fixed income debt security or a pool of such debt
securities;
o payments due on those securities; and/or
o other assets described in this prospectus and in the accompanying
prospectus supplement.
THE CERTIFICATES -
o will represent interests in the trust and will be paid only from the trust
assets;
o will be denominated and sold for U.S. dollars or for one or more foreign or
composite currencies and any payments to certificateholders may be payable
in U.S. dollars or in one or more foreign or composite currencies; and
o will be issued as part of a designated series which may include one or more
classes of certificates and enhancement.
THE CERTIFICATEHOLDERS -
o will receive interest and principal payments from the assets deposited with
the trust.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
LEHMAN BROTHERS
_____________ __, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange is effective. This prospectus is not an offer to sell
and it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular series
of certificates, including your series, and (b) the accompanying prospectus
supplement, which will describe the specific terms of your series of
certificates, including:
o the currency or currencies in which the principal, premium, if
any, and any interest are distributable,
o 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,
o information concerning the type, characteristics and
specifications of the securities deposited with the trust (the
"Underlying Securities") and any other assets deposited with the
trust (together with the Underlying Securities, the "Deposited
Assets") and any credit support for such series or class,
o 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 the
Deposited Assets),
o the name of the trustee and the administrative agent, if any, for
the series,
o the Pass Through Rate (as defined below) or the terms relating to
the applicable method of calculation thereof,
o the time and place of distribution (a "Distribution Date") of any
interest, premium (if any) and/or principal (if any),
o the date of issue,
o the Final Scheduled Distribution Date (as defined below), if
applicable,
o the offering price,
o any exchange, whether mandatory or optional, the redemption terms
and any other specific terms of certificates of each series or
class.
See "Description of Certificates--General" for a listing of other items that may
be specified in the applicable prospectus supplement.
IF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES VARY BETWEEN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus
and the accompanying prospectus supplement including the information
incorporated by reference. We have not
2
<PAGE>
authorized anyone to provide you with different information. We are not offering
the certificates in any state where the offer is not permitted. We do not claim
the accuracy of the information in this prospectus or the accompanying
prospectus supplement as of any date other than the dates stated on their
respective covers.
We include cross-references in this prospectus and in the
accompanying prospectus supplement to captions in these materials where you can
find further related discussions. The following table of contents and the table
of contents included in the accompanying prospectus supplement provide the pages
on which these captions are located.
TABLE OF CONTENTS
Prospectus Supplement......................................................1
Where You Can Find Additional Information..................................4
Incorporation of Certain Documents by Reference............................4
Reports to Certificateholders..............................................4
Important Currency Information.............................................4
Risk Factors ..............................................................5
Lehman ABS.................................................................7
Use of Proceeds............................................................8
Formation of the Trust.....................................................8
Maturity and Yield Considerations .........................................9
Description of the Certificates............................................11
Description of Deposited Assets and Credit Support.........................27
Description of the Trust Agreement.........................................38
Limitation on Issuance of Bearer Certificates..............................48
Currency Risks.............................................................49
Plan of Distribution.......................................................51
Legal Opinions.............................................................52
3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Each trust is subject to the informational requirements of the
Exchange Act and we file on behalf of each trust reports and other information
with the SEC. You may read and copy any reports, statements or other information
we file at the SEC's public reference room in Washington, D.C. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at (800) SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings are also available to
the public on the SEC Internet site (http://www.sec.gov.). We do 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.]
We filed a registration statement relating to the certificates with
the SEC. This prospectus is part of the registration statement, but the
registration statement includes additional information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. We are incorporating by reference all
documents that we have filed with the SEC pursuant to the Exchange Act prior to
the date of this prospectus. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future SEC reports filed by or on behalf of the
trust until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by writing
or calling us at: Secretary of Lehman ABS Corporation, 3 World Financial Center,
New York, New York 10285, (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 trust will be prepared by the trustee and sent on behalf of each
trust only to Cede & Co., as nominee of DTC and registered holder of the
certificates. See "Description of Certificates--Global Securities" and
"Description of the Trust Agreement--Reports to Certificateholders; Notice."
These reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. We will file with the SEC on
behalf of the trust periodic reports as are required under the Exchange Act.
IMPORTANT CURRENCY INFORMATION
References herein to "U.S. dollars," "U.S.$," "USD," "dollar" or "$"
are to the lawful currency of the United States.
Purchasers are required to pay for each certificate in the currency
in which the certificate is denominated. Currently, there are limited facilities
in the United States for conversion of U.S. dollars
4
<PAGE>
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 denominated in
a currency other than U.S. dollars, Lehman Brothers will arrange for the
exchange of U.S. dollars into such currency to enable the purchaser to pay for
the certificate. Requests must be made on or before the fifth Business Day (as
defined below) preceding the date of delivery of the certificate or by a later
date as determined by Lehman Brothers. Each exchange will be made by Lehman
Brothers on the terms and subject to the conditions, limitations and charges
that Lehman Brothers may from time to time establish in accordance with its
regular foreign exchange practice. All costs of exchange will be borne by the
purchaser.
RISK FACTORS
Limited Liquidity. Prior to the issuance of any series (or class
within such series) of certificates there will not be a public market for those
securities. We cannot predict the extent to which a trading market will develop
or how liquid that market might become or for how long it may continue.
Legal Aspects. A prospectus supplement may set forth 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 Lehman ABS 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, Lehman ABS, any person affiliated with the
Lehman ABS or the trust, or any other person. Any obligation of Lehman ABS with
respect to the certificates of any series will only be pursuant to limited
representations and warranties. Lehman ABS 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 Lehman ABS were
required to repurchase an Underlying Security, its only sources of funds to make
a repurchase would be from funds obtained from the enforcement of a
corresponding obligation, if any, on the part of the seller of the Underlying
Security to Lehman ABS, or from a reserve fund established to provide funds for
repurchases. Lehman ABS is not obligated to establish or maintain a reserve
fund.
Credit Support; Limited Assets. The trust for any series (or class of
such series) of certificates may include assets which are designed to support
the payment or ensure the servicing or distribution with respect to the
Deposited Assets. However, the certificates do not represent obligations of
Lehman ABS, any administrative agent or any of their affiliates and, unless
otherwise specified in the applicable prospectus supplement, are not insured or
guaranteed by any person or entity. Accordingly, certificateholders' receipt of
distributions will depend entirely on 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 any
distribution with respect to any series (or of any class within such series) of
certificates is affected by a number of factors, including:
o the performance of the related Deposited Assets,
o the extent of any early redemption, repayment or extension of
maturity of the related Underlying Securities (including
acceleration resulting from any default or rescheduling resulting
from the bankruptcy or similar proceeding with respect to the
issuer of the Underlying Securities), and
5
<PAGE>
o the manner and priority in which collections from the Underlying
Securities and any other Deposited Assets are allocated to each
class of such series.
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 other terms applicable to the Underlying Securities and any other
Deposited Assets. See "Maturity and Yield Considerations."
Tax Considerations. The Federal income tax consequences of the
purchase, ownership and disposition of the certificates and the tax treatment of
the trust will depend on the specific terms of the certificates, the trust, any
credit support and the Deposited Assets. See the description under "Certain
Federal Income Tax Consequences" in the related prospectus supplement. If the
Deposited Assets include securities issued by one or more government agencies or
instrumentalities, purchasers of the certificates may also be affected by the
tax treatment of the Underlying Securities by the relevant issuing government.
Ratings of the Certificates. At the time of issue, the certificates
of any given series (or each class of such series that is offered hereby) will
be rated in one of the investment grade categories recognized by one or more
nationally recognized rating agencies. 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. A
rating does not comment as to market price or suitability for a particular
investor and is not a recommendation to purchase, hold or sell certificates. We
cannot be certain 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
in the future.
Global Securities. 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 a Depositary (as defined below) and
purchasers will not receive individual certificates. Consequently, unless and
until individual definitive certificates of a particular series or class are
issued, purchasers will not be recognized as certificateholders under the Trust
agreement. Until such time, purchasers will only be able to exercise the rights
of certificateholders indirectly through the Depositary and its respective
participating organizations. The ability of any purchaser to pledge a
certificate to persons or entities that do not participate in the Depositary's
system, or to otherwise act with respect to a certificate, may be limited. See
"Description of Certificates--Global Securities" and "Limitations on Issuance of
Bearer Certificates" and any further description contained in the related
prospectus supplement.
Foreign Government Issuer. The Underlying Securities may include
obligations of foreign governments, foreign political subdivisions, or agencies
and instrumentalities thereof. Consequently, it may be difficult for the
applicable trust as a holder of the Underlying Securities to obtain or realize
upon judgments in the United States against the obligor. If a foreign government
does not waive immunity, it would not be possible to obtain a United States
judgment against the foreign government unless a court were to determine that
the issuer is not entitled under the Sovereign Immunities Act of 1976 to
sovereign immunity with respect to such action. Even if an issuer is amenable to
suit in the United States, the enforceability of any judgment obtained may be
limited by a lack of substantial assets which can be levied upon in the United
States or the inability to obtain recognition and enforcement of the judgment in
the issuer's country. Because the Underlying Securities may represent direct or
indirect obligations of foreign governments, certificateholders should consider
the political, economic and other risks attendant on holding the obligations of
a foreign government which are not typically associated with an investment in
securities of a domestic issuer. Such risks include:
o future political and economic developments,
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o governmental repudiation,
o moratorium on payment or rescheduling of external debts,
o confiscatory taxation,
o imposition of any withholding tax,
o exchange rate fluctuations,
o political or social instability or diplomatic developments, and
o the imposition of additional governmental laws or restrictions.
In addition, While a foreign government issuer may make information available by
filing periodic reports and other information with the SEC, such information
(including financial information) may differ in timing, form and substance from
that normally available with respect to domestic issuers.
Currency Risks. The certificates of any given series (or class within
such series) may be denominated in a currency other than U.S. dollars. This
prospectus does not describe all the risks of an investment in such
certificates, and Lehman ABS disclaims any responsibility to advise prospective
purchasers of such risks as they exist from time to time. 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. See "Currency Risks." In addition, there are risks associated with
Underlying Securities denominated in a currency other than the local currency of
a foreign government. Governments have from time to time imposed, and may in the
future impose, exchange controls that could affect the availability of a
currency for making distributions in respect of Underlying Securities
denominated in such currency.
Passive Nature of the Trust. The trustee with respect to any series
of certificates will hold the Deposited Assets for the benefit of the
certificateholders. Each trust will generally hold the related Deposited Assets
to maturity and not dispose of them, regardless of adverse events, financial or
otherwise, which may affect any issuer of Underlying Securities or the value of
the Deposited Assets. Under specified 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,
applicable to such series (and each class within such series).
LEHMAN ABS
Lehman ABS 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 Lehman ABS is located in 3 World Financial
Center, New York, New York 10285. Its telephone number is (212) 526-5594.
The Certificate of Incorporation of Lehman ABS provides that Lehman
ABS 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 Lehman ABS provides that any securities, except
for subordinated securities, issued by Lehman ABS 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
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Lehman ABS 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, Lehman ABS 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 Lehman ABS to
purchase the related Deposited Assets and arrange 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 Lehman ABS for general corporate purposes.
FORMATION OF THE TRUST
Lehman ABS 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 these services. Any administrative agent named in the applicable
prospectus supplement will perform the tasks as are specified therein and in the
trust agreement and will receive a fee for these services 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, Lehman ABS'
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 will consist primarily of:
o its contractual--administrative obligations, if any, under the
trust agreement,
o its obligation, if any, to make 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
o its obligations, if any, to purchase Deposited Assets as to which
there has been a breach of specified representations and
warranties or as to which the documentation is materially
defective.
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The obligations of an administrative agent, if any, named in the
applicable prospectus supplement to make advances will be limited to amounts
which the 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:
o the Deposited Assets, or interests therein, exclusive of any
interest in such assets (the "Retained Interest") retained by
Lehman ABS or any previous owner thereof, as from time to time
are specified in the trust agreement;
o such assets as from time to time are identified as deposited in
the related certificate account;
o property, if any, acquired on behalf of certificateholders by
foreclosure or repossession and any revenues received thereon;
o 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";
o the rights of Lehman ABS relating to any breaches of
representations or warranties by the issuer of the Deposited
Assets; and
o 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, Lehman ABS 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 contain any applicable 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
redemption, repayment or extension of maturity 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 aspects of the Deposited Assets or
any credit support or the manner and priorities of allocations of collections
with respect to the 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
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redemption or repayment or extension of the related Underlying Securities prior
to the stated maturity thereof. A variety of tax, accounting, economic, and
other factors will influence whether an issuer exercises any right of redemption
in respect of its securities. The rate of redemption may also be influenced by
prepayments on the obligations a government sponsored entity issuer holds for
its own account. All else remaining equal, if prevailing interest rates fall
significantly below the interest rates on the related Underlying Securities, the
likelihood of redemption would be expected to increase. There can be no
certainty as to whether any Underlying Security redeemable at the option of its
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 specified 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 (as defined below) by the holders thereof. See "Description of
the Deposited Assets--Underlying Securities Indenture." If an issuer of
Underlying Securities 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 the ability of an issuer of
Underlying Securities to satisfy its obligations under the Underlying
Securities, including the company's operating and financial condition, leverage,
and social, geographic, legal and economic factors. In addition, if the
Underlying Securities are issued by a foreign government and the foreign
government issuer or guarantor repudiates or places any limitation or moratorium
on the payment of external indebtedness or imposes any confiscatory or
withholding tax, the timing and amount of payments on the certificates may be
materially and adversely affected. A variety of factors could influence a
foreign government's willingness or ability to satisfy its obligations under the
related Underlying Securities. We cannot predict the probability of a moratorium
or other action affecting any Underlying Security.
The extent to which the yield to maturity of such certificates may
vary from the anticipated yield due to the rate and timing of payments on the
Deposited Assets will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any series (or class) of certificates will
also be affected by variations in the interest rates applicable to, and the
corresponding payments in respect of, such certificates, to the extent that the
Pass-Through Rate (as defined below) for such series (or class) is based on
variable or adjustable interest rates. With respect to any series of
certificates representing an interest in a pool of government, foreign
government or 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 on the
certificates.
A variety of economic, social, political, tax, accounting and other
factors may affect the degree to which any of the Underlying Securities are
redeemed or called (whether by the applicable obligor or pursuant to a
third-party call option) or the maturity of such Underlying Securities is
extended, as specified in the related prospectus supplement. There can be no
assurance as to the rate or likelihood of redemption, third-party call or
extension of maturity of any Underlying Security. The applicable prospectus
supplement will, to the extent available, provide further information with
respect to any such experience applicable to the related Underlying Securities.
In addition, the prospectus supplement for each series of certificates will set
forth additional information regarding yield and maturity considerations
applicable to such series (and each class within such series) and the related
Deposited Assets, including the applicable Underlying Securities.
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DESCRIPTION OF THE 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 Lehman ABS, 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 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 Lehman ABS as an exhibit to a Current Report on Form 8-K to be filed with the
SEC 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 the series created pursuant to the trust agreement and
each class will be allocated certain relative priorities to receive specified
collections from, and a certain percentage ownership interest of the assets
deposited in, such trust, all as identified and described in the applicable
prospectus supplement. See "Description of Deposited Assets and Credit
Support--Collections."
Reference is made to the related prospectus supplement for a
description of the following terms of the series (and, if applicable, classes
within such series) of certificates in respect of which this prospectus and such
prospectus supplement are being delivered:
o the title of such certificates;
o the series of such certificates and, if applicable, the number
and designation of classes of such series;
o information concerning the type, characteristics and
specifications of the Deposited Assets being deposited into the
related trust by Lehman ABS (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, 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);
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o the limit, if any, upon the aggregate principal amount or
notional amount, as applicable, of each class thereof;
o 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;
o if applicable, the relative rights and priorities of each class
(including the method for allocating collections from and
defaults or losses on the Deposited Assets to the
certificateholders of each class);
o 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;
o 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 Lehman ABS 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 Lehman ABS' 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;
o 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);
o 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;
o 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;
o 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 will be attached thereto; whether bearer
certificates of such series or class may be exchanged for
registered
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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;
o 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;
o 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;
o 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 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;
o if other than U.S. dollars, the 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 (the "Specified Currency") and the
circumstances and conditions, if any, when such currency may be
changed, at the election of Lehman ABS 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;
o any additional Administrative Agent Termination Events (as
defined below), if applicable, provided for with respect to such
class;
o 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 Lehman ABS or
the applicable administrative agent, if any, or trustee under the
trust agreement or with respect to the applicable trust; and
o 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, 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
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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 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 Currency on the applicable issue date. As specified in the applicable
prospectus supplement, such determination will be made by Lehman ABS, 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. Lehman ABS may at any time purchase certificates at any price in
the open market or otherwise. Certificates so purchased by Lehman ABS may, at
the discretion of Lehman ABS, be held or resold or surrendered to the trustee
for cancellation of such certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest
on the certificates of each series (and class within such series) will be made
in the Specified Currency for such certificates by or on behalf of the trustee
on each Distribution Date as specified in the related prospectus supplement and
the amount of each distribution will be determined as of the close of business
on the date specified in the related prospectus supplement (the "Determination
Date"). If the Specified Currency for a given series or class within such series
is other than U.S. dollars, the administrative agent, if any, or otherwise the
trustee will (unless otherwise specified in the applicable prospectus
supplement) arrange to convert all payments in respect of each certificate of
such series or class to U.S. dollars in the manner described in the following
paragraph. The certificateholder of a registered certificate of a given series
or class within such series denominated in a Specified Currency other than U.S.
dollars may (if the applicable prospectus supplement and such certificate so
indicate) elect to receive all distributions in respect of such certificate in
the Specified Currency by delivery of a written notice to the trustee and
administrative agent, if any, for such series not later than fifteen calendar
days prior to the applicable Distribution Date, except under the circumstances
described under "Currency Risks--Payment Currency" below. An 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
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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 Lehman ABS' 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
Currency other than U.S. dollars) or more in aggregate principal amount of
registered certificates of a given series shall be entitled to receive such U.S.
dollar distributions by wire transfer of immediately available funds, but only
if appropriate wire transfer instructions have been received in writing by the
trustee for such series not later than fifteen calendar days prior to the
applicable Distribution Date. Simultaneously with the election by any
certificateholder to receive payments in a Specified Currency other than U.S.
dollars (as provided above), such certificateholder shall provide appropriate
wire transfer instructions to the trustee for such series, and all such payments
will be made by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States.
Except as otherwise specified in the applicable prospectus
supplement, "Business Day" with respect to any certificate means any day, other
than a Saturday or Sunday, that is (i) not a day on which banking institutions
are authorized or required by law or regulation to be closed in (a) The City of
New York or (b) if the Specified Currency for such certificate is other than
U.S. dollars, the financial center of the country issuing such Specified
Currency (which, in the case of ECU, shall be Brussels, Belgium) and (ii) if the
Pass-Through Rate for such certificate is based on LIBOR, a London Banking Day.
"London Banking Day" with respect to any certificate means any day on which
dealings in deposits in the Specified Currency of such certificate are
transacted in the London interbank market. The Record Date with respect to any
Distribution Date for a series or class of registered certificates shall be
specified as such in the applicable prospectus supplement.
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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 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:
o LIBOR (a "LIBOR Certificate"),
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o the Commercial Paper Rate (a "Commercial Paper Rate
Certificate"),
o the Treasury Rate (a "Treasury Rate Certificate"),
o the Federal Funds Rate (a "Federal Funds Rate Certificate"),
o the CD Rate (a "CD Rate Certificate") or
o 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.
Lehman ABS will appoint, and enter into agreements with, agents (each
a "Calculation Agent") to calculate Pass-Through Rates on each series or class
of Floating Rate Certificates. The applicable prospectus supplement will set
forth the identity of the Calculation Agent for each series or class of Floating
Rate Certificates. All determinations of interest by the Calculation Agent
shall, in the absence of manifest error, be conclusive for all purposes and
binding on the holders of Floating Rate Certificates of a given series or class.
The Pass-Through Rate on each class of Floating Rate Certificates
will be reset daily, weekly, monthly, quarterly, semiannually or annually (such
period being the "Interest Reset Period" for such class, and the first day of
each Interest Reset Period being an "Interest Reset Date"), as specified in the
applicable prospectus supplement. Interest Reset Dates with respect to each
series, and any class within such series of Floating Rate Certificates, will be
specified in the applicable prospectus supplement; provided, however, that
unless otherwise specified in such prospectus supplement, the Pass-Through Rate
in effect for the ten days immediately prior to the Final Scheduled Distribution
Date (as defined in the prospectus supplement) will be that in effect on the
tenth day preceding such Final Scheduled Distribution Date. If an Interest Reset
Date for any class of Floating Rate Certificates would otherwise be a day that
is not a Business Day, such Interest Reset Date will occur on a prior or
succeeding Business Day, specified in the applicable prospectus supplement.
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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
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New
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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 Paper Rate Calculation Date" pertaining to any
Commercial Paper Rate Determination Date shall be the first to occur of (a) the
tenth calendar day after such Commercial
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Paper Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate
Certificate will bear interest for each Interest Reset Period at the
Pass-Through Rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, specified in such certificate and in the
applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement,
the "Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for such Interest Reset Period (a "Federal Funds
Rate Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Federal Funds Rate
Calculation Date (as defined below) pertaining to such Federal Funds Rate
Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on such Federal Funds Rate Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date made publicly available by the Federal
Reserve Bank of New York which is equivalent to the rate which appears in
H.15(519) under the heading "Federal Funds (Effective)"; provided, however, that
if such rate is not made publicly available by the Federal Reserve Bank of New
York by 3:00 p.m., New York City time, on such Federal Funds Rate Calculation
Date, the "Federal Funds Rate" for such Interest Reset Period will be the same
as the Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Pass-Through
Rate). Unless otherwise specified in the applicable prospectus supplement, in
the case of a Federal Funds Rate Certificate that resets daily, the Pass-Through
Rate on such Certificate for the period from and including a Monday to but
excluding the succeeding Monday will be reset by the Calculation Agent for such
certificate on such second Monday (or, if not a Business Day, on the next
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rate in effect with respect to each such day in such week.
The "Federal Funds Rate Calculation Date" pertaining to any Federal
Funds Rate Determination Date shall be the next succeeding Business Day.
(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
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LIBO Page, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of such offered rates as determined by the
Calculation Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters
Screen LIBO Page on such LIBOR Determination Date, the Calculation
Agent for such LIBOR Certificate will request the principal London
offices of each of four major banks in the London interbank market
selected by such Calculation Agent to provide such Calculation Agent
with its offered quotations for deposits in U.S. dollars for the
period of the specified Index Maturity, commencing on such Interest
Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination
Date and in a principal amount equal to an amount of not less than
$1,000,000 that is representative of a single transaction in such
market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of
such quotations. If fewer than two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of
rates quoted by three major banks in The City of New York selected by
the Calculation Agent for such LIBOR Certificate at approximately
11:00 a.m., New York City time, on such LIBOR Determination Date for
loans in U.S. dollars to leading European banks, for the period of
the specified Index Maturity, commencing on such Interest Reset Date,
and in a principal amount equal to an amount of not less than
$1,000,000 that is representative of a single transaction in such
market at such time; provided, however, that if fewer than three
banks selected as aforesaid by such Calculation Agent are quoting
rates as specified in this sentence, "LIBOR" for such Interest Reset
Period will be the same as LIBOR for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset
Period, the Initial Pass-Through Rate).
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
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remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Pass-Through Rate).
The "Treasury Rate Determination Date" for such Interest Reset Period
will be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned. Treasury
bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. Unless otherwise
specified in the applicable prospectus supplement, if an auction date shall fall
on any day that would otherwise be an Interest Reset Date for a Treasury Rate
Certificate, then such Interest Reset Date shall instead be the Business Day
immediately following such auction date.
The "Treasury Rate Calculation Date" pertaining to any Treasury Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Treasury Rate Determination Date or, if such a day is not a Business
Day, the next succeeding Business Day or (b) the second Business Day preceding
the date any distribution of interest is required to be made following the
applicable Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related prospectus supplement provides otherwise, each
certificate (other than certain classes of Strip Certificates) will have a
"Certificate Principal Balance" which, at any time, will equal the maximum
amount that the holder thereof will be entitled to receive in respect of
principal out of the future cash flow on the Deposited Assets and other assets
included in the related trust. Unless otherwise specified in the related
prospectus supplement, distributions generally will be applied to undistributed
accrued interest on, then to principal of, and then to premium (if any) on, each
such certificate of the class or classes entitled thereto (in the manner and
priority specified in such prospectus supplement) until the aggregate
Certificate Principal Balance of such class or classes has been reduced to zero.
The outstanding Certificate Principal Balance of a certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable pursuant
to the terms of the related series, by the amount of any net losses realized on
any Deposited Asset ("Realized Losses") allocated thereto. Unless the related
prospectus supplement provides otherwise, the initial aggregate Certificate
Principal Balance of all classes of certificates of a series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal Balance
of a series and each class thereof will be specified in the related prospectus
supplement. Distributions of principal of any class of certificates will be made
on a pro rata basis among all the certificates of such class. Strip Certificates
with no Certificate Principal Balance will not receive distributions of
principal.
FOREIGN CURRENCY CERTIFICATES
If the specified currency of any certificate is not U.S. dollars (a
"Foreign Currency Certificate"), certain provisions with respect thereto will be
set forth in the related prospectus supplement which will specify the
denominations, the currency or currencies in which the principal and interest
with respect to such certificate are to be paid and any other terms and
conditions relating to the non-U.S. dollar denominations or otherwise applicable
to the certificates.
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INDEXED CERTIFICATES
From time to time, the trust may offer a series of certificates
("Indexed Certificates"), the principal amount payable at the stated maturity
date of which (the "Indexed Principal Amount") and/or interest with respect to
which is determined by reference to
o the rate of exchange between the specified currency for such
certificate and the other currency or composite currency (the
"Indexed Currency") specified therein;
o the difference in the price of a specified commodity (the
"Indexed Commodity") on specified dates;
o 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
o such other objective price or economic measure as are described
in the related prospectus supplement.
The manner of determining the Indexed Principal Amount of an Indexed
Certificate, and historical and other information concerning the Indexed
Currency, Indexed Commodity, Stock Index or other price or economic measure used
in such determination, will be set forth in the related prospectus supplement,
together with any information concerning tax consequences to the holders of such
Indexed Certificates.
Except as otherwise specified in the related prospectus supplement,
interest on an Indexed Certificate will be payable based on the amount
designated in the related prospectus supplement as the "Face Amount" of such
Indexed Certificate. The related prospectus supplement will describe whether the
principal amount of the related Indexed Certificate that would be payable upon
redemption or repayment prior to the stated maturity date will be the Face
Amount of such Indexed Certificate, the Indexed Principal Amount of such Indexed
Certificate at the time of redemption or repayment, or another amount described
in such prospectus supplement.
DUAL CURRENCY CERTIFICATES
Certificates may be issued as dual currency certificates ("Dual
Currency Certificates"), in which case payments of principal and/or interest in
respect of Dual Currency Certificates will be made in such currencies, and rates
of exchange will be calculated upon such bases, as indicated in the certificates
and described in the related prospectus supplement. Other material terms and
conditions relating to Dual Currency Certificates will be set forth in the
certificates and the related prospectus supplement.
CREDIT DERIVATIVES
If so provided in the related prospectus supplement, a trust issuing
a series of certificates may enter into a credit derivative arrangement such as
a credit default swap agreement or a credit spread option. Under such a swap
agreement the trust would agree, in return for a fee or other consideration, to
assume the default or other credit risk on a security not owned by the trust (a
"Reference Security"). Upon the occurrence of a default or other objective
credit event with respect to the Reference Security, the trust would suffer the
resulting loss pursuant to (i) a provision requiring the trust to pay the
counterparty the difference between the face amount of the Reference Security
and its then current market value as determined by independent quotations (which
payment would be made from the proceeds of sale of the Underlying Securities),
(ii) a provision requiring the trust to deliver the Underlying Securities to the
counterparty in exchange for the Reference Securities, which would then either
be distributed in kind to
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certificateholders or sold (and the proceeds distributed) or (iii) other
provisions set forth in the related prospectus supplement with similar effects.
Reference Securities will be of the same types as the Underlying
Securities described herein. The related Prospectus Supplement will include
information regarding Reference Securities and the issuer thereof that is
analogous to that provided with respect to Underlying Securities.
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 Lehman ABS' 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:
o a requirement that the exchanging holder tender to the trustee
certificates of each class within such Exchangeable Series;
o a minimum Certificate Principal Balance or Notional Amount, as
applicable, with respect to each certificate being tendered for
exchange;
o 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;
o specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
o 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
o adjustments to the value of the proceeds of any exchange based
upon the required prepayment of future expense allocations and
the establishment of a reserve for any anticipated Extraordinary
Trust Expenses as set forth in the applicable prospectus
supplement, if applicable.
Unless otherwise specified in the related prospectus supplement, in
order for a certificate of a given Exchangeable Series (or class within such
Exchangeable Series) to be exchanged by the applicable certificateholder, the
trustee for such certificate must receive, at least 30 (or such shorter period
acceptable to the trustee) but not more than 45 days prior to an Optional
Exchange Date (i) such certificate with the form entitled "Option to Elect
Exchange" on the reverse thereof duly completed, or (ii) in the case of
registered certificates, a telegram, telex, facsimile transmission or letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depositary (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the holder of such registered certificate, the Certificate
Principal Balance or Notional Amount of the registered certificate to be
exchanged, the certificate number or a description of the tenor and terms of the
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"
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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,
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 the certificateholder, such pro rata share of the Deposited Assets. In
such event the certificateholder will be entitled to receive the net proceeds of
such sale, less any costs and expenses incurred by the trustee in facilitating
the 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. The global securities will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York (for registered
certificates denominated and payable in U.S. dollars), or such other depositary
identified in the related prospectus supplement (the "Depositary"), and
registered in the name of a nominee of the Depositary. Global securities may be
issued in either registered or bearer form and in either temporary or definitive
form. See "Limitations on Issuance of Bearer Certificates" for provisions
applicable to certificates issued in bearer form. Unless and until it is
exchanged in whole or in part for the individual certificates represented
thereby (each a "definitive certificate"), a global security may not be
transferred except as a whole by the Depositary for such global security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor (Sections 5.02
and 5.04).
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The Depository Trust Company has advised Lehman ABS 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 the Depositary ("participants") in such securities through
electronic book-entry changes in the accounts of the Depositary participants,
thereby eliminating the need for physical movement of securities certificates.
The Depositary's participants include securities brokers and dealers (including
Lehman Brothers), banks, trust companies, clearing corporations, and certain
other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the 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 Lehman ABS that it
intends to follow such procedures.
Upon the issuance of a global security, the Depositary for the 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 Lehman ABS 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 the global security, the Depositary or the 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 the 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 the global security registered in their
names, will not receive or be entitled to receive physical delivery of any
certificates and will not be considered the certificateholder thereof under the
trust agreement governing the 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 the certificate, may be
limited due to the lack of a physical certificate for the 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 the global security. None of Lehman ABS, the
administrative agent, if any, the trustee for the certificates, any paying agent
or the certificate registrar for the certificates will have responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests in a global security or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
Lehman ABS 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
certificates, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the global security as shown on the records of such Depositary. Lehman
ABS also expects that payments by participants to owners of beneficial interests
in a global security held through such participants will be governed by standing
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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 Lehman ABS within ninety days, Lehman ABS will
issue individual definitive certificates in exchange for the global security or
securities representing such certificates. In addition, Lehman ABS 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 Lehman
ABS 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 Lehman ABS and the Depositary of the 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 the global security equal in principal
amount or notional amount, if applicable, to such beneficial interest and to
have 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:
o as registered certificates in denominations, unless otherwise
specified by Lehman ABS or in the related prospectus supplement,
of $1,000 and integral multiples thereof if the certificates of
such class are issuable as registered certificates,
o as bearer certificates in the denomination or denominations
specified by Lehman ABS or as specified in the related prospectus
supplement if the certificates of such class are issuable as
bearer certificates, or
o as either registered or bearer certificates, if the certificates
of such class are issuable in either form (Section 5.03).
See, however, "Limitations on Issuance of Bearer Certificates" below for a
description of certain restrictions on the issuance of individual bearer
certificates in exchange for beneficial interests in a global security.
The applicable prospectus supplement will set forth any specific
terms of the depositary arrangement with respect to any class or series of
certificates being offered thereby to the extent not set forth or different from
the description set forth above.
DESCRIPTION OF DEPOSITED ASSETS AND CREDIT SUPPORT
GENERAL
Each certificate of each series (or if more than one class exists,
each class (whether or not each such class is offered hereby) within such
series) will represent an ownership interest specified for such series (or
class) of certificates in a designated, publicly issued, fixed income debt
security or a pool of such debt securities (the "Underlying Securities"),
purchased by Lehman ABS (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 one or more of the following:
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o direct obligations or term preferred stock of one or more
corporations, limited liability companies, banking organizations
or insurance companies organized under the laws of the United
States or any state, or preferred securities of trusts or other
legal entities organized by such issuers to issue
trust-originated preferred securities, which in each case are
subject to the informational requirements of the Exchange Act and
which, in accordance therewith, file reports and other
information with the SEC ("Private Sector Securities"),
o an obligation issued or guaranteed by the United States of
America or any agency thereof for the payment of which the full
faith and credit of the United States of America is pledged
("Treasury Securities"),
o an obligation of one or more U.S. government sponsored entities
created pursuant to federal statute (a "GSE"),
o Government Trust Certificates ("GTCs") (provided that such GTCs,
together with any AID-Guaranteed Underlying Securities (as
defined below), shall not account for 20% or more of the
aggregate cash flows on the Underlying Securities securing any
series of certificates),
o obligations guaranteed by the United States Agency for
International Development pursuant to the AID Housing Guaranty
Program ("AID-Guaranteed Underlying Securities") (provided that
such AID-Guaranteed Underlying Securities, together with any
GTCs, shall not account for 20% or more of the aggregate cash
flows on the Underlying Securities securing any series of
certificates), (AID-Guaranteed Underlying Securities, together
with Treasury Securities, obligations of GSEs and GTCs being
referred to collectively as "Domestic Government Securities") or
o an obligation issued or guaranteed by a foreign government,
political subdivision or agency or instrumentality thereof
("Foreign Government Securities").
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 Lehman ABS is permitted to deposit in a trust and is
not a complete description of any prospectus relating to any Underlying
Security, and, if applicable, Underlying Securities Indenture (as defined below)
and as qualified by the applicable prospectus supplement, prospectus relating to
any Underlying Security, if any, and to the extent applicable, the statement of
terms or similar document with respect to any Underlying Security, and if
applicable, the Underlying Securities Indenture.
UNDERLYING SECURITIES
PRIVATE SECTOR SECURITIES
Private Sector Securities will be either:
o senior or subordinated debt obligations,
o preferred securities of trusts, or
o term preferred stocks.
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Indentures. With respect to senior or subordinated debt obligations,
the related prospectus supplement will specify whether each Underlying Security
will have been issued pursuant to an agreement (each, a "Underlying Securities
Indenture") between the issuer of the Underlying Securities and a trustee (the
"Underlying Securities Trustee"). Unless otherwise specified, the Underlying
Securities Indenture, if any, and the Underlying Securities Trustee, if any,
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. With respect to senior or subordinated debt
obligations and if specified in the related prospectus supplement, the
Underlying Securities that consist of Private Sector Securities will be issued
pursuant to a Underlying Securities Indenture. 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:
o consolidate, merge, or transfer or lease assets;
o incur or suffer to exist any lien, charge, or encumbrance upon
any of its property or assets;
o 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; or
o 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 specified 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 Underlying Securities
(including a Foreign Government Security) that represents ten percent or more of
the total Underlying Securities with respect to any series of certificates (a
"Concentrated Underlying Security") and, as applicable, will describe material
covenants which are common to any pool of Underlying Securities.
Events of Default. Indentures generally provide that any one of a
number of specified events will constitute an event of default with respect to
the securities issued thereunder. Such events of default typically include the
following or variations thereof:
o 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);
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o failure by the issuer to observe or perform any covenant,
agreement or condition contained in the securities or the
indenture, as the case may be, 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; or
o 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.
Remedies. Indentures for Private Sector Securities generally provide
that upon the occurrence of an event of default, the indenture trustee may, and
upon the written request of the holders of not less than a specified percentage
of the outstanding securities must, take such action as it may deem appropriate
to protect and enforce the rights of the security holders. Certain indentures
provide that the indenture trustee or a specified percentage of the holders of
the outstanding securities have the right to declare all or a portion of the
principal and accrued interest on the outstanding securities immediately due and
payable upon the occurrence of certain events of default, subject to the
issuer's right to cure, if applicable. Generally, an indenture will contain a
provision entitling the trustee thereunder to be indemnified by the security
holders prior to proceeding to exercise any right or power under such indenture
with respect to such securities at the request of such security holders. An
indenture is also likely to limit a security holder's right to institute certain
actions or proceedings to pursue any remedy under the indenture unless certain
conditions are satisfied, including 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 or Underlying Security may
include some, all or none of the foregoing provisions or variations thereof or
additional events of default not discussed herein. The prospectus supplement
with respect to any series of certificates will describe the events of default
under the Underlying Securities with respect to any Concentrated Underlying
Security ("Underlying Security Events of Default") and applicable remedies with
respect thereto. With respect to any trust comprised of a pool of securities,
the applicable prospectus supplement will describe certain common Underlying
Security Events of Default with respect to such pool. There can be no assurance
that any such provision will protect the trust, as a holder of the Underlying
Securities, against losses. If an Underlying Security Event of Default occurs
and the trustee as a holder of the Underlying Securities is entitled to vote or
take such other action to declare the principal amount of an Underlying Security
and any accrued and unpaid interest thereon to be due and payable, the
certificateholders' objectives may differ from those of holders of other
securities of the same series and class as any Underlying Security ("Outstanding
Debt Securities") in determining whether to declare the acceleration of the
Underlying Securities.
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 issuer of the
Underlying Securities. There can be no assurance, however, that in the event of
a bankruptcy or similar proceeding the trust as a holder of Senior
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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 issuer of the
Underlying Securities ("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 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 provisions for release, substitution or disposition of
collateral under specified circumstances with or without the consent of the
indenture trustee or upon the direction of not less than a specified percentage
of the security holders. The indenture pursuant to which any secured
indebtedness is issued will also provide for the disposition of the collateral
upon the occurrence of specified 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 the 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 general
information with respect to such security provisions and the collateral.
DOMESTIC GOVERNMENT SECURITIES
Domestic Government Securities will be either:
o Treasury Securities,
o GSEs,
o GTCs, or
o AID Guaranteed Underlying Securities.
As specified in the applicable prospectus supplement, the obligations
of one or more of the following GSEs may be included in a trust: Federal
National Mortgage Association, Federal Home Loan Mortgage Association, Student
Loan Marketing Association, Resolution Funding Corporation, Federal Home Loan
Banks (to the extent such obligations represent the joint and several
obligations of the twelve Federal Home Loan Banks), Tennessee Valley Authority
and Federal Farm Credit Banks. GSE debt securities are exempt from registration
under the Securities Act pursuant to Section 3(a)(2) of the Securities
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Act (or are deemed by statute to be so exempt) and are not required to be
registered under the Exchange Act. The securities of any GSE will be included in
a trust only to the extent (A) its obligations are supported by the full faith
and credit of the U.S. government or (B) the organization makes publicly
available its annual report, which shall include financial statements or similar
financial information with respect to the organization (a "GSE issuer"). GTCs
and AID-Guaranteed Obligations will have been registered under the Securities
Act (or will qualify for an exemption from registration) and will have been
acquired by Lehman ABS in purely secondary market transactions. Based on
information contained in the prospectus pursuant to which any GSE issuer's
securities were originally offered, the applicable prospectus supplement will
set forth information with respect to the public availability of information
with respect to any GSE issuer the debt securities of which constitute more than
ten percent of the Underlying Securities for any series of certificates as of
the date of the prospectus supplement. The specific terms and conditions of the
Underlying Securities will be set forth in the related prospectus supplement.
In the case of a GSE issuer there will generally be a fiscal agent
with respect to any related Underlying Security whose actions will be governed
by a fiscal agency agreement. A fiscal agent is not a trustee for the holders of
the Underlying Securities and does not have the same responsibilities or duties
to act for the holders of a GSE's securities as would a trustee. Unless
otherwise specified in the related prospectus supplement, the Underlying
Securities with respect to any GSE issuer will not be guaranteed by the United
States and do not constitute a debt or obligation of the United States or of any
agency or instrumentality thereof other than the related GSE.
Contractual and Statutory Restrictions. A GSE issuer and the related
Underlying Securities may be subject to contractual and statutory restrictions
which may provide some protection to securityholders against the occurrence or
effects of specified events. Unless otherwise specified in the related
prospectus supplement, each GSE is limited to the activities as will promote its
statutory purposes as set forth in the publicly available information with
respect to the issuer. See "Description of the Deposited Assets--Publicly
Available Information" in the related prospectus supplement. A GSE's promotion
of its statutory purposes, as well as its statutory, structural and regulatory
relationships with the federal government may cause or require the GSE to
conduct its business in a manner that differs from that an enterprise which is
not a GSE might employ.
Neither the United States nor any agency thereof is obligated to
finance any GSE issuer's operations or to assist a GSE issuer in any manner.
Prospective purchasers should consult the publicly available information with
respect to each GSE issuer for a more detailed description of the regulatory and
statutory restrictions on the related GSE's activities.
Events of Default. Underlying Securities issued by a GSE Issuer may
provide that any one of a number of specified events will constitute an event of
default with respect to the securities issued thereunder. Events of default
typically include the following or variations thereof:
o 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);
o failure by the issuer to observe or perform any covenant,
agreement or condition contained in the securities or the
indenture or authorizing legislation or regulation, as the case
may be, 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; and
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o 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.
FOREIGN GOVERNMENT SECURITIES
General. Any pool of publicly offered Foreign Government Securities
may include both registered and unregistered offerings. Each Underlying
Security, or Underlying Securities in the case of debt securities with a common
obligor, issued by a foreign government that represents ten percent or more of
the total Underlying Securities with respect to any series of certificates as of
the date of the related prospectus supplement ("Concentrated Foreign Government
Underlying Securities") will represent an obligation issued or guaranteed by a
foreign government, one of its political subdivisions or an agency or
instrumentality of the foregoing which has offered debt securities in the United
States pursuant to a registration statement filed with the SEC containing
information required by Schedule B of the Securities Act ("Schedule B"), that
qualifies as a "seasoned" issuer under SEC practice and which issuer or
guarantor Lehman ABS reasonably believes (based on publicly available
information) is eligible to use Schedule B as of the time of any offering of
certificates hereunder. The Underlying Securities may include obligations of any
or all of the following foreign governments (which may include obligations
guaranteed by the following): Austria, Australia, Canada, Canadian Provinces,
Denmark, Finland, France, Germany, Ireland, Japan, Norway, Italy, Spain, Sweden
and the United Kingdom. The prospectus supplement for any series will set forth
the foreign government obligations included in the related trust.
In the case of Foreign Government Securities there will generally be
a fiscal agent with respect to any related Underlying Security whose actions
will be governed by a fiscal agency agreement. A fiscal agent is not a trustee
for the holders of the Underlying Securities and does not have the same
responsibilities or duties to act for the holders of Foreign Government
Securities as would a trustee. Unless otherwise specified in the related
prospectus supplement, the due and punctual payment of each Underlying Security
issued by a foreign government and the due and timely performance of all
obligations with respect thereto will be backed by the full faith and credit of
the related foreign government issuer or unconditionally guaranteed by the
related foreign government guarantor, as the case may be.
Contractual and Statutory Restrictions. There will generally be few,
if any, contractual restrictions on the foreign government issuers or foreign
government guarantors in respect of Foreign Government Securities. The
Underlying Securities by their terms and provisions may, however, restrict
specified actions of the related foreign governments and may also require, among
other things, the creation or maintenance of reserves or a sinking fund or
contain an undertaking or pledge of the foreign government not to encumber its
assets to secure any other external indebtedness without providing like security
for the related Underlying Securities. Certain actions in respect of the Foreign
Governments Securities may also be subject to proper executive, legislative or
administrative approval.
The prospectus supplement used to offer any series of certificates
will describe material covenants or undertakings in relation to any Concentrated
Foreign Government Underlying Security and, as applicable, will describe
material covenants or undertakings which are common to any pool of Underlying
Securities. There can be no assurance that any provision will protect the trust
as a holder of the Underlying Securities against losses. In the event of a
breach of any such covenant or undertaking, it may not be possible to force any
action in respect of the Underlying Securities or to obtain an enforceable
judgment against a foreign government.
Events of Default. Foreign Government Securities 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:
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o 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);
o failure by the issuer to observe or perform any covenant,
agreement or condition contained in the securities or the
indenture or authorizing legislation or regulation, as the case
may be, 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;
o 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;
o the declaration of a moratorium on payment of interest or
principal in respect or external indebtedness by a foreign
government; and
o certain events of insolvency or bankruptcy with respect to the
issuer of the Underlying Securities.
Remedies. Generally, upon the occurrence of an event of default, the
holders of not less than a specified percentage of the outstanding securities of
a foreign government may enforce their rights under the securities, including in
some cases, the right to declare all or a portion of the principal and accrued
interest on the outstanding securities immediately due and payable, subject to
the issuer's right to cure, if applicable. A fiscal agency agreement will not
typically provide for the agent to enforce the rights of the security holders as
would an indenture trustee. Consequently, any rights in respect of Foreign
Government Securities must be pursued through the trustee as a holder thereof in
the manner prescribed with respect to the Underlying Securities. There can be no
assurance that the trustee will be able to enforce any contractual obligation
against a foreign government. Additionally, where action may be taken in respect
of the Underlying Securities only by a specified percentage of the holders of
the Outstanding Debt Securities, the trustee's ability to influence such action
will be limited by the proportion of such securities held by the trust.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable prospectus supplement with
respect to each series of certificates for a description of the following terms,
as applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, the aggregate principal amount, denomination and
form thereof; (ii) whether such securities are senior or subordinated to any
other obligations of the issuer of the Underlying Securities; (iii) whether any
of the obligations are secured or unsecured and the nature of any collateral;
(iv) the limit, if any, upon the aggregate principal amount of such debt
securities; (v) the dates on which, or the range of dates within which, the
principal of (and premium, if any, on) such debt securities will be payable;
(vi) the rate or rates or the method of determination thereof, at which such
Underlying Securities will bear interest, if any ("Underlying Securities Rate");
the date or dates from which such interest will accrue ("Underlying Securities
Interest Accrual Periods"); and the dates on which such interest will be payable
("Underlying Securities Payment Dates"); (vii) the obligation, if any, of the
issuer of the Underlying Securities 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;
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(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 issuer of the Underlying
Securities; (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.
PUBLICLY AVAILABLE INFORMATION
In addition to the foregoing, with respect to each Concentrated
Underlying Security the applicable prospectus supplement will disclose the
identity of the applicable obligor and the Underlying Securities Trustee, if
applicable, 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 publicly available information with respect to each
obligor. Publicly available information will typically consist of the quarterly
and annual reports filed under the Exchange Act by the issuer with, and which
are available from, the SEC. Such information will typically consist of the
obligor's annual report, which contains financial statements or similar
financial information, and can be obtained from the SEC, if so specified in the
applicable prospectus supplement, or from the office of the obligor identified
in the related prospectus supplement. However, the precise nature of such
publicly available information and where and how it may be obtained with respect
to any given GSE issuer will vary, and, as described above, will be set forth in
the applicable prospectus supplement.
If an issuer of Concentrated Underlying Securities ceases to file
periodic reports under the Exchange Act, Lehman ABS, 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.
Certain issuers of Foreign Government Securities have obtained
no-action letters from the SEC which condition a foreign government issuer's
eligibility to continue to use shelf procedures for delayed offerings and
incorporation of certain documents by reference on such foreign government
issuer periodically filing with the SEC on Form 18-K under the Exchange Act.
However, a foreign government issuer is not required to use these delayed
offering procedures to offer securities in the United States and is not subject
to the reporting requirements of the Exchange Act by reason of having filed a
registration statement under Schedule B. Foreign government issuers are subject
to the reporting requirements of the Exchange Act only if, and for so long as,
their securities are listed on a U.S. exchange. With respect to any foreign
government issuer whose obligations represent ten percent or more of the total
Underlying Securities of a trust, the applicable prospectus supplement will set
forth whether the prospectus offering the related Underlying Securities states
that such obligor is subject to the informational requirements of the Exchange
Act or if such obligor files periodic reports with the SEC on a voluntary basis.
The precise source and nature of publicly available information and where and
how it may be obtained with respect to any such foreign government issuer will
vary, and, as described above will be set forth in the applicable prospectus
supplement. If any foreign government issuer of Concentrated Underlying
Securities ceases to
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file periodic reports with the SEC, Lehman ABS, on behalf of the related trust,
will continue to be subject to the reporting requirements of the Exchange Act,
but certain information with respect to such foreign government issuer may be
unavailable.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, Lehman ABS 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,
credit spread options, 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),
credit derivatives 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. 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 obligor providing credit support for
20% or more of the aggregate principal amount of such class or classes unless
such obligor is subject to the informational requirements of the Exchange Act.
Subordination. As discussed below under "--Collections," the rights
of the certificateholders of any given class within a series of certificates to
receive collections from the trust for such series and any credit support
obtained for the benefit of the certificateholders of such series (or classes
within such series) may be subordinated to the rights of the certificateholders
of one or more other classes of such series to the extent described in the
related prospectus supplement. Such subordination accordingly provides some
additional credit support to those certificateholders of those other classes.
For example, if losses are realized during a given period on the Deposited
Assets relating to a series of certificates such that the collections received
thereon are insufficient to make all distributions on the certificates of such
series, those realized losses would be allocated to the certificateholders of
any class of 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
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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 issued by a bank or a surety bond or bonds issued by a
surety company. 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 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, Lehman ABS or
such other person named in the related prospectus supplement.
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COLLECTIONS
The trust agreement will establish procedures by which the trustee or
such other person specified in the prospectus supplement is obligated to
administer the related Deposited Assets. This will include making collections of
all payments made on the Deposited Assets and depositing the collections from
time to time prior to any applicable Distribution Date into a segregated account
maintained or controlled by the 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
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. 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 may not 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 is not complete and is qualified in its entirety by
reference to the detailed provisions of the form of trust agreement filed as an
exhibit to the registration statement. Article and section references in
parentheses below are to articles and sections in the trust agreement. Wherever
particular sections or defined terms of the trust agreement are referred to,
such sections or defined terms are incorporated herein by reference as part of
the statement made, and the statement is qualified in its entirety by such
reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any series of certificates, Lehman ABS
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 Lehman ABS 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
Lehman ABS in exchange
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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. The 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 is a Concentrated
Underlying Security, the 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.
In addition, Lehman ABS 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 the documents
within such period as is permitted in the prospectus supplement, and the trustee
(or such custodian) will hold the documents in trust for the benefit of the
certificateholders (Sections 2.01 and 2.02).
With respect to the types of Deposited Assets specified in the
applicable prospectus supplement if and to the extent provided therein, if any
document is found to be missing or defective in any material respect, the
trustee (or such custodian) will immediately notify the administrative agent, if
any, and Lehman ABS, and the administrative agent, if any, and the trustee will
immediately notify the relevant person who sold the applicable Deposited Asset
to Lehman ABS (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 notice, the
Deposited Asset Provider will be obligated, within 90 days of receipt of notice,
to repurchase the related Deposited Asset from the trustee at the Purchase Price
(as defined below) or provide a substitute for the 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 this obligation,
neither such administrative agent nor Lehman ABS 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 Lehman ABS 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 Lehman ABS or any such administrative
agent, as the case may be, which materially and adversely affects the interests
of the certificateholders, Lehman ABS 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. The trustee will follow the collection
procedures, 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").
However, the trustee or administrative agent will remain obligated with
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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.
The agreement between any administrative agent or trustee and a
sub-administrative agent will be consistent with the terms of the trust
agreement and the 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. 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 the administrative
agent for the 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 the sub-administration
agreement.
The administrative agent or trustee 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 may require any
sub-administrative agent to agree to indemnify the administrative agent or
trustee, as applicable, for any liability or obligation sustained 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, 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 reasonable steps as are necessary to receive payment or to permit
recovery with respect to defaulted Deposited Assets. As set forth above, all
collections by or on behalf of the trustee or administrative agent under any
credit support instrument are to be deposited in the Certificate Account for the
related trust, subject to withdrawal as described above.
Unless otherwise provided in the applicable prospectus supplement, if
recovery on a defaulted Deposited Asset under any related credit support
instrument is not available, the trustee will be obligated to follow or cause to
be followed normal practices and procedures as it deems necessary or advisable
to realize upon the defaulted Deposited Asset (Section 3.07). However, 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 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
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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. A 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 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, the 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. The amount of funds
advanced will equal to the aggregate of payments of principal, premium (if any)
and interest (net of related administration fees and any Retained Interest) with
respect to the Deposited Assets that were due during the related Collection
Period (as defined in the related prospectus supplement) and were delinquent on
the related Determination Date, subject to (i) any such administrative agent's
or trustee's good faith determination that such advances will be reimbursable
from Related Proceeds (as defined below) and (ii) such other conditions as may
be specified in the prospectus supplement.
Advances are intended to maintain a regular flow of scheduled
interest, premium (if any) and principal payments to holders of the class or
classes of certificates entitled thereto, rather than to guarantee or insure
against losses. Unless otherwise provided in the related prospectus supplement,
advances of an administrative agent's or trustee's funds 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 advance will be reimbursable from any amounts in the
certificate account for the series to the extent that the administrative agent
or trustee shall determine, in its sole judgment, that the advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds.
If advances have been made by the administrative agent or trustee from excess
funds in the certificate account for any series, the
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administrative agent or trustee will replace the funds in such certificate
account on any future Distribution Date to the extent that funds in the
certificate account on the 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 LEHMAN ABS
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, Lehman ABS, an affiliate of either thereof, the Deposited Asset
Provider or any third party and may have other normal business relationships
with the trustee, Lehman ABS, their affiliates or the Deposited Asset Provider.
The "Deposited Asset Provider" is the relevant person who sold the applicable
Deposited Asset to Lehman ABS.
The trust agreement will provide that an administrative agent may
resign from its obligations and duties under the trust agreement with respect to
any series of certificates only if such resignation, and the appointment of a
successor, will not result in a withdrawal or downgrading of the rating of any
class of certificates of such series, or upon a determination that its duties
under the trust agreement with respect to such series are no longer permissible
under applicable law. No 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 an
administrative agent, Lehman ABS nor any director, officer, employee, or agent
of the administrative agent or Lehman ABS 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, Lehman
ABS 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, an administrative agent, Lehman ABS and any director, officer, employee
or agent of the administrative agent or Lehman ABS 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 an administrative agent nor Lehman ABS will be under any obligation
to appear in, prosecute or defend any legal action which is not incidental to
their respective responsibilities under the trust agreement or which in its
opinion may cause it to incur any expense or liability. Each of the
administrative agent or Lehman ABS may, however, in its discretion undertake any
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 the 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.
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ADMINISTRATIVE AGENT TERMINATION EVENTS; RIGHTS UPON ADMINISTRATIVE AGENT
TERMINATION EVENT
Unless otherwise provided in the related prospectus supplement,
"Administrative Agent Termination Events under the trust agreement with respect
to any given series of certificates will consist of the following:
o 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 Lehman ABS, or to the administrative agent, Lehman ABS
and the trustee by the holders of such certificates evidencing
not less than 25% of the Voting Rights (as defined below);
o 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 Lehman ABS, or to the administrative agent, Lehman ABS and the
trustee by the holders of such certificates evidencing not less
than 25% of the Voting Rights; and
o specified 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 matter is calculated. "Required
Percentage" means with respect to any matter requiring a vote of holders of
certificates of a given series, the specified percentage (computed on the basis
of outstanding Certificate Principal Balance or Notional Amount, as applicable)
of certificates of a designated class or group of classes within such series
(either voting as separate classes or as a single class) applicable to such
matter, all as specified in the applicable prospectus supplement and the related
series supplement to the trust agreement. "Voting Rights" evidenced by any
certificate will be the portion of the voting rights of all the certificates in
the related series allocated in the manner described in the related prospectus
supplement (Article I).
Unless otherwise specified in the applicable prospectus supplement,
so long as an Administrative Agent Termination Event under the trust agreement
with respect to a given series of certificates remains unremedied, Lehman ABS 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 the 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). The trustee will then succeed to all the
responsibilities, duties and liabilities of the administrative agent under the
trust agreement with respect to such series (except that if the trustee is
prohibited by law from obligating itself to make advances regarding delinquent
Deposited Assets, then the trustee will not be so obligated) and will be
entitled to similar compensation arrangements. In the event that the trustee is
unwilling or unable to act, it may or, at the written request of the holders of
such certificates evidencing not less than the "Required
Percentage--Administrative Agent Termination" of the Voting Rights, it will
appoint, or petition a court of competent jurisdiction for the appointment of,
an administration agent
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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 the 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 the 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 Lehman ABS
and the trustee with respect to such series, without notice to or consent of the
certificateholders, for specified purposes including:
o to cure any ambiguity,
o to correct or supplement any provision therein which may be
inconsistent with any other provision therein or in the
prospectus supplement,
o 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),
o to add to the covenants, restrictions or obligations of Lehman
ABS, the administrative agent, if any, or the trustee for the
benefit of the certificateholders,
o 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
o to comply with any requirements imposed by the Code.
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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 Lehman ABS, 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 modification or amendment would materially adversely
affect the rating of any series or class by each rating agency, the "Required
Percentage--Amendment" specified in the related series supplement to the trust
agreement shall include an additional specified percentage of the certificates
of such series or class.
Except as otherwise set forth in the applicable prospectus
supplement, no such modification or amendment may, however, (i) reduce in any
manner the amount of or alter the timing of, distributions or payments which are
required to be made on any certificate without the consent of the holder of such
certificate or (ii) reduce the aforesaid Required Percentage of Voting Rights
required for the consent to any 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 Lehman
ABS, 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 Lehman ABS and to such other
parties as may be specified in the trust agreement, a statement setting forth:
o 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;
o 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;
o the amount of compensation received by the administrative agent,
if any, and the trustee for the period relating to such
Distribution Date, and such other customary information as the
administrative agent, if any, or otherwise the trustee deems
necessary or desirable to enable certificateholders to prepare
their tax returns;
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o 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;
o 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;
o 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
o 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 with respect to the amounts of
distributions or the amounts of compensation of the administrative agent and the
trustee, 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 above with respect to the amounts
of distributions or the amounts of compensation of the administrative agent and
the trustee, 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, will 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 Lehman ABS, 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
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obligations under the trust agreement throughout the preceding year with respect
to any series of certificates.
Copies of the annual accountants' statement, if any, and the
statement of officers of the trustee may be obtained by certificateholders
without charge upon written request to either the administrative agent or the
trustee, as applicable, at the address set forth in the related prospectus
supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable prospectus supplement, if
a certificate is mutilated, destroyed, lost or stolen, it may be replaced at the
corporate trust office or agency of the applicable trustee in the City and State
of New York (in the case of registered certificates) or at the principal London
office of the applicable trustee (in the case of bearer certificates), or such
other location as may be specified in the applicable prospectus supplement, upon
payment by the holder of such expenses as may be incurred by the applicable
trustee in connection therewith and the furnishing of such evidence and
indemnity as such trustee may require. Mutilated certificates must be
surrendered before new certificates will be issued (Section 5.05).
TERMINATION
The obligations created by the trust agreement for each series of
certificates will terminate upon the payment to certificateholders of that
series of all amounts held in the related certificate account or by an
administrative agent, if any, and required to be paid to them pursuant to the
trust agreement following the earlier of (i) the final payment or other
liquidation of the last Deposited Asset subject thereto or the disposition of
all property acquired upon foreclosure or liquidation of any such Deposited
Asset and (ii) the purchase of all the assets of the trust by the party entitled
to effect such termination, under the circumstances and in the manner set forth
in the related prospectus supplement. In no event, however, will any trust
created by the trust agreement continue beyond the respective date specified in
the related prospectus supplement. Written notice of termination of the
obligations with respect to the related series of certificates under the trust
agreement will be provided as set forth above under "--Reports to
Certificateholders; Notices--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 purchase of Deposited Assets and property acquired in respect of
Deposited Assets evidenced by a series of certificates will 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. The trustee is not accountable for the use
or application by or on behalf of any administrative agent of any funds paid to
the
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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 the 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, Lehman ABS,
any administrative agent and their respective affiliates.
LIMITATIONS ON ISSUANCE OF BEARER CERTIFICATES
In compliance with United States Federal income tax laws and
regulations, Lehman ABS 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
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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 Lehman ABS
has no control, such as economic and political events and the supply of and
demand for the relevant currencies. In recent years, rates of exchange between
the U.S. dollar and certain currencies have been highly volatile, and such
volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
certificate. Depreciation of the Specified Currency for a certificate against
the U.S. dollar would result in a decrease in the effective yield of such
certificate below its Pass-Through Rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a Specified Currency for making distributions in respect of
certificates denominated in such currency. At present, Lehman ABS has identified
the following currencies in which distributions of principal, premium and
interest on certificates may be made: Australian dollars, Canadian dollars,
Danish kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and
ECU. However, certificates distributable with Specified Currencies other than
those listed may be issued at any time. There can be no assurance that exchange
controls will not restrict or prohibit distributions of principal, premium or
interest in any Specified Currency. Even if there are no actual exchange
controls, it is possible that, on a Distribution Date with respect to any
particular certificate, the currency in which amounts then due to be distributed
in respect of such certificate are distributable would not be available. In that
event, such payments will be made in the manner set forth above under
"Description of Certificates--General" or as otherwise specified in the
applicable prospectus supplement.
As set forth in the applicable prospectus supplement, certain of the
Underlying Securities may be denominated in a currency other than the Specified
Currency. Although payments in respect of principal and interest on the
certificates will be made in the Specified Currency, such payments may be based
in whole or in part upon receipt by the related trust of payments in the
Underlying Securities Currency. An investment in certificates supported by
Underlying Securities denominated in a currency other than the Specified
Currency entails significant risks not associated with an investment in
securities supported by obligations denominated in the same currency as the
currency of payment on such securities. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the
Specified Currency and the Underlying Securities Currency and the possibility of
the imposition or modification of foreign exchange controls with respect to
either the Specified Currency or the Underlying Securities Currency.
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
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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 Lehman ABS' control or is no longer used by the government
of the country issuing such currency or for the settlement of transactions by
public institutions of or within the international banking community, then all
distributions in respect of such certificate shall be made in U.S. dollars until
such currency is again available or so used. The amounts so payable on any date
in such currency shall be converted into U.S. dollars on the basis of the most
recently available Market Exchange Rate for such currency or as otherwise
indicated in the applicable prospectus supplement.
If distribution in respect of a certificate is required to be made in
ECU and ECU is no longer used in the European Monetary System, then all
distributions in respect of such certificate shall be made in U.S. dollars until
ECU is again so used. The amount of each distribution in U.S. dollars shall be
computed on the basis of the equivalent of the ECU in U.S. dollars, determined
as described below, as of the second Business Day prior to the date on which
such distribution is to be made.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined for the certificates of any series and class by
the applicable trustee on the following basis. The component currencies of the
ECU for this purpose (the "Components") shall be the currency amounts that were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by such
trustee on the basis of the most recently available Market Exchange Rates for
such Components or as otherwise indicated in the applicable prospectus
supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
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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 the certificates and
the proceeds to Lehman ABS from the 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 the 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. Certificates
may be offered to the public either through underwriting syndicates represented
by managing underwriters or by underwriters without a syndicate. The managing
underwriters or underwriters in the United States will include Lehman Brothers
Inc., an affiliate of Lehman ABS. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase the
certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of the certificates if any
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 Lehman ABS
from time to time. Any agent involved in the offer or sale of certificates will
be named, and any commissions payable by Lehman ABS to such agent will be set
forth, in the applicable prospectus supplement. Unless otherwise indicated in
the applicable prospectus supplement, any agent will act on a best efforts basis
for the period of its appointment.
If so indicated in the applicable prospectus supplement, Lehman ABS
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
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<PAGE>
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 Lehman ABS to indemnification by Lehman ABS 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, Lehman ABS or its
affiliates in the ordinary course of business.
Lehman Brothers Inc. is an affiliate of Lehman ABS. 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 Lehman ABS 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 Lehman ABS 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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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the SEC
registration and filling fees, are estimated:
SEC Registration Fee $295,008.33*
Legal Fees and Expenses $**
Accounting Fees and Expenses $**
Trustee's Fees and Expenses
(including counsel Fees) $**
Blue Sky Qualification Fees
and expenses $**
Printing and Engraving Fees $**
Rating Agency Fees $**
Miscellaneous $**
- - - -
Total $**
- ---------------
* Paid previously
** To be provided by amendment
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or witness or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, office, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses, costs and fees (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with such action suit or proceeding if the person indemnified acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. If the person indemnified is not wholly successful in such action,
suit or proceeding, but is successful, on the merits or otherwise, in one or
more but less than all claims, issues or matters in such proceeding, he or she
may be indemnified against expenses actually and reasonably incurred in
connection with each successfully resolved claim, issue or matter. In the case
of an action or suit by or in the right of the corporation, no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Section 145 provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
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<PAGE>
The Certification of Incorporation of the Registrant provides that no
Director of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a Director;
provided, however, that this limitation of liability of a Director shall not
apply with respect to (i) any breach of the Director's duty of loyalty to the
Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) any
liability arising under Section 174 of the General Corporation Law of the State
of Delaware and (iv) for any transaction from which the Director derives an
improper personal benefit. The Bylaws of the Registrant require that the
Registrant indemnify each of its Directors and officers, who serve as a Director
or officer of the Registrant, or as a director, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Registrant, to the fullest extent permitted under and in
accordance with the laws of the State of Delaware.
Reference is made to Section 6 of the form of Underwriting Agreement
filed as Exhibit 1.1 hereto for provisions relating to the indemnification of
directors, officers and controlling persons against certain liabilities
including liabilities under the Securities Act of 1933, as amended
Item 16. Exhibits:
*1.1 Form of Underwriting Agreement(1)
*3.1 Restated Certification of Incorporation of Lehman ABS
Corporation(2)
*3.2 Form of Bylaws of Lehman ABS Corporation(3)
*4.1 Form of Trust Agreement, with form of Certificate
attached thereto(4)
*5.1 Opinion of Weil, Gotshal & Manges LLP as to legality
(including consent of such firm)
*8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax
matters (including consent of such firm)
*23.1 Consents of Weil, Gotshal & Manges LLP (included in
Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on Signature Page)
25.1(a) Statement of Eligibility of Trustee
- ----------
* Previously filed; incorporated by reference.
(1) Previously filed in Pre-Effective Amendment No. 1 to Registration Statement
on Form S-3 (Reg. No. 33-69720), filed with the SEC by the Registrant on
November 16, 1993.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (Reg. No. 33-67452), filed with the SEC by the
Registrant on August 17, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (Reg. No. 33-20084), filed with the SEC by the
Registrant on January 13, 1993.
(4) Previously filed in Registration Statement on Form S-3 (Reg. No. 33-85946)
and Post-Effective Amendment No. 6 to Registration Statement on Form S-3
(Reg. No. 33-78396), filed with the SEC by the Registrant on November 3,
1994.
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<PAGE>
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415.
The Registrant hereby undertakes:
1. To file, curing any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
1. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
2. To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
3. To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. Filing Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
C. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant, pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant, as the case may be, will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
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<PAGE>
D. Undertaking in respect to the eligibility of the Trustee.
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned hereby certifies on behalf of Lehman ABS Corporation
(the "Company") that he has reasonable grounds to believe that the Company meets
all of the requirements for filing on Form S-3 and the Company has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
8th of November, 1999.
LEHMAN ABS CORPORATION
By: /s/ Mark L. Zusy
--------------------------------
Mark L. Zusy
Chairman of the Board,
Director and Managing Director
POWER OF ATTORNEY
Each person whose signature appears below hereby severally
constitutes and appoints Mark L. Zusy his true and lawful attorney-in-fact, for
him and in his name, place and stead, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any additional
registration statement pursuant to Rule 462 of the Securities Act and to cause
the same to be filed with the Securities and Exchange Commission, hereby
granting to said attorney-in-fact full power and authority to do and perform
each and every act and thing whatsoever requisite or desirable to be done and
about the premises as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all acts and things that
said attorney-in-fact may do or cause to be done by virtue of these presents.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Position Date
- --------- -------- ----
<S> <C> <C>
/s/ Mark L. Zusy Chairman of the Board, Director and November 8, 1999
- -------------------------- Managing Director
Mark L. Zusy (Principal Executive Officer)
/s/ Neal B. Leonard Director and Managing Director November 8, 1999
- --------------------------
Neal B. Leonard
/s/ David Goldfarb Controller November 8, 1999
- -------------------------- (Principal Accounting Officer)
David Goldfarb
/s/ James J. Sullivan Director November 8, 1999
- --------------------------
James J. Sullivan
</TABLE>
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
*1.1 Form of Underwriting Agreement(1)
*3.1 Certification of Incorporation of Lehman ABS Corporation as
currently in effect(2)
*3.2 Bylaws of Lehman ABS Corporation as currently in effect(3)
*4.1 Form of Trust Agreement, with form of Certificate attached(4)
*5.1 Opinion of Weil, Gotshal & Manges LLP as to legality (including
consent of such firm)
*8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax matters
(including consent of such firm)
*23.1 Consents of Weil, Gotshal & Manges LLP (included in Exhibits 5.1
and 8.1)
24.1 Power of Attorney (included on Signature Page to Registration
Statement)
*25.1(a) Statement of Eligibility of Trustee
- ----------
* Previously filed; incorporated by reference.
(1) Previously filed in Pre-Effective Amendment No. 1 to Registration Statement
on Form S-3 (Reg. No. 33-69720), filed with the SEC by the Registrant on
November 16, 1993.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (Reg. No. 33-67452), filed with the SEC by the
Registrant on August 17, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (Reg. No. 33-20084), filed with the SEC by the
Registrant on January 13, 1993.
(4) Previously filed in Registration Statement on Form S-3 (Reg. No. 33-85946)
and Post-Effective Amendment No. 6 to Registration Statement on Form S-3
(Reg. No. 33-78396), filed with the SEC by the Registrant on November 3,
1994.
II-6
