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Prospectus Supplement
(To Prospectus Dated June 13, 1997)
TIERS(SM) Corporate Bond-Backed Certificates, Series APA 1997-8
issued by
TIERS(SM) Corporate Bond-Backed Certificates Trust APA 1997-8
relating to APACHE CORPORATION Fifty Year 7 3/8% Debentures,
Due August 15, 2047 (the "Term Assets")
ZTF(R)Class: $75,000,000 Certificate Principal Balance, 0%
Pass-Through Rate from September 15, 1997 to August 15,
2017; Mandatorily Exchangeable for Term Assets on
August 15, 2017
Amortizing Class: $58,072,000 initial Certificate Principal Balance,
semiannual Fixed Payments of principal and interest until
August 15, 2017
Evidencing fractional interests in $75,000,000 Fifty Year 7 3/8%
Debentures, due August 15, 2047 issued by Apache Corporation
Structured Products Corp.
Depositor
The TIERS(SM) Corporate Bond-Backed Certificates, Series APA 1997-8 (the
"Certificates") offered hereby will represent two classes of fractional
undivided beneficial interests in TIERS Corporate Bond-Backed Certificates Trust
APA 1997-8 (the "Trust") to be formed pursuant to the Trust Agreement, dated as
of September 15, 1997, between Structured Products Corp., as depositor (the
"Company" or the "Depositor"), and First Trust of New York, National
Association, as trustee (the "Trustee"), as supplemented by the Series APA
1997-8 Supplement, dated as of September 15, 1997 (collectively, the "Trust
Agreement"). The property of the Trust will consist principally of initially
$75,000,000 aggregate principal amount of Fifty Year 7 3/8% Debentures, due
August 15, 2047 (the "Term Assets") issued by Apache Corporation (the "Term
Assets Issuer"), having the characteristics described in a prospectus dated
October 31, 1996 and a supplement thereto dated August 8, 1997 (together, the
"Term Assets Prospectus"). The Term Assets were issued and sold as part of an
underwritten public offering of $150,000,000 aggregate principal amount of such
securities.
The Term Assets will be acquired by the Trustee on behalf of the Trust in
exchange for the Certificates. Terms used but not otherwise defined herein are
defined in the Prospectus dated June 13, 1997 attached hereto (the
"Prospectus").
(cover continued on next page)
The Amortizing Class Certificates (the "Amortizing Class Certificates") have
been authorized for listing, upon official notice of issuance, with the New York
Stock Exchange ("NYSE"). The Zero-To-Full(R) Class Certificates (the "ZTF(R)
Class Certificates") will not be so listed.
It is a condition to the establishment of the Trust and the issuance of the
Certificates that the Certificates be rated identically to the Term Assets
by both Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Group ("Standard & Poor's," and with Moody's, the "Rating Agencies").
Moody's and Standard & Poor's have rated the Term Assets "Baa1" and "BBB+,"
respectively.
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THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE COMPANY OR ANY OF ITS AFFILIATES. THE
CERTIFICATES DO NOT REPRESENT A DIRECT OBLIGATION OF THE TERM ASSETS ISSUER OR
ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Salomon Brothers Inc ("Salomon" or the "Underwriter") proposes to offer the
Certificates from time to time for sale in negotiated transactions or otherwise
at prices determined at the time of sale. The price at which Certificates will
be sold by the Underwriter may vary with each transaction. The Underwriter has
agreed to purchase the ZTF Class Certificates from the Company at 20.527% of the
Certificate Principal Balance thereof. The Underwriter has agreed to purchase
the Amortizing Class Certificates from the Company at 99.129% of the initial
Certificate Principal Balance thereof plus accrued interest, if any, calculated
at an annual rate of 7.22% compounded semiannually (the "Yield to Amortizing
Class Final Distribution Date") from August 13, 1997 to the Closing Date (as
defined below). Proceeds to the Company from any sale of the Certificates will
be equal to the purchase price paid therefor by the Underwriter, net of any
expenses payable by the Company and any compensation payable to the Underwriter.
For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Method of Distribution" herein.
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the Certificates will be made in book entry form
through the facilities of The Depository Trust Company on or about September 15,
1997 (the "Closing Date") against payment therefor in same-day funds.
"Zero-To-Full"(R) and "ZTF"(R) are registered service marks of Salomon Brothers
Inc. Salomon Brothers Inc has filed an application with the United States Patent
and Trademark Office for the registration of the "TIERS" service mark.
Salomon Brothers Inc
The date of this Prospectus Supplement is September 11, 1997.
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The Certificates will be issued in two classes. Except in the case of a Maturity
Shortening Redemption (as defined below), the ZTF Class Certificates evidence
fractional undivided beneficial interests in all principal payments on the Term
Assets, and in interest accrued on the $75,000,000 aggregate principal amount of
the Term Assets on and after August 15, 2017 at a rate of 7 3/8% per annum (the
"Pass-Through Rate"), compounded semiannually. Except in the case of a Maturity
Shortening Redemption, the Amortizing Class Certificates evidence fractional
undivided beneficial interests in all payments of interest accrued and paid on
the Term Assets on or before August 15, 2017.
Distributions on the Amortizing Class Certificates will be made semiannually on
the 15th day of each February and August, or if any such day is not a Business
Day then on the immediately following Business Day, commencing February 15, 1998
(each, a "Distribution Date").
Except in the case of a Maturity Shortening Redemption, no cash distributions
will be made on the ZTF Class Certificates. Instead, the ZTF Class Certificates
outstanding on August 15, 2017 will be terminated and deemed involuntarily
surrendered by the holders thereof in exchange for a principal amount of the
Term Assets underlying such ZTF Class Certificates equal to the aggregate
Certificate Principal Balance of such ZTF Class Certificates. No action by such
holders will be required to effect such termination and exchange, which will be
carried out by the Trustee notifying such holders of such termination and
exchange and distributing to each such holder in kind its pro rata portion of
the Term Assets under the terms of the Trust Agreement.
Distributions on the Amortizing Class Certificates will consist of equal
semiannual installments of principal and interest through August 15, 2017 (each,
a "Fixed Payment"). Each Fixed Payment will be allocated between interest
accrued at a rate equal to the Yield to Amortizing Class Final Distribution Date
on the then-outstanding Certificate Principal Balance of the Amortizing Class
Certificates, and the repayment of principal. The Amortizing Class Certificates
will be paid in full on August 15, 2017 (the "Amortizing Class Final
Distribution Date").
Losses realized on the Term Assets will be borne by the holders of the
Certificates (the "Certificateholders") in the manner described herein. See
"Special Considerations--Events of Default".
Upon the occurrence of a Tax Event (as defined herein) with respect to the Term
Assets, the Term Assets Issuer has the right to shorten the maturity of the Term
Assets (a "Maturity Shortening") to the extent required, in the opinion of a
nationally recognized independent tax counsel, such that, after the shortening
of the maturity, interest paid on the Term Assets will be deductible for federal
income tax purposes. (Any such new maturity date is referred to hereinafter as
the "Shortened Maturity Date.") If the Shortened Maturity Date is on or prior to
August 15, 2017, the ZTF Class Certificates and the Amortizing Class
Certificates will be redeemed on the Shortened Maturity Date (a "Maturity
Shortening Redemption"). The Trustee will distribute the payment received on the
Term Assets on the Shortened Maturity Date (the amount of any such payment, the
"Shortened Maturity Date Payment") to the holders of the Amortizing Class
Certificates and ZTF Class Certificates in the following amounts: (i) to the
holders of the Amortizing Class Certificates, an amount equal to the principal
balance of the Amortizing Class Certificates as of the Shortened Maturity Date,
together with any accrued interest (such amount, the "Amortizing Class Shortened
Maturity Date Payment") and (ii) to the holders of the ZTF Class Certificates,
an amount equal to the difference between (x) the Shortened Maturity Date
Payment and (y) the Amortizing Class Shortened Maturity Date Payment. Such
amounts to be paid on the Certificates will be calculated by Salomon Brothers
Inc, as calculation agent (the "Calculation Agent").
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, the sale of the Certificates.
There is currently no secondary market for the Certificates, and there can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. See "Special Considerations" in the
Prospectus.
The Certificates are being offered in registered form. The Certificates
initially will be represented by certificates registered in the name of Cede &
Co., as nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of such Certificates will be represented by book entries on
the records of participating members of DTC ("Participants"). Definitive
certificates will be available for such Certificates only under the limited
circumstances described herein. See "Description of the Certificates--Definitive
Certificates."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL CONSTITUTE A
SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE COMPANY PURSUANT TO ITS
PROSPECTUS DATED JUNE 13, 1997, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART
AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. IN PARTICULAR, INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH UNDER "SPECIAL CONSIDERATIONS" IN THE PROSPECTUS AND IN THIS
PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
Page
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SUMMARY OF TERMS........................................................... S-1
SPECIAL CONSIDERATIONS..................................................... S-6
FORMATION OF THE TRUST..................................................... S-7
USE OF PROCEEDS............................................................ S-7
THE TERM ASSETS ISSUER..................................................... S-7
DESCRIPTION OF THE TERM ASSETS............................................. S-8
DESCRIPTION OF THE CERTIFICATES............................................ S-8
DESCRIPTION OF THE TRUST AGREEMENT.........................................S-12
FEDERAL INCOME TAX CONSEQUENCES............................................S-14
ERISA CONSIDERATIONS.......................................................S-16
METHOD OF DISTRIBUTION.....................................................S-17
RATINGS ..................................................................S-18
LEGAL OPINIONS.............................................................S-18
INDEX OF TERMS.............................................................S-19
APPENDIX A -- Identification of the Term Assets
APPENDIX B -- Amortizing Class Certificates--Schedule of Amortizing Payments
APPENDIX C -- Amounts Distributable Upon Maturity Shortening
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SUMMARY OF TERMS
The following summary of terms does not purport to be complete
and is qualified in its entirety by reference to the detailed information
appearing elsewhere herein and in the Prospectus. Certain capitalized terms used
herein are defined elsewhere in this Prospectus Supplement or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
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The Trust.......................................... TIERS Corporate Bond-Backed Certificates Trust APA
1997-8. The Trust will be formed pursuant to the Trust
Agreement dated as of September 15, 1997 (the "Closing
Date"), between Structured Products Corp., as depositor, and
First Trust of New York, National Association, as trustee, as
supplemented by the Series APA 1997-8 Supplement dated as
of September 15, 1997. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of
1939, as amended. The Company is an indirect wholly-owned
subsidiary of Salomon Inc and an affiliate of Salomon Brothers
Inc. See "The Company" in the Prospectus.
Securities Offered................................. TIERS Corporate Bond-Backed Certificates, Series APA
1997-8. The Certificates, each of which represents a
fractional undivided beneficial interest in the Trust, will be
issued pursuant to the Trust Agreement and will consist of two
classes: the ZTF Class Certificates and the Amortizing Class
Certificates. The Term Assets will be the sole assets of the
Trust from which Certificateholders will receive any
distributions.
ZTF Class Certificates............................. $75,000,000 aggregate Certificate Principal Balance. Except
in the case of a Maturity Shortening Redemption, no cash
distributions will be made on the ZTF Class Certificates.
Instead, the ZTF Class Certificates outstanding on August 15,
2017 will be terminated and deemed involuntarily surrendered
by the holders thereof in exchange for a principal amount of
the Term Assets underlying such ZTF Class Certificates equal
to the aggregate Certificate Principal Balance of such ZTF
Class Certificates. No action by such holders will be required
to effect such termination and exchange, which will be carried
out by the Trustee notifying such holders of such termination
and exchange and distributing to each such holder in kind its
pro rata portion of the Term Assets under the terms of the
Trust Agreement.
Cash Distributions
on the ZTF Class Certificates...................... Except in the case of a Maturity Shortening Redemption, there
will be no cash distributions on the ZTF Class Certificates.
Amortizing Class Certificates...................... $58,072,000 aggregate initial Certificate Principal Balance.
Distributions on the Amortizing Class Certificates will consist
of semiannual Fixed Payments payable on each Distribution
Date up to and including August 15, 2017. Each Fixed
Payment will be in an amount equal to the product of (i)
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7 3/8%, (ii) 180 divided by 360, and (iii) the amount of the
Term Assets (initially $75,000,000) outstanding as of the
applicable Distribution Date. Each Fixed Payment payable on
the Amortizing Class Certificates will be allocated between
interest accrued at the Yield to Amortizing Class Final
Distribution Date on the then-outstanding aggregate Certificate
Principal Balance of the Amortizing Class Certificates, and
return of principal to Certificateholders, according to the
schedule attached as Appendix B hereto. Although payments
on the Amortizing Class Certificates are denominated as
principal and interest, the Amortizing Class Certificates
generally represent indirect beneficial ownership of solely the
interest payments on the Term Assets and will be paid solely
from interest payments on the Term Assets; absent a Maturity
Shortening Redemption on or prior to August 15, 2017, the
Amortizing Class Certificateholders have no right to any
portion of the principal payments on the Term Assets.
The aggregate Certificate Principal Balance of the Amortizing
Class Certificates will initially be $58,072,000. On any
Distribution Date, the aggregate Certificate Principal Balance
will be reduced by the positive difference between (i) the
semiannual Fixed Payment made on such Distribution Date
and (ii) interest accrued on the aggregate Certificate Principal
Balance at the Yield to Amortizing Class Final Distribution
Date from the prior Distribution Date (or, in the case of the
initial Distribution Date, such interest accrued from the
Closing Date).
Amortizing Class Final Distribution ............... The Amortizing Class Certificates will be paid in full on
August 15, 2017.
Distribution Dates................................. Distributions on the Amortizing Class Certificates will be
made semiannually on the 15th day of each February and
August, or if any such day is not a Business Day then on the
immediately following Business Day, commencing February
15, 1998; provided, however, that payment on each
Distribution Date shall be subject to prior payment of interest
on the Term Assets.
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Interest Accrual Period............................ For each Distribution Date, interest shall accrue on the
Amortizing Class Certificates during the period commencing
on and including the prior Distribution Date to, but excluding,
such Distribution Date, except that the initial Interest Accrual
Period will commence on the Closing Date.
Term Assets........................................ The Term Assets consist of $75,000,000 aggregate principal
amount of Apache Corporation Fifty Year 7 3/8% Debentures,
due August 15, 2047, having the characteristics described in
a prospectus dated October 31, 1996 and a supplement thereto
dated August 8, 1997. The Term Assets were issued and sold
as part of an underwritten public offering of $150,000,000
aggregate principal amount of such securities. Distributions
are required to be made on the Term Assets semiannually on
the 15th day of each February and August, commencing
February 15, 1998, or if such day is not a Business Day, on
the next succeeding Business Day. See "Description of the
Term Assets" herein.
Trustee and Trust Agreement........................ First Trust of New York, National Association, acts as the
Trustee pursuant to a series trust agreement (the "Trust
Agreement"), a copy of which may be inspected at the
designated office of the Trustee, 100 Wall Street, Suite 1600,
New York, New York 10005.
Maturity Shortening
on Term Assets..................................... Upon the occurrence of a Tax Event (as defined herein), the
Term Assets Issuer will have the right to shorten the maturity
of the Term Assets (a "Maturity Shortening") to the extent
required, in the opinion of a nationally recognized independent
tax counsel selected by the Term Assets Issuer, such that,
after the shortening of the maturity, interest paid on the Term
Assets will be deductible for federal income tax purposes. If
the Shortened Maturity Date is on or prior to August 15,
2017, the ZTF Class Certificates and the Amortizing Class
Certificates will be redeemed on the Shortened Maturity Date
(a "Maturity Shortening Redemption"). The Trustee will
distribute the payment received on the Term Assets on the
Shortened Maturity Date (the amount of any such payment, the
"Shortened Maturity Date Payment") to the holders of the
Amortizing Class Certificates and ZTF Class Certificates in
the following amounts: (i) to the holders of the Amortizing
Class Certificates, an amount equal to the principal balance of
the Amortizing Class Certificates as of the Shortened Maturity
Date, together with any accrued interest (such amount, the
"Amortizing Class Shortened Maturity Date Payment") and (ii)
to the holders of the ZTF Class Certificates, an amount equal
to the difference between (x) the Shortened Maturity Date
Payment and (y) the Amortizing Class Shortened Maturity
Date Payment. Such amounts to be paid on the Certificates
will be calculated by the Calculation Agent.
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Distribution of Term Assets
on Default......................................... Upon a Payment Default or an Acceleration of the Term
Assets (as such terms are defined herein), the Trustee will
make an in-kind distribution of the Term Assets to the holders
of the ZTF Class Certificates and the Amortizing Class
Certificates. The distribution will be made in the same ratio
as (i) the present value of all scheduled future payments on the
Term Assets after August 15, 2017 bears to (ii) the present
value of all scheduled future payments on the Amortizing
Class Certificates, discounted semiannually in each case at a
rate of 7 3/8% per annum to the date of such Payment Default
or Acceleration. Such ratio will be calculated by the
Calculation Agent.
Record Dates....................................... The day immediately preceding each Distribution Date.
Denominations;
Specified Currency................................. The Certificates will be denominated and payable in U.S.
dollars and will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof.
Form of Security................................... The Certificates are being offered in registered form.
The Certificates initially will be registered in the name of
Cede & Co., as nominee of The Depository Trust Company.
Definitive certificates will be available for such Certificates
only under the limited circumstances described herein.
See "Description of the Certificates--Definitive Certificates."
Distributions on the Certificates will be settled in immediately
available (same-day) funds.
Trustee .......................................... First Trust of New York, National Association.
Federal Income
Tax Consequences................................... See "Federal Income Tax Consequences" herein.
ERISA Considerations............................... Subject to the matters discussed under "ERISA
Considerations" herein, any employee benefit or other plan
subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), including
an individual retirement account or Keogh plan, may purchase
Certificates of a class if such plan or the fiduciary who causes
"plan assets" of any such plan to purchase the Certificates is
able to make a deemed representation that its purchase and
holding of the Certificates, as well as subsequent transactions
involving the Trust, would not be prohibited under ERISA or
Section 4975 of the Code.
Ratings .......................................... It is a condition to the issuance of the Certificates that they
receive ratings of "Baa1" from Moody's Investors Service,
Inc. ("Moody's") and "BBB+" from Standard & Poor's
Ratings Group ("Standard & Poor's"). The Depositor has not
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requested a rating of the Certificates from any other rating
agency. The rating given to the Certificates will be based
primarily upon the credit rating of the Term Assets and the
legal structure of the transaction, including the limitation that
payments in respect of the Certificates are subject to receipt by
the Trustee of payments on the Term Assets. The rating
reflects the likelihood that Certificateholders will receive the
payments or property due or distributable on their Certificates,
as applicable. 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 entity.
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SPECIAL CONSIDERATIONS
No Detailed Information About Term Assets or Term Assets Issuer
This Prospectus Supplement does not provide detailed information with
respect to the Term Assets or Apache Corporation (the "Term Assets Issuer"), any
risk factors relating thereto, or any rights or obligations, legal, financial or
otherwise, arising under or related to the Term Assets. See "The Term Assets
Issuer" and "Appendix A--Identification of Term Assets" herein.
Term Assets Issuer is the Only Payment Source
The Certificates are payable solely from payments made on the Term
Assets by the Term Assets Issuer. The Term Assets Issuer is subject to laws
permitting bankruptcy, moratorium, reorganization or other actions which, in the
event of financial difficulties of the Term Assets Issuer, could result in
delays in payment, partial payment or non-payment of the Certificates relating
to a Term Asset. See "Description of the Certificates--Distribution of Term
Assets on Payment Default or Acceleration" herein.
Bankruptcy Risks
If Salomon Brothers Holding Company Inc ("SBHCI"), the parent of the
Depositor, were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy or SBHCI itself were to request a bankruptcy court to
order that the Depositor be substantively consolidated with SBHCI, delays in and
reductions in the amount of distributions on the Certificates could occur. SBHCI
and the Depositor have taken certain steps that are intended to minimize the
risk that the assets of the Depositor would be substantively consolidated with
the assets and liabilities of SBHCI. These steps include the creation of the
Depositor as a separate, limited purpose subsidiary, restrictions on the
operations of the Depositor, and limitations in the certificate of incorporation
of the Depositor on the nature of the Depositor's business and its ability to
commence voluntary insolvency cases or proceedings without the prior unanimous
vote of all its directors. Further, the Depositor does not intend to file, and
SBHCI has agreed that it will not file, a voluntary petition for relief under
the Bankruptcy Code or any similar applicable state laws with respect to the
Depositor. Thus, (i) the voluntary or involuntary application with respect to
the Depositor for relief under Title 11 of the United States Code or similar
applicable state laws and (ii) the substantive consolidation of the Depositor
and SBHCI is unlikely to occur.
The transfer of the Term Assets from Salomon to the Depositor is
intended and has been structured to constitute an absolute sale of the Term
Assets rather than a borrowing by Salomon secured by the Term Assets. If Salomon
were to become a debtor in a bankruptcy case or a case under the Securities
Investor Protection Act of 1970, as amended ("SIPA") and a bankruptcy trustee, a
court which had issued a protective decree under SIPA or a creditor of Salomon
were to take the position that the transfer of the Term Assets from Salomon to
the Depositor should be characterized as the pledge of the Term Assets to secure
a borrowing by Salomon, then delays in distributions on the Certificates or
(should the bankruptcy court or the court in a case under SIPA rule in favor of
any such trustee or creditor) reductions in such distributions could result. If
the transfer of the Term Assets to the Depositor is treated as a sale, however,
the Term Assets would not be part of Salomon's bankruptcy estate and would not
be available to Salomon's creditors.
No Assurance of Liquidity
There is no assurance that any secondary market will develop or be
maintained for any class of Certificates. While the Underwriter intends to
maintain a secondary market for Certificates, it is not obligated to do so.
There can be no assurance that a secondary market in the Certificates will
develop or, if it does develop, that it will remain in existence for any period
of time. The absence of a secondary market would adversely affect the liquidity
of the Certificates.
Events of Default
If an event of default on the Term Assets occurs, the risk of loss with
respect to the Term Assets lies entirely with the Certificateholders. If a
Payment Default or Acceleration (as such terms are defined herein) occurs,
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the Trustee will distribute the Term Assets to the Certificateholders. See
"Description of the Certificates--Distribution of Term Assets on Payment Default
or Acceleration" herein.
The Underwriter and the Company
The Underwriter is an affiliate of the Company.
FORMATION OF THE TRUST
TIERS Corporate Bond-Backed Certificates Trust APA 1997-8 will
be formed under New York law pursuant to the Trust Agreement dated as of
September 15, 1997, as supplemented by the Series APA 1997-8 Supplement dated as
of September 15, 1997. The Trust Agreement will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Concurrently with the execution and delivery of the Trust Agreement, the Company
will deposit with the Trustee the proceeds from the sale of the Certificates to
the Underwriter, with instructions to use such funds for the specific purpose of
purchasing the Term Assets. The Trustee, on behalf of the Trust, will accept
such funds, purchase the Term Assets and deliver the Certificates to or upon the
order of the Company. The Trustee will hold the Term Assets for the benefit of
the Certificateholders.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Certificates will be used to purchase the Term Assets, which, after the purchase
thereof, will be sold by the Company to the Trust and will be the sole Deposited
Assets (as defined in the Prospectus) of the Trust.
THE TERM ASSETS ISSUER
This Prospectus Supplement does not provide information with respect to
the Term Assets Issuer. No investigation has been made of the financial
condition or creditworthiness of the Term Assets Issuer or any of its
subsidiaries in connection with the issuance of the Certificates. The Company is
not an affiliate of the Term Assets Issuer.
The Term Assets Issuer is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information (including financial
information) with the Commission. Copies of such reports and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade
Center, New York, New York 10048; and Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661, and may be obtained from the Public
Reference Section of the Commission at Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. In addition, such reports and other
information can be obtained from the Term Assets Issuer at its address specified
in its most recent publicly available reports.
The Trust will have no assets other than the Term Assets from which to
make distributions of amounts due in respect of the Certificates. Consequently,
the ability of Certificateholders to receive distributions in respect of the
Certificates will depend principally on the Trust's receipt of payments on the
Term Assets from the Term Assets Issuer.
Prospective purchasers of the Certificates should consider carefully
the Term Assets Issuer's financial condition and its ability to make payments in
respect of such Term Assets. This Prospectus Supplement relates only to the
Certificates being offered hereby and does not relate to the Term Assets or the
Term Assets Issuer. All information contained in this Prospectus Supplement
regarding the Term Assets Issuer is derived from the Term Assets Prospectus.
Neither the Company nor the Underwriter has participated in the preparation of
such documents, or takes any responsibility for the accuracy or completeness of
the information provided therein.
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DESCRIPTION OF THE TERM ASSETS
The Term Assets of the Trust will consist solely of initially
$75,000,000 aggregate principal amount of Fifty Year 7 3/8% Debentures, due
August 15, 2047 issued by the Term Assets Issuer, having the characteristics
described in the Term Assets Prospectus. The Term Assets were originally issued
by the Term Assets Issuer as part of an underwritten public offering of
$150,000,000 aggregate principal amount of such securities, pursuant to a
registration statement on Form S-3 (together with all amendments and exhibits
thereto, the "Term Assets Registration Statement"), filed by the Term Assets
Issuer with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). Distributions are
required to be made on the Term Assets semiannually on the 15th day of each
February and August, commencing February 15, 1998 (each, a "Term Assets Payment
Date"), or if such day is not a Business Day, on the next succeeding Business
Day.
The Term Assets deposited in the Trust represent the sole assets of the
Trust that are available to make distributions in respect of the Certificates.
Consequently, the ability of Certificateholders to receive distributions in
respect of the Certificates will depend on the Trust's receipt of payments on,
or in respect of, the Term Assets. This Prospectus Supplement relates only to
the Certificates being offered hereby and does not relate to the Term Assets.
The disclosure under this caption in the Prospectus Supplement is
intended primarily to identify the Term Assets and does not purport to summarize
the Term Assets or to provide information with respect to the Term Assets
Issuer. Appendix A to this Prospectus Supplement, which contains the pricing
terms of the Term Assets, is derived solely from the description thereof in the
Term Assets Prospectus. Such information does not purport to be complete and is
qualified in its entirety by, and should be read in conjunction with, (i) the
Term Assets Prospectus, and (ii) the Term Assets Registration Statement, of
which the Term Assets Prospectus is a part. This Prospectus Supplement relates
only to the Certificates offered hereby and does not relate to an offering of
the Term Assets. No representation is made by the Trust, the Trustee or the
Company as to the accuracy or completeness of the information contained in the
Term Assets Prospectus or the Term Assets Registration Statement.
Ratings
The Term Assets have been rated "Baa1" and "BBB+" by Moody's and
Standard & Poor's, respectively. Any rating of the Term Assets is not a
recommendation to purchase, hold or sell such Term Assets or the Certificates,
and there can be no assurance that a rating will remain for any given period of
time or that a rating will not be revised or withdrawn entirely by a rating
agency if in its judgment circumstances in the future so warrant.
Salomon Brothers Inc and the Term Assets Issuer
From time to time, Salomon Brothers Inc may be engaged by the Term
Assets Issuer as an underwriter or placement agent, in an advisory capacity or
in other business arrangements. In addition, Salomon Brothers Inc or another
affiliate of the Company may make a market in other outstanding securities of
the Term Assets Issuer.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be denominated and distributions with respect
thereto will be payable in United States Dollars, which will be the "Specified
Currency" as such term is defined in the Prospectus. The Certificates represent
in the aggregate the entire beneficial ownership interest in the Trust. The
property of the Trust will consist of (i) the Term Assets, (ii) all payments on
or collections in respect of the Term Assets accrued on or after the Closing
Date, together with any proceeds thereof, and (iii) all funds from time to time
deposited with the Trustee in accounts related to the Trust. The property of the
Trust will be held for the benefit of the Certificateholders by the Trustee.
Certificateholders will receive payments on each Distribution Date as described
herein. See "--Collections & Distributions."
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The Certificates represent two classes of undivided fractional
beneficial interests in specific assets of the Trust, and all distributions to
Certificateholders shall be made only from the property of the Trust as
described herein. The Certificates do not represent an interest in or obligation
of the Company, the Term Assets Issuer, the Term Assets Trustees, the Trustee or
Salomon Brothers Inc or any affiliate thereof.
The aggregate "Certificate Principal Balance" of the ZTF Class
Certificates on any determination date will equal the aggregate principal amount
of the Term Assets in the Trust as of such date. The Certificate Principal
Balance of any ZTF Class Certificate will represent a pro rata portion of the
then-current aggregate Certificate Principal Balance of all outstanding ZTF
Class Certificates and will equal the principal amount of Term Assets that the
holder of such ZTF Class Certificate is entitled to receive as an in-kind
distribution on August 15, 2017. Except in the case of a Maturity Shortening
Redemption, holders of ZTF Class Certificates will not be entitled to receive
any cash distributions.
The aggregate "Certificate Principal Balance" of the Amortizing Class
Certificates will initially be $58,072,000. On any Distribution Date, the
aggregate Certificate Principal Balance will be reduced by the positive
difference between (i) the semiannual Fixed Payment made on such Distribution
Date and (ii) interest accrued on the aggregate Certificate Principal Balance at
the Yield to Amortizing Class Final Distribution Date from the prior
Distribution Date (or, in the case of the initial Distribution Date, such
interest accrued from the Closing Date). The Certificate Principal Balance of
any Amortizing Class Certificate will represent a pro rata portion of the
then-current aggregate Certificate Principal Balance of all outstanding
Amortizing Class Certificates.
The semiannual Fixed Payment payable on the Amortizing Class
Certificates will be allocated between interest and return of principal
according to the table attached as Appendix B hereto. Although payments on the
Amortizing Class Certificates are denominated as principal and interest, the
Amortizing Class Certificates generally represent indirect beneficial ownership
of solely the interest payments on the Term Assets and will be paid solely from
interest payments on the Term Assets; absent a Maturity Shortening Redemption
prior to August 15, 2017, the Amortizing Class Certificateholders have no right
to any portion of the principal payments on the Term Assets.
Form of the Certificates
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants in minimum denominations of $1,000 and integral multiples
thereof.
The Certificates will each initially be represented by one or more
global certificates registered in the name of the nominee of DTC (together with
any successor clearing agency selected by the Company, the "Clearing Agency"),
except as provided below; the Company has been informed by DTC that DTC's
nominee will be Cede & Co. No Certificateholder will be entitled to receive a
certificate representing such Certificateholder's interest, except as set forth
below under "Definitive Certificates." Unless and until Definitive Certificates
(as defined below) 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 the
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 (as defined
herein) 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 owners of Certificates or
their nominees, respectively, rather than to DTC or its nominee, only if (i) the
Company advises the Trustee in writing that DTC is no longer willing or able
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to discharge properly its responsibilities as Clearing Agency with respect to
the Certificates and the Company is unable to locate a qualified successor or
(ii) the Company, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and receipt of
instructions for re-registration, the Trustee will reissue such Certificates as
Definitive Certificates issued in the respective principal amounts owned by the
individual owners of such Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as Certificateholders
under the Trust Agreement.
Listing on the New York Stock Exchange
The Amortizing Class Certificates have been authorized for listing,
upon official notice of issuance, with the NYSE. There can be no assurance that
the Amortizing Class Certificates, once listed, will continue to be eligible for
trading on the NYSE.
Interest Accrual
For each Distribution Date, interest shall accrue on the Amortizing
Class Certificates during the period (the "Interest Accrual Period") commencing
on and including the prior Distribution Date to, but excluding, such
Distribution Date, except that the initial Interest Accrual Period shall
commence on August 13, 1997.
Interest will not accrue on the Certificate Principal Balance of the
ZTF Class Certificates. Instead, the ZTF Class Certificates will be terminated
and deemed involuntarily surrendered by the holders thereof in exchange for a
principal amount of the Term Assets underlying such ZTF Class Certificates equal
to the aggregate Certificate Principal Balance of such ZTF Class Certificates on
August 15, 2017, unless a Maturity Shortening Redemption has occurred prior to
such date. No action by such holders will be required to effect such termination
and exchange, which will be carried out by the Trustee notifying such holders of
such termination and exchange and distributing to each such holder in kind its
pro rata portion of the Term Assets under the terms of the Trust Agreement.
Interest will accrue on each Amortizing Class Certificate for each
Interest Accrual Period ending on or prior to the Amortizing Class Final
Distribution Date at the Yield to Amortizing Class Final Distribution Date (such
accrued interest, the "Amortizing Class Periodic Interest"). Except in the case
of any Maturity Shortening Redemption, the Amortizing Class Periodic Interest
shall be payable (together with principal on the Amortizing Class Certificates)
on the Distribution Dates related to each applicable Interest Accrual Period.
See "Description of the Certificates--Interest on the Certificates"
in the Prospectus.
Collections and Distributions
Distributions by the Trustee pursuant to the terms of the Certificates
and the Trust Agreement shall be made, subject to timely receipt of payments on
the Term Assets and, in the case of cash distributions, solely to the extent of
funds held under the Trust Agreement:
(i) for the ZTF Class Certificates, by a distribution in kind of
the Term Assets on August 15, 2017, and
(ii) for the Amortizing Class Certificates, on each Distribution
Date through the Amortizing Class Final Distribution Date;
subject, in each case, to the provisions discussed under "Description of the
Certificates -- Maturity Shortening on Term Assets" and "-- Distribution of Term
Assets on Payment Default or Acceleration."
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If a payment with respect to the Term Assets is made to the Trustee
after the Term Assets Payment Date on which such payment was due, the Trustee
will distribute any such amounts received on the Business Day following such
receipt; provided, however, that the Record Date for such distribution shall be
five days prior to such Business Day. No additional amounts will accrue on the
Certificates or be owed to Certificateholders in respect of such distribution.
All amounts received on or with respect to the Term Assets shall be
held uninvested by the Trustee.
On August 15, 2017, the Trustee will distribute the Term Assets in kind
to the ZTF Class Certificateholders, unless a Maturity Shortening Redemption has
occurred on or prior to such date.
On each Distribution Date, the Trustee will distribute Interest
Collections (as defined below) for such Distribution Date in the Collection
Account to the Amortizing Class Certificateholders for the payment of Fixed
Payments, but only to the extent that such Interest Collections were accrued
prior to the Amortizing Class Final Distribution Date.
"Interest Collections" means, with respect to any Distribution Date,
all payments received by the Trustee, during the Collection Period ending
immediately prior to such Distribution Date, in respect of (i) interest on the
Term Assets, and (ii) penalties or other amounts required to be paid because of
late payments on the Term Assets. "Collection Period" means each period from and
including the preceding Distribution Date (or, in the case of the first
Distribution Date, from and including the Closing Date) up to and including the
first Business Day preceding such Distribution Date.
Distribution In Kind of Term Assets on August 15, 2017
The ZTF Class Certificates outstanding on August 15, 2017 will be
terminated and deemed involuntarily surrendered by the holders thereof in
exchange for a principal amount of the Term Assets underlying such ZTF Class
Certificates equal to the aggregate Certificate Principal Balance of such ZTF
Class Certificates. No action by such holders will be required to effect such
termination and exchange, which will be carried out by the Trustee notifying
such holders of such termination and exchange and distributing to each such
holder in kind its pro rata portion of the Term Assets under the terms of the
Trust Agreement.
Maturity Shortening on Term Assets
Upon occurrence of a Tax Event (as defined below), the Term Assets
Issuer will have the right to shorten the maturity of the Term Assets to the
extent required, in the opinion of a nationally recognized independent tax
counsel selected by the Term Assets Issuer, such that, after the shortening of
the maturity, interest paid on the Term Assets will be deductible for federal
income tax purposes.
"Tax Event" means that the Term Assets Issuer shall have received an
opinion of a nationally recognized independent tax counsel to the effect that on
or after the date of the issuance of the Term Assets, as a result of (a) any
amendment to, clarification of, or change (including any announced prospective
change) in laws, or any regulations thereunder, of the United States, (b) any
judicial decision, official administrative pronouncement, ruling, regulatory
procedure, notice or announcement, including any notice or announcement of
intent to adopt such procedures or regulations (an "Administrative Action"), or
(c) any amendment to, clarification of or change in the official position of the
interpretation of such Administrative Action or judicial decision that differs
from the theretofore generally accepted position, in each case, or after the
date of the issuance of the Term Assets, such change in tax law creates a more
than insubstantial risk that interest paid by the Term Assets Issuer on the Term
Assets is not, or will not be, deductible, in whole or in part, by the Term
Assets Issuer for purposes of United States federal income tax.
In the event of a Maturity Shortening for which the Shortened Maturity
Date is on or prior to August 15, 2017, the Certificates will be redeemed on the
Shortened Maturity Date. The Trustee will distribute the payment received on the
Term Assets on the Shortened Maturity Date (the amount of any such payment, the
"Shortened Maturity Date Payment") to the holders of the Amortizing Class
Certificates and ZTF Class Certificates in the following amounts: (i) to the
holders of the Amortizing Class Certificates, an amount equal to the principal
balance
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of the Amortizing Class Certificates as of the Shortened Maturity Date, together
with any accrued interest (such amount, the "Amortizing Class Shortened Maturity
Date Payment") and (ii) to the holders of the ZTF Class Certificates, an amount
equal to the difference between (x) the Shortened Maturity Date Payment and (y)
the Amortizing Class Shortened Maturity Date Payment. Such amounts to be paid on
the Certificates will be calculated by the Calculation Agent and are shown on
Appendix C hereto.
Distribution of Term Assets on Payment Default or Acceleration
If a Payment Default or an Acceleration occurs, the Trustee will make
an in-kind distribution of the Term Assets to the holders of the ZTF Class
Certificates and the Amortizing Class Certificates. A "Payment Default" means a
default in the payment of any amount due on the Term Assets from the Term Assets
Issuer after the same becomes due and payable (and the expiration of any
applicable grace period on the Term Assets). An "Acceleration" means the
acceleration of the maturity of the Term Assets following the occurrence of any
default on the Term Assets other than a Payment Default. The distribution will
be made in the same ratio as (i) the present value of all scheduled future
payments on the Term Assets after August 15, 2017 bears to (ii) the present
value of all scheduled future payments on the Amortizing Class Certificates,
discounted semiannually in each case at a rate of 7 3/8% per annum to the date
of such Payment Default or Acceleration. Such ratio will be calculated by the
Calculation Agent. Term Assets will be liquidated by the Trustee, and the
proceeds thereof distributed in cash, only to the extent necessary to avoid
distribution of fractional securities to Certificateholders.
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 of which this
Prospectus Supplement and the Prospectus form a part. A Current Report on Form
8-K relating to the Certificates containing a copy of the Trust Agreement as
executed will be filed by the Company with the Commission following the issuance
and sale of the Certificates. The assets of the Trust created under the Trust
Agreement will consist of (i) the Term Assets, (ii) all payments on or
collections in respect of the Term Assets accrued on or after the Closing Date,
together with any proceeds thereof, and (iii) all funds from time to time
deposited with the Trustee in accounts related to the Trust. 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.
Affiliate Exchange Right
Each affiliate of the Depositor, but not the Depositor itself, will
have the right, subject to the limitations contained in the Trust Agreement, on
any date to tender to the Trustee ZTF Class Certificates comprising a specified
percentage of the aggregate Certificate Principal Balance of the ZTF Class
Certificates, together with Amortizing Class Certificates comprising the same
percentage of the aggregate Certificate Principal Balance of the Amortizing
Class Certificates, and to receive in exchange a principal amount of Term Assets
comprising the same percentage of the Term Assets deposited in the Trust.
The Trustee
First Trust of New York, National Association, a national banking
association, will act as trustee for the Certificates and the Trust pursuant to
the Trust Agreement. The Trustee's offices are located at 100 Wall Street, Suite
1600, New York, New York 10005 and its telephone number is (212) 361-2500.
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent thereof will be indemnified by the Trust and 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
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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.
Pursuant to the Trust Agreement, as compensation for the performance of
its duties under such agreement, the Trustee shall be entitled to payment of
trustee fees and reimbursement of expenses by the Company pursuant to a separate
agreement with the Company, but shall not have any claim against the Trust with
respect thereto.
Event of Default
There are no events of default with respect to the Certificates. If a
Payment Default or an Acceleration occurs, the Trustee will distribute the Terms
Assets to the Certificateholders. See "Description of the
Certificates--Distribution of Term Assets on Payment Default or Acceleration"
herein.
Voting Rights
The ZTF Class Certificateholders will have 50% of the total Voting
Rights, and the Amortizing Class Certificateholders will have 50% of the total
Voting Rights. All Voting Rights with respect to the ZTF Class Certificates will
be allocated among all ZTF Class Certificateholders in proportion to the
respective Certificate Principal Balances of the then-outstanding ZTF Class
Certificates held by such Certificateholders on any date of determination. All
Voting Rights with respect to the Amortizing Class Certificates will be
allocated among all Amortizing Class Certificateholders in proportion to the
respective Certificate Principal Balances of the then-outstanding Amortizing
Class Certificates held by such Certificateholders on any date of determination.
The required percentage of Voting Rights of those Certificates that are
materially adversely affected by any modification or amendment of the Trust
Agreement necessary to consent to such modification or amendment shall be
66-2/3%.
Voting of Term Assets
The Trustee, as holder of the Term Assets, has the right to vote and
give consents and waivers in respect of such Term Assets as permitted by the
depositary with respect thereto and except as otherwise limited by the Trust
Agreement. In the event that the Trustee receives a request from the Term Assets
Issuer for its consent to any amendment, modification or waiver of the Term
Assets or any document relating thereto, or receives any other solicitation for
any action with respect to the Term Assets, 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 of the
Certificates) as the Certificates of the Trust were actually voted or not voted
by the Certificateholders thereof as of a date determined by the Trustee prior
to the date on which such consent or vote is required; provided, however, that,
notwithstanding anything to the contrary stated herein, the Trustee shall at no
time vote in favor of or consent to any matter (i) which would alter the timing
or amount of any payment on the Term Assets, including, without limitation, any
demand to accelerate the Term Assets or (ii) which would result in the exchange
or substitution of any Term Asset pursuant to a plan for the refunding or
refinancing of such Term Asset, except in each case with the unanimous consent
of the Certificateholders and subject to the requirement that such vote or
consent would not, based on an opinion of counsel, materially increase the risk
that the Trust would fail to qualify as a grantor trust for federal income tax
purposes. The Trustee shall have no liability for any failure to act resulting
from Certificateholders' late return of, or failure to return, directions
requested by the Trustee from the Certificateholders.
Evidence as to Compliance
Annual independent audits of the Trust will not be required; however,
the Trust Agreement will provide that within four months following the end of an
Accounting Period, a firm of independent public accountants will furnish a
report to the Depositor, the Rating Agencies and the Trustee to the effect that
such firm has examined
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certain documents and records relating to the administration of the Term Assets
during the related Accounting Period and performed accounting and auditing
procedures set forth in the Trust Agreement which should enable the recipients
of such reports to determine whether such administration was conducted in
compliance with the terms of the Trust Agreement. Such report will identify any
exceptions found during the examination. "Accounting Period" will mean each
twelve-month period ending on the 30th day of June (commencing with the
twelve-month period ending June 30, 1998). The Company reserves the right to
change the timing of Accounting Periods, but no Accounting Period may exceed 12
months.
Termination of the Trust
The Trust shall terminate upon (i) the distribution in kind of the Term
Assets on August 15, 2017, (ii) the payment in full of amounts due and owing on
the Certificates following a Maturity Shortening Redemption, (iii) the
distribution in kind of the Term Assets to the ZTF Class Certificateholders and
Amortizing Class Certificateholders after a Payment Default or an Acceleration
thereof or (iv) the distribution in kind of the Term Assets upon the tender by
an affiliate of the Depositor of 100% of each of the then-outstanding ZTF Class
Certificates and Amortizing Class Certificates in exchange for 100% of the Term
Assets. See "Description of the Trust Agreement--Termination" in the Prospectus.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the United States federal
income tax consequences of an investment in the Certificates by Holders that
acquire their Certificates in their initial offering. The discussion and the
opinions referenced below are based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change. Prospective
investors should note that no rulings have been or are expected to be sought
from the Internal Revenue Service (the "IRS") with respect to any of the United
States federal income tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions. Further, the following
summary does not deal with all United States federal income tax consequences
applicable to all categories of investors, some of which may be subject to
special rules, such as Non-United States Holders (as defined below), banks,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, S corporations, estates and trusts, investors that hold the
Certificates (or have held the Term Assets) as part of a hedge, straddle,
integrated transaction or conversion transaction, or holders whose "functional
currency" is not the United States dollar. Furthermore, it does not address
alternative minimum tax consequences or the indirect effects on the holders of
equity interests in a Certificateholder. In addition, this summary generally is
limited to investors that will hold the Certificates as "capital assets" within
the meaning of Section 1221 of the Internal Revenue Code of 1986 (the "Code").
Investors should consult their own tax advisers to determine the United States
federal, state, local and other tax consequences of the purchase, ownership and
disposition of the Certificates.
As used herein under "Federal Income Tax Consequences," "United States
Holder" or "Holder" means a beneficial holder of a Certificate that is an
individual citizen or resident of the United States, a corporation or, except as
may be provided in regulations, other entity created or organized in or under
the laws of the United States or an estate or trust which is a United States
Person within the meaning of section 7701(a)(30) of the Code. "Non-United States
Holder" means any holder that is not a United States Holder.
Tax Status of the Trust
The characterization of the Trust for federal income tax purposes is
not certain. It is structured as a "grantor trust" and will likely be so
treated. Nonetheless, certain terms of the Trust may be viewed by the Internal
Revenue Service as inconsistent with the rules for qualification as a grantor
trust. In light of this uncertainty, upon the issuance of the Certificates,
Orrick, Herrington & Sutcliffe LLP, special counsel to the Depositor, will
deliver its opinion generally to the effect that, assuming compliance with the
Trust Agreement (and certain other documents) and based on certain
representations of the Depositor, for federal income tax purposes, if the Trust
is determined not to be a grantor trust, it will be characterized as a
partnership and not as an association taxable as a corporation (or publicly
traded partnership treated as an association).
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Prospective investors should be aware that no rulings have been sought
from the IRS, and that legal opinions are not binding on the IRS or the courts.
Accordingly, there can be no absolute assurance that the IRS will agree that the
Trust is a grantor trust. If, contrary to special counsel's opinion, the Trust
is determined to be an association taxable as a corporation or a publicly traded
partnership treated as a corporation, among other consequences, the Trust would
be subject to federal income tax (and similar state income or franchise taxes)
on its income and distributions to Certificateholders would be impaired. In
light of special counsel's opinion, however, (i) the Trust intends for tax
reporting purposes to characterize the Trust as a grantor trust and (ii) except
as specifically discussed otherwise under "Possible Recharacterization of the
Trust as a Partnership and the Amortizing Class Certificates as Debt" or
otherwise indicated herein, the balance of this discussion assumes that the
Trust will be classified as a grantor trust.
Certificateholders will be treated, for federal income tax purposes, as
if they had purchased their pro rata interest of the Trust's underlying assets.
The prospectus supplement relating to the original offering of the Term
Assets indicates that counsel to the Term Assets Issuer advised the Term Assets
Issuer that the Term Assets will constitute indebtedness for United States
federal income tax purposes. Special tax counsel to the Company has made no
investigation of the Term Assets or the circumstances surrounding their issuance
but has assumed that they will be classified for United States federal income
tax purposes as indebtedness of the Term Assets Issuer. The balance of this
discussion assumes that the Term Assets will be so classified.
Income of Certificateholders
Each Certificateholder will be subject to the original issue discount
("OID") rules of the Code and Treasury Regulations with respect to such
Certificate. Under those rules, the Certificateholder (whether on the cash or
accrual method of accounting) will be required to include in income the OID on
the Certificate as it accrues on a daily basis, regardless of when cash payments
are received, using a method reflecting a constant yield as described below.
The amount of OID on the Certificate will be equal to the excess of all
amounts payable on the Certificate over the amount paid to acquire the
Certificate. In general, the amount of OID includible in income in any taxable
year by a Certificateholder is the sum of the "daily portions" of OID on the
Certificate for all days during the taxable year that the Certificateholder owns
the Certificate. The daily portions of OID on a Certificate 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 allocable to each accrual
period is determined by multiplying the "adjusted issue price" (as defined
below) of the Certificate at the beginning of the period by a fraction, the
numerator of which is the annual yield to maturity of the Certificate and the
denominator of which is the number of accrual periods in a year. An "accrual
period" would generally be each period ending on an interest payment date on the
Certificates, although Treasury regulations allow a Certificateholder to elect
other accrual periods of no more than a year in length, as long as each
scheduled payment on the Certificates occurs at the end of an accrual period.
The yield to maturity of a Certificate is determined by each holder based on
that holder's purchase price.
The "adjusted issue price" of the Certificate at the beginning of any
accrual period is the purchase price for a Certificate (i) increased by the
amount of OID allocable to all prior accrual periods and (ii) reduced by the
amount of all payments on the Certificates allocable to the holder in all prior
accrual periods.
The Trustee currently intends for information reporting purposes to
account for OID reportable by Certificateholders by reference to the price paid
for a Certificate by an initial purchaser at the original offering price to the
public, although the amount of OID will differ for other purchasers. Such
purchasers should consult their tax advisers regarding the proper calculation of
OID.
Because a ZTF Class Certificateholder will not be receiving current
distributions of interest, OID will be reported as income prior to the receipt
of cash attributable to such income and (prior to the ZTF Class Accrual
Commencement Date) the amount of OID includible in income will increase each
year.
Purchase and Sale of a Certificate or Term Assets
S-15
<PAGE>
A Certificateholder's tax basis in a Certificate generally will equal
the cost of the Certificate increased by any amounts includible in income as
OID, and reduced by any payments made on the Certificate. If a Certificate is
sold, capital gain or loss will be recognized equal to the difference between
the proceeds of sale and the Certificateholder's adjusted basis in the
Certificate. Assuming that all holders receive solely Term Assets, no gain or
loss will be recognized by a holder upon the exchange of Term Assets for ZTF
Class Certificates of equal principal amount on August 15, 2017. It is not clear
whether gain or loss will be recognized upon the redemption of the Certificates
in exchange for Term Assets following a Payment Default or an Acceleration on
the Term Assets.
Possible Recharacterization of the Trust as a Partnership and the Amortizing
Class Certificates as Debt
As indicated above under "Tax Status of the Trust," it is possible that
the IRS will seek to recharacterize the Trust as a partnership. If the IRS were
to successfully recharacterize the Trust as a partnership, the Trust would not
be subject to federal income tax. Further, under Treasury Regulation 1.761-2,
certain partnerships may "elect out" of subchapter K of the Code (partnership
tax accounting). Although its eligibility is subject to uncertainty, the Trust
intends to make this election. Assuming that it is so eligible, each
Certificateholder will be required to report its respective share of the items
of income, deductions, and credits of the organization on their respective
returns (making such elections as to individual items as may be appropriate) in
a manner consistent with the exclusion of the Trust from partnership tax
accounting. Such reporting should be substantially similar to the income tax
reporting that would be required under the grantor trust rules. In mutual
consideration for each Holder's purchase of a Certificate, each such Holder is
deemed to consent to the Trust's making of a protective election out of
subchapter K of the Code.
If the election to be excluded from the partnership tax accounting
provisions of the Code is not effective, among other consequences, (i) the Trust
would be required to account for its income and deductions at the Trust level
and to utilize a taxable year for reporting purposes, (ii) the information
reporting rules applicable to partnerships would apply and (iii) each Holder
would be required to separately take into account such Holder's distributive
share of income and deductions of the Trust. A Holder would take into account
its distributive share of Trust income and deductions for each taxable year of
the Trust in the Holder's taxable year which ends with or within the Trust's
taxable year. A Holder's share of the income of the Trust computed at the Trust
level would not necessarily be the same if computed under the OID rule described
above under "Income of Certificateholders" and, in particular, may not take
account of any difference in the yield on the Certificate to the Holder based on
the Certificateholder's purchase price and the yield on the Term Assets
determined at the Trust level.
Although unlikely, it is also possible that the Amortizing Class
Certificates may be treated as newly issued debt instruments of the Trust. In
such a case they would generally be treated as not having been issued with
original issue discount. However, as debt instruments, the Amortizing Class
Certificates would be debt instruments described in section 1272(a)(6) of the
Code. Special rules apply to such debt instruments acquired with market discount
or premium and, in general, such instruments may not be integrated with hedging
instruments under Treasury Regulation section 1.1275-6.
In the unlikely event that the Amortizing Class Certificates are
treated as debt instruments issued by the Trust, ZTF Class Certificateholders
would be treated as owning indirect interests in the (whole) Term Assets and the
Amortizing Class Certificates would be treated as acquisition indebtedness.
Among other consequences, income on the ZTF Class Certificates would be included
in unrelated business taxable income, and thus subject to tax, in the hands of
tax-exempt investors.
State and Other Tax Consequences
In addition to the federal income tax consequences described above,
potential investors should consider the state, local and foreign tax
consequences of the acquisition, ownership and disposition of the Certificates.
State, local and foreign tax law may differ substantially from federal tax law,
and this discussion does not purport to describe any aspect of the tax law of a
state or other jurisdiction (including whether the Trust, if treated as a
partnership for federal income tax purposes, would be treated as a partnership
under any state or local jurisdiction). Therefore, prospective purchasers should
consult their own tax advisers with respect to such matters.
S-16
<PAGE>
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and Section 4975 of 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, including an individual retirement
account ("IRA") or Keogh plan ("Keogh") or (c) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity (each,
a "Plan").
In accordance with ERISA's general 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 overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and Section 4975 of
the Code prohibit certain transactions involving the assets of a Plan and
persons who have specified relationships to the Plan, i.e., "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code (collectively, "Parties in Interest"). Thus, a Plan
fiduciary considering an investment in Certificates should also consider whether
such an investment might constitute or give rise to a prohibited transaction
under ERISA or Section 4975 of the Code. The Term Assets Issuer, the
Underwriter, the Trustee and their respective affiliates may be Parties in
Interest with respect to many Plans.
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 deemed extension of credit
between the Term Assets Issuer and the holder of a Certificate (as a result of
the Term Assets being deemed to be plan assets) might be prohibited transactions
under ERISA and Section 4975 of the Code unless exemptive relief were available
under an applicable exemption issued by the United States Department of Labor
(the "DOL"). Neither ERISA nor the Code defines the term "plan assets." Under
Section 2510.3-101 of the DOL regulations (the "Regulation"), a Plan's assets
may include the assets of an entity if the Plan acquires an "equity interest" in
such entity. Thus, if a Plan acquired a Certificate, for certain purposes
(including the prohibited transaction provisions of ERISA and Section 4975 of
the Code), the Plan would be considered to own an undivided interest in the
underlying assets of the Trust unless an exception applied under the Regulation.
Each purchaser of a ZTF Class Certificate or Amortizing Class
Certificate, as applicable, and each fiduciary who causes any entity to purchase
a Certificate will be deemed to have represented and warranted that either (i)
it is neither a Plan nor an entity the assets of which are deemed to be "plan
assets" or (ii) its purchase and holding of such Certificate will not constitute
or result in a non-exempt prohibited transaction. In this regard, prospective
Plan investors as to which the Term Assets Issuer, the Underwriter or any of
their affiliates may be a Party in Interest may wish to consider the exemptive
relief available under the following prohibited transaction class exemptions
("PTCEs"): (A) the qualified in-house asset manager ("INHAM") exemption (PTCE
96-23), (B) the insurance company general account exemption (PTCE 95-60), (C)
the bank collective investment fund exemption (PTCE 91-38), (D) the insurance
company pooled separate account exemption (PTCE 90-1), (E) the qualified
professional asset manager ("QPAM") exemption (PTCE 84-14), and (F) the
broker-dealer exemption (PTCE 75-1).
Nothing herein shall be construed as a representation that an
investment in the Certificates would meet any or all of the relevant legal
requirements with respect to investments by, or is appropriate for, Plans
generally or any particular Plan. Any Plan or any other entity the assets of
which are deemed to be "plan assets," such as an insurance company investing
assets of its general account, proposing to acquire Certificates should consult
with its counsel.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated September 10, 1997 (the "Underwriting Agreement"), the Company
has agreed to sell and Salomon Brothers Inc (an affiliate of the Company) has
agreed to purchase, all the ZTF Class Certificates and Amortizing Class
Certificates.
S-17
<PAGE>
The Underwriter has agreed, subject to the terms and conditions set
forth in the Underwriting Agreement, to purchase all Certificates offered
hereby, if any such Certificates are purchased, at a price of $73,334,136.07,
which will constitute the aggregate proceeds to the Company, before deducting
expenses estimated at $150,000.
The Company has been advised by the Underwriter that it proposes to
offer the Certificates from time to time in negotiated transactions or otherwise
at varying prices to be determined at the time of sale. Any profit on the resale
of Certificates by the Underwriter will constitute underwriting compensation
under the Securities Act.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriter may be required
to make in respect thereof.
Salomon Brothers Inc is an affiliate of the Company, and the
participation by Salomon Brothers Inc in the offering of the Certificates
complies with Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the establishment of the Trust and the issuance of
the Certificates that the Certificates be rated identically to the Term Assets
by both Moody's and Standard & Poor's. Moody's and Standard & Poor's have rated
the Term Assets "Baa1" and "BBB+," respectively.
The ratings address the likelihood of the receipt by Certificateholders
of payments required under the Trust Agreement, and are based primarily on the
credit quality of the Term Assets.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of any other security rating.
The Company has not requested a rating on the Certificates by any
rating agency other than the Rating Agencies. However, there can be no assurance
as to whether any other rating agency will rate the Certificates, or, if it
does, what rating would be assigned by any such other rating agency. A rating on
the Certificates by another rating agency, if assigned at all, may be lower than
the ratings assigned to the Certificates by the Rating Agencies.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon
for the Company and for the Underwriter by Orrick, Herrington & Sutcliffe LLP,
New York, New York.
S-18
<PAGE>
INDEX OF TERMS
Acceleration ..............................................................S-12
Accounting Period .........................................................S-14
Administrative Action......................................................S-11
Amortizing Class Certificates.............................................1, ii
Amortizing Class Final Distribution Date.....................................ii
Amortizing Class Periodic Interest.........................................S-10
Amortizing Class Shortened Maturity Date Payment..................ii, S-3, S-11
Calculation Agent ...........................................................ii
Certificate Principal Balance...............................................S-9
Certificateholders...........................................................ii
Certificates .................................................................1
Clearing Agency ............................................................S-9
Closing Date ............................................................1, S-1
Code .................................................................S-4, S-14
Collection Period .........................................................S-11
Commission .................................................................S-8
Company ......................................................................1
Definitive Certificates.....................................................S-9
Depositor ....................................................................1
Distribution Date ...........................................................ii
DOL .......................................................................S-17
DTC .........................................................................ii
ERISA ................................................................S-4, S-16
Exchange Act ...............................................................S-7
Fixed Payment ...............................................................ii
Holder ....................................................................S-14
IBM ..........................................................................1
INHAM .....................................................................S-17
Interest Accrual Period....................................................S-10
Interest Collections.......................................................S-11
IRA .......................................................................S-16
IRS .......................................................................S-14
Keogh .....................................................................S-16
Maturity Shortening ....................................................ii, S-3
Maturity Shortening Redemption..........................................ii, S-3
Method of Distribution........................................................1
Moody's .................................................................1, S-5
Non-United States Holder...................................................S-14
NYSE .........................................................................1
OID .......................................................................S-15
Participants ................................................................ii
Pass-Through Rate ...........................................................ii
Payment Default ...........................................................S-12
Plan ......................................................................S-16
Plan assets ................................................................S-4
Prospectus ...................................................................1
PTCEs .....................................................................S-17
QPAM .....................................................................S-17
Rating Agencies ..............................................................1
Record Dates ...............................................................S-4
Regulation ................................................................S-17
Salomon ......................................................................1
Securities Act .............................................................S-8
S-19
<PAGE>
Shortened Maturity Date......................................................ii
Shortened Maturity Date Payment...................................ii, S-3, S-11
Special Considerations.......................................................ii
Specified Currency..........................................................S-8
Standard & Poor's .......................................................1, S-5
Tax Event .................................................................S-11
Term Assets ..................................................................1
Term Assets Issuer.......................................................1, S-6
Term Assets Payment Date....................................................S-8
Term Assets Prospectus........................................................1
Term Assets Registration Statement..........................................S-8
Trust ........................................................................1
Trust Agreement .........................................................1, S-3
Trust Indenture Act ........................................................S-7
Trustee ......................................................................1
Underwriter ..................................................................1
Underwriting Agreement.....................................................S-17
United States Holder.......................................................S-14
Yield to Amortizing Class Final Distribution Date.............................1
Zero-To-Full .................................................................1
ZTF ..........................................................................1
ZTF(SM) Class Certificates....................................................1
S-20
<PAGE>
APPENDIX A
IDENTIFICATION OF TERM ASSETS
Terms of Term Assets
Term Assets Issuer: Apache Corporation
Term Assets: Fifty Year 7 3/8% Debentures, due August 15,
2047
Dated: August 13, 1997
Original Principal Maturity Date: August 15, 2047
Original Par Value Amount Issued: $150,000,000
CUSIP Number: 037411AM7
Stated Interest Rate: 7 3/8%
Interest Payment Dates: February 15 and August 15
Mode of Payment of Term Assets: By credit to the account of the holder at DTC
Par Value Amount of Term Assets Deposited
Under Trust Agreement: $75,000,000
The Term Assets will be held by the Trustee for the Owners of
Certificates as book-entry credits to an account of the Trustee at DTC.
Available Information
The Term Assets Issuer is subject to the information
requirements of the Securities Exchange Act of 1934 and in accordance therewith
files reports and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Term Assets Issuer
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 75 Park Place, New York, New York 10007.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. In addition, certain material described
above and other information will also be available for inspection at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York and the
Midwest Stock Exchange, 120 South LaSalle Street, Chicago, Illinois.
S-21
<PAGE>
APPENDIX B
Amortizing Class Certificates
Schedule of Amortizing Payments
<TABLE>
<CAPTION>
Total
Amortizing
Distribution Date Interest Principal Payment Balance
----------------- ---------- --------- ---------- -------
<S> <C> <C> <C> <C>
February 15, 1998 $2,119,693 $676,662 $2,796,354 $57,395,338
August 15, 1998 2,071,972 693,653 2,765,625 58,701,685
February 15, 1999 2,046,931 718,694 2,765,625 55,982,991
August 15, 1999 2,020,986 744,639 2,765,625 55,238,352
February 15, 2000 1,994,105 771,520 2,765,625 54,466,831
August 15, 2000 1,966,253 799,372 2,765,625 53,667,459
February 15, 2001 1,937,395 828,230 2,765,625 52,839,229
August 15, 2001 1,907,496 858,129 2,765,625 51,981,100
February 15, 2002 1,876,518 889,107 2,765,625 51,091,993
August 15, 2002 1,844,421 921,204 2,765,625 50,170,789
February 15, 2003 1,811,165 954,460 2,765,625 49,216,330
August 15, 2003 1,776,709 988,916 2,765,625 48,227,414
February 15, 2004 1,741,010 1,024,615 2,765,625 47,202,799
August 15, 2004 1,704,021 1,061,604 2,765,625 46,141,195
February 15, 2005 1,665,697 1,099,928 2,765,625 45,041,267
August 15, 2005 1,625,990 1,139,635 2,765,625 43,901,632
February 15, 2006 1,584,849 1,180,776 2,765,625 42,720,856
August 15, 2006 1,542,223 1,223,402 2,765,625 41,497,453
February 15, 2007 1,498,058 1,267,567 2,765,625 40,229,887
August 15, 2007 1,452,299 1,313,326 2,765,625 38,916,560
February 15, 2008 1,404,888 1,360,737 2,765,625 37,555,823
August 15, 2008 1,355,765 1,409,860 2,765,625 36,145,963
February 15, 2009 1,304,869 1,460,756 2,765,625 34,685,208
August 15, 2009 1,252,136 1,513,489 2,765,625 33,171,719
February 15, 2010 1,197,499 1,568,126 2,765,625 31,603,593
August 15, 2010 1,140,890 1,624,735 2,765,625 29,978,857
February 15, 2011 1,082,237 1,683,388 2,765,625 28,295,469
August 15, 2011 1,021,466 1,744,159 2,765,625 26,551,311
February 15, 2012 958,502 1,807,123 2,765,625 24,744,188
August 15, 2012 893,265 1,872,360 2,765,625 22,871,828
February 15, 2013 825,673 1,939,952 2,765,625 20,931,876
August 15, 2013 755,641 2,009,984 2,765,625 18,921,892
February 15, 2014 683,080 2,082,545 2,765,625 16,839,347
August 15, 2014 607,900 2,157,725 2,765,625 14,681,623
February 15, 2015 530,007 2,235,618 2,765,625 12,446,004
August 15, 2015 449,301 2,316,324 2,765,625 10,129,680
February 15, 2016 365,681 2,399,944 2,765,625 7,729,736
August 15, 2016 279,043 2,486,582 2,765,625 5,243,155
February 15, 2017 189,278 2,576,347 2,765,625 2,666,808
August 15, 2017 96,272 2,666,808 2,763,080 0
</TABLE>
S-22
<PAGE>
APPENDIX C
Amounts Distributable Upon Maturity
Shortening Redemption
<TABLE>
<CAPTION>
Distribution Amortizing Class ZTF
Distribution Date Amounts Certificates Certificates
----------------- ------------ ---------------- ------------
<S> <C> <C> <C>
February 15, 1998 $75,000,000 $57,395,338 $17,604,662
August 15, 1998 75,000,000 56,701,685 18,298,315
February 15, 1999 75,000,000 55,982,991 19,017,009
August 15, 1999 75,000,000 55,238,352 19,761,648
February 15, 2000 75,000,000 54,466,831 20,533,169
August 15, 2000 75,000,000 53,667,459 21,332,541
February 15, 2001 75,000,000 52,839,229 22,160,771
August 15, 2001 75,000,000 51,981,100 23,018,900
February 15, 2002 75,000,000 51,091,993 23,908,007
August 15, 2002 75,000,000 50,170,789 24,829,211
February 15, 2003 75,000,000 49,216,330 25,783,670
August 15, 2003 75,000,000 48,227,414 26,772,586
February 15, 2004 75,000,000 47,202,799 27,797,201
August 15, 2004 75,000,000 46,141,195 28,858,805
February 15, 2005 75,000,000 45,041,267 29,958,733
August 15, 2005 75,000,000 43,901,632 31,098,368
February 15, 2006 75,000,000 42,720,856 32,279,144
August 15, 2006 75,000,000 41,497,453 33,502,547
February 15, 2007 75,000,000 40,229,887 34,770,113
August 15, 2007 75,000,000 38,916,560 36,083,440
February 15, 2008 75,000,000 37,555,823 37,444,177
August 15, 2008 75,000,000 36,145,963 38,854,037
February 15, 2009 75,000,000 34,685,208 40,314,792
August 15, 2009 75,000,000 33,171,719 41,828,281
February 15, 2010 75,000,000 31,603,593 43,396,407
August 15, 2010 75,000,000 29,978,857 45,021,143
February 15, 2011 75,000,000 28,295,469 46,704,531
August 15, 2011 75,000,000 26,551,311 48,448,689
February 15, 2012 75,000,000 24,744,188 50,255,812
August 15, 2012 75,000,000 22,871,828 52,128,172
February 15, 2013 75,000,000 20,931,876 54,068,124
August 15, 2013 75,000,000 18,921,892 56,078,108
February 15, 2014 75,000,000 16,839,347 58,160,653
August 15, 2014 75,000,000 14,681,623 60,318,377
February 15, 2015 75,000,000 12,446,004 62,553,996
August 15, 2015 75,000,000 10,129,680 64,870,320
February 15, 2016 75,000,000 7,729,736 67,270,264
August 15, 2016 75,000,000 5,243,155 69,756,845
February 15, 2017 75,000,000 2,666,808 72,333,192
</TABLE>
S-23
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement or the Prospectus in connection with the offer made by
this Prospectus Supplement and the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Underwriter. This Prospectus Supplement and the Prospectus do not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus
Supplement or the accompanying Prospectus, nor any sale made hereunder and
thereunder, shall, under any circumstances, create any implication that the
information contained herein and in the accompanying Prospectus is correct as of
any time subsequent to the date hereof; however, if any material change occurs
while this Prospectus Supplement or the accompanying Prospectus is required by
law to be delivered, this Prospectus Supplement or the accompanying Prospectus
will be amended or supplemented accordingly.
S-24
<PAGE>
EXHIBIT A
---------
The Deed of Trust constitutes and is defined as follows:
That certain Colorado Deed of Trust dated September 8, 1987 from Guest
Mansions, Inc. to the Public Trustee of Arapahoe County recorded
September 9, 1987 in Arapahoe County in Book 5257 at Page 739 as
Reception No. 2886657, as assigned by Megapolitan in instrument
recorded September 15, 1987, in Book 5261 at Page 138 as Reception
No. 2888481, to First Federal Savings and Loan Association of Toledo,
Ohio ("First Federal") as succeeded by Order No.91-52 of the Office of
Thrift Supervision, as conservator of First Federal, the Resolution
Trust Corporation (the "RTC").
On or about October 21, 1991, by the RTC to Xerox Financial Services
Life Insurance Company by Assignment of Deed of Trust recorded
October 23, 1991 in Book 6280 at Page 138 as Reception No. 9100088529,
and as amended by First Amendment To and Assumption of Colorado Deed
of Trust recorded March 17, 1994 in Book 7461 at Page 684 and as
secured by Oakre Life Insurance Company by merger/consolidation/
acquisition and as renewed and extended, by Renewal and Extension
Agreement executed effective as of March 11, 1997, and recorded
June 30, 1997 as Reception No. A707077282.
Indemnification. Borrower shall indemnify, defend and save and hold
harmless Senior Lender and its directors, officers, agents, attorneys
and employees (collectively, the "Indemnitees") from and against, and
shall pay on demand, any and all losses, liabilities, damages, costs,
expenses and charges (including the reasonabie fees, charges and
disbursements of legal counsel) actually incurred by any Indemnitee as
a result of (a) any failure of the Borrower to perform any of its
obligations under the Loan Documents, as amended, arising from and
after the date hereof, (b) the inaccuracy or incompleteness of any
representation or warranty made by Borrower, (c) injury or death to
persons or damage to property or other loss occurring on or in
connection with the Property and improvements thereon, whether caused
by the negligence or any other act or omission of the Borrower or any
person claiming through Borrower, (d) negligent, faulty, inadequate or
defective design, building, construction or maintenance or any other
condition or otherwise, and (e) any claim, demand or cause of action,
or any action or other proceeding, whether meritorious or not, brought
or asserted against any Indemnitee which relates to or arises out of
the Loan Documents (as amended or extended, as the case may be), the
Property or any transaction contemplated by, or the relationship
between the Borrower and the Lender under, the Loan Documents (as
amended or extended, as the case may be), provided that no Indemnitee
shall be entitled to indemnification under this paragraph 6 for
matters caused solely by such Indemnitee's gross negligence or willful
misconduct. Except as otherwise provided in the Loan Documents (as
amended
A-1
<PAGE>
or extended, as the case may be), any obligation of Borrower under
this paragraph 6 shall survive the making and repayment of the
Indebtedness secured by the Loan Documents, (as amended).
Assignor's Warranties and Representations. Assignor hereby warrants
and represents that as of the execution of this Assumption and
Ex_____ Agreement owner and lender of the Note and general party
under the Loan Document, as amended and that Assignor has not
previously assigned, transferred, participated, or otherwise
encumbered Assignor's interest in and to the Loan or any of the Loan
Documents.
Senior Lender's Assumption. Assignor hereby assigns to Senior Lender
and Senior Lender hereby assumes from Assignor all right, title and
interest of Assignor as lender under the Deed of Trust and the other
Loan Documents, (as amended or extended, as the case may be). Each of
Borrower and Assignor agree that Senior Lender is not assuming any
claims or causes of action against Assignor arising from or relating
to the Loan for any period prior to the date hereof.
Borrower's Ratification and Affirmation. Borrower hereby ratified and
affirms all covenants, obligations and liabilities of Borrower under
the Deed of Trust and all of the other Loan Documents, (as amended or
extended, as the case may be), subject, however, to the non-recourse
provisions of the Deed of Trust. Borrower further agrees, affirms and
acknowledges that:
(a) Borrower does not have and will not assert any claim, defense,
counterclaim or right of offset against Senior Lender with
respect to the Indebtedness or any of the Loan Documents, (as
amended or extended, as the case may be); and
(b) Borrower will execute any and all documents, and do all other
acts and things necessary to perfect the rights and security
intended to be granted to Senior Lender under the Extended
Deed of Trust and hereunder and to implement the agreements
intended to be documented pursuant hereto.
A-2
