<PAGE>
Rule 424(b)(3)
File No. 33-55860
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
Prospectus Supplement SUBJECT TO COMPLETION DATED JUNE 9, 1997
(To Prospectus Dated June __, 1997)
TIERS(sm) CORPORATE BOND-BACKED CERTIFICATES TRUST NB CAPITAL 1997-1 TIERS(sm)
Corporate Bond-Backed Certificates, Series NB Capital 1997-1
<TABLE>
<S> <C>
ZTF(R)Class: $25,000,000 Certificate Principal Balance, 0% Pass-Through Rate from June 17, 1997 to December 15,
2001; 7.83% Pass-Through Rate from December 15, 2001*/; due December 15, 2026
-
Amortizing Class: $_________ initial Certificate Principal Balance, semiannual Fixed Payments of principal and interest
until December 15, 2001.*/
</TABLE>
Evidencing fractional interests in $25,000,000 7.83% Capital Securities
due December 15, 2026 issued by NB Capital Trust II, a trust created by
NationsBank Corporation
*/ Subject to the Payment Deferral provisions discussed below.
Structured Products Corp.
Depositor
The TIERS(sm) Corporate Bond-Backed Certificates, Series NB Capital 1997-1 (the
"Certificates") offered hereby will represent two classes of fractional
undivided beneficial interests in TIERS(sm) Corporate Bond-Backed Certificates
Trust NB Capital 1997-1 (the "Trust") to be formed pursuant to the Trust
Agreement, dated as of June 17, 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
NB Capital 1997-1 Supplement, dated as of June 17, 1997 (collectively, the
"Trust Agreement"). The property of the Trust will consist principally of
$25,000,000 aggregate principal amount of 7.83% Capital Securities due December
15, 2026 (the "Term Assets") issued by NB Capital Trust II (the "Term Assets
Issuer"), having the characteristics described in a prospectus dated November
27, 1996 and a supplement thereto dated December 10, 1996 (together, the "Term
Assets Prospectus") and representing ownership of 7.83% Junior Subordinated
Notes of NationsBank Corporation (the "Junior Subordinated Notes"). The Term
Assets were issued and sold as part of an underwritten public offering of
$365,000,000 aggregate principal amount of such securities. In the event of a
dissolution of NB Capital Trust II, the Trust may receive the Junior
Subordinated Notes in exchange for the 7.83% Capital Securities, in which case
the Junior Subordinated Notes shall become the Term Assets of the Trust and
NationsBank Corporation shall become the Term Assets Issuer.
The Term Assets will be acquired by the Trustee on behalf of the Trust with the
net proceeds of the sale of the Certificates and the consideration paid to the
Trust for the Call Warrants (as defined herein). The Call Warrants are not
offered hereby. Terms used but not otherwise defined herein are defined in the
Prospectus dated June ___, 1997 attached hereto (the "Prospectus").
(cover continued on next page)
The Zero-To-Full(R) Class Certificates (the "ZTF(R) Class Certificates") have
been authorized for listing, upon official notice of issuance, with the New York
Stock Exchange ("NYSE").
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 "a1" and "A-," respectively.
---------------
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 ____% of the
Certificate Principal Balance thereof. The Underwriter has agreed to purchase
the Amortizing Class Certificates (the "Amortizing Class Certificates") from the
Company at ____% of the initial Certificate Principal Balance thereof plus
accrued interest, if any, calculated at an annual rate of ____% compounded
semiannually (the "Amortizing Class Yield to Earliest Maturity Date") from June
15, 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 June 17, 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"(sm) service mark.
Salomon Brothers Inc
The date of this Prospectus Supplement is June __, 1997.
<PAGE>
(cover page continued)
The Certificates will be issued in two classes. The ZTF Class Certificates
evidence fractional undivided beneficial interests in all principal payments on
the Term Assets, and in interest accrued on the $25,000,000 aggregate principal
amount of the Term Assets on and after December 15, 2001 at a rate of 7.83% per
annum (the "Pass-Through Rate"), compounded semiannually; provided, that no
distributions will be made on the ZTF Class Certificates until the date the
Amortizing Class Certificates are paid in full (the "Cross-Over Date"). Absent a
Payment Deferral (as defined herein), the Cross-Over Date will be December 15,
2001. The Amortizing Class Certificates evidence fractional undivided beneficial
interests in all payments of interest accrued and paid on the Term Assets on or
before December 15, 2001; provided, that in the event of a Payment Deferral
commencing on or prior to, and continuing after, December 15, 2001, the Fixed
Payments (as defined herein) otherwise distributable on the Amortizing Class
Certificates on or prior to December 15, 2001 will be deferred and paid after
December 15, 2001, together with interest accrued on such deferred Fixed
Payments at the Pass-Through Rate, compounded semiannually.
The Term Assets Issuer has the right to defer payments of interest on the Term
Assets for a period (a "Non-Payment Period") not exceeding 10 consecutive
semiannual periods from the last date on which interest was paid (and in no
event extending beyond December 15, 2026 (the "Stated Maturity")). At the end of
any such Non-Payment Period, the Term Assets Issuer will pay all interest then
accrued and unpaid together with interest thereon compounded semiannually at the
Pass-Through Rate to the extent permitted by applicable law. The commencement of
a Non-Payment Period by the Term Assets Issuer will result in deferral of all
interest payments on the Term Assets (a "Payment Deferral") until the end of
such Non-Payment Period.
Distributions on the Certificates, to the extent described below for each class
and subject to any Payment Deferral, will be made semiannually on the 15th day
of each June and December, or if any such day is not a Business Day then on the
immediately following Business Day, commencing December 15, 1997 (each, a
"Distribution Date").
No distributions are scheduled to accrue on the ZTF Class Certificates prior to
December 15, 2001, or to be made on the ZTF Class Certificates prior to June 15,
2002. Distributions on the ZTF Class Certificates will consist of interest
accruing at the Pass-Through Rate on and after December 15, 2001 on the
outstanding Certificate Principal Balance thereof (which will be equal to the
$25,000,000 aggregate principal amount of the Term Assets) and all amounts
allocable to principal of (but not premium on) the Term Assets. The holders of
the ZTF Class Certificates will receive a distribution of all amounts allocable
to principal on such ZTF Class Certificates on the Stated Maturity.
Absent a Payment Deferral, distributions on the Amortizing Class Certificates
will consist of equal semiannual installments of principal and interest through
December 15, 2001 (each, a "Fixed Payment"). Each Fixed Payment will be
allocated between interest accrued at a rate equal to the Amortizing Class Yield
to Earliest Maturity Date on the then-outstanding Certificate Principal Balance
of the Amortizing Class Certificates, and the repayment of principal. Absent a
Payment Deferral, the Amortizing Class Certificates will be paid in full on
December 15, 2001; however, in the event of a Payment Deferral, such payment may
occur as late as June 15, 2006.
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 Under the Declaration."
Term Assets may be purchased from the Trust pursuant to a Warrant Exercise (as
defined herein) by and at the option of each holder of a Call Warrant (a
"Warrantholder") at any time after the Cross-Over Date. In such event, ZTF Class
Certificates with a Certificate Principal Balance equal to the principal amount
of the Term Assets subject to such Call Warrant will be redeemed (any such
redemption, a "Warrant Exercise ZTF Redemption") at a price equal to $1,000 per
ZTF Class Certificate plus accrued and unpaid interest thereon at the
Pass-Through Rate to the date of redemption (the "ZTF Class Redemption Price").
See "Special Considerations-Maturity and Yield Considerations" and "Description
of the Certificates-Purchase of Term Assets and Redemption of ZTF Class
Certificates" herein.
The Term Assets may be redeemed by the Term Assets Issuer in whole but not in
part prior to December 15, 2006 upon the occurrence of a Special Event (as
defined herein), at a price which will at least equal the principal amount of
the Term Assets plus accrued and unpaid interest thereon at the Pass-Through
Rate. In such event, the Certificates will be redeemed (a "Special Event
Redemption"). Each holder of a ZTF Class Certificate will be paid a redemption
price equal to its Accreted Amount (as defined herein). Each holder of an
Amortizing Class Certificate will be paid its Certificate Principal Balance plus
accrued and unpaid interest at the Amortizing Class Yield to Earliest Maturity
Date to the date of redemption. See "Description of the Certificates-Special
Event Redemption Following Special Event" herein. In the event of a Special
Event Redemption, the Call Warrants will be deemed automatically exercised with
respect to the entire principal amount of Term Assets (without the requirement
of any advance notice by the Warrantholders) and the proceeds of redemption
received by the Trustee from the Term Assets Issuer will be applied first to pay
the applicable redemption prices to the holders of the redeemed ZTF Class
Certificates and Amortizing Class Certificates, with the balance of such
proceeds, if any, being remitted pro rata to each Warrantholder as a cash
settlement of the deemed exercise of its Call Warrant. Upon such deemed exercise
of the Call Warrants, no payment of the Warrant Exercise Purchase Price (as
defined herein) will be due from any Warrantholder.
The Amortizing Class Certificates will be paid in full no later than June 15,
2006. The Term Assets may be redeemed by the Term Assets Issuer in whole or part
at any time on or after December 15, 2006 (an "Optional Redemption") at a price
which will decline ratably on each December 15 from 103.915% on December 15,
2006, to 100% on December 15, 2016 and will thereafter remain constant, in each
case plus accrued interest to the date of redemption at the Pass-Through Rate.
In the event of an Optional Redemption, the Call Warrants will be deemed
automatically exercised with respect to a Certificate Principal Balance of the
ZTF Class Certificates equal to the principal amount of Term Assets subject to
Optional Redemption (without the requirement of any advance notice by the
Warrantholders), and the proceeds of redemption received by the Trustee from the
Term Assets Issuer will be applied first to pay the ZTF Class Redemption Price
(as defined herein) to the holders of the redeemed ZTF Class Certificates, with
the balance of such proceeds, if any, being remitted to the related
Warrantholders as a cash settlement of the deemed exercise of their Call
Warrants. Upon such deemed exercise of the Call Warrants, no payment of the
Warrant Exercise Purchase Price will be due from any Warrantholder.
The Term Assets Issuer is not participating in, and will not receive any
proceeds in connection with, the sale of the Certificates.
(ii)
<PAGE>
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 __, 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.
(iii)
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF TERMS............................................................S-1
SPECIAL CONSIDERATIONS......................................................S-9
FORMATION OF THE TRUST.....................................................S-10
USE OF PROCEEDS............................................................S-10
THE TERM ASSETS ISSUER.....................................................S-10
DESCRIPTION OF THE TERM ASSETS.............................................S-11
DESCRIPTION OF THE CERTIFICATES............................................S-12
YIELD ON THE CERTIFICATES..................................................S-18
DESCRIPTION OF THE TRUST AGREEMENT.........................................S-18
FEDERAL INCOME TAX CONSEQUENCES............................................S-22
ERISA CONSIDERATIONS.......................................................S-26
METHOD OF DISTRIBUTION.....................................................S-27
RATINGS ..................................................................S-28
LEGAL OPINIONS.............................................................S-28
INDEX OF TERMS.............................................................S-29
APPENDIX A - Identification of the Term Assets
APPENDIX B - Amortizing Class Certificates--Schedule of Amortizing
Payments Absent Payment Deferral
ZTF Class Certificates--Schedule of Accretion Through
December 15, 2001 Absent Payment Deferral
(iv)
<PAGE>
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 NB
Capital 1997-1. The Trust will be formed pursuant to
the Trust Agreement dated as of June 17, 1997, between
Structured Products Corp., as depositor, and First Trust
of New York, National Association, as trustee, as
supplemented by the Series NB Capital 1997-1
Supplement dated as of June 17, 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 NB
Capital 1997-1. 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............................. $25,000,000 aggregate Certificate Principal Balance, due
on the Stated Maturity. No distributions are scheduled
to accrue on the ZTF Class Certificates prior to
December 15, 2001, or to be made on the ZTF Class
Certificates prior to June 15, 2002. Distributions on the
ZTF Class Certificates will consist of (i) interest at the
Pass-Through Rate accruing on and after December 15,
2001 on the outstanding Certificate Principal Balance
thereof (which will be equal to the $25,000,000
aggregate principal amount of the Term Assets) and
distributable on each Distribution Date thereafter, and
(ii) all amounts allocable to principal of (but not
premium on) the Term Assets and distributable on the
Stated Maturity or earlier redemption; provided, that no
distributions of interest on the ZTF Class Certificates
will be made during a Non-Payment Period on the Term
Assets, and at the end of such Non-Payment Period,
such interest will be distributed on the ZTF Class
Certificates together with interest thereon (to the extent
permitted by applicable law) at the Pass-Through Rate
compounded semiannually.
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Interest Distributions on the
ZTF Class Certificates............................. 0% per annum to but excluding December 15, 2001, and
7.83% per annum on each Distribution Date from
December 15, 2001 to the Stated Maturity, subject to the
payment deferral provisions of the Term Assets
described in "Description of the Term Assets--Payment
Deferral" herein.
ZTF Class Final Distribution ...................... The holders of the ZTF Class Certificates will receive a
distribution of all amounts allocable to principal on the
Term Assets on the ZTF Class Final Distribution Date,
which shall be the earlier of (i) the date of the Warrant
Exercise ZTF Redemption which results in the
redemption of all remaining ZTF Class Certificates, and
(ii) December 15, 2026, which is the Stated Maturity.
Amortizing Class Certificates...................... $______________ aggregate initial Certificate Principal
Balance. Absent a Payment Deferral, distributions on the
Amortizing Class Certificates will consist of semiannual
Fixed Payments payable on each Distribution Date up to
and including December 15, 2001. Each Fixed Payment
will be in an amount equal to the product of (i) 7.83%,
(ii) 180 divided by 360, and (iii) $25,000,000. Each
Fixed Payment payable on the Amortizing Class
Certificates will be allocated between interest accrued at
the Amortizing Class Yield to Earliest Maturity Date on
the then-outstanding aggregate Certificate Principal
Balance of the Amortizing Class Certificates, and return
of principal to Certificateholders, according to the table
attached as Appendix B hereto (the "Amortization
Table"). 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 an
acceleration of the Term Assets in connection with a
Special Event or a Declaration Event of Default, the
Amortizing Class Certificateholders have no right to
any portion of the principal payments on the Term
Assets. Furthermore, in the event of a Payment
Deferral commencing on or prior to December 15, 2001,
Fixed Payments will not be distributed semiannually on
the Amortizing Class Certificates, but will be deferred
until the end of the related Non-Payment Period, at
which time the holders of the Amortizing Class
Certificates will receive a distribution of the due and
unpaid Fixed Payments otherwise scheduled to be made
on or before December 15, 2001, together with interest
thereon (to the extent permitted by applicable law) at the
Pass-Through Rate compounded semiannually. Such
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S-2
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amounts will be applied first to scheduled
principal as shown in the Amortization Table and then
to interest, including, but not limited to, scheduled
interest shown in such table.
The aggregate Certificate Principal Balance of the
Amortizing Class Certificates will initially be
$____________. On any Distribution Date, absent a
Payment Deferral, 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 Amortizing
Class Yield to Earliest Maturity Date from the prior
Distribution Date (or, in the case of the initial
Distribution Date, such interest accrued from the Closing
Date). During a Non-Payment Period, no reductions
will be made to the Certificate Principal Balance of the
Amortizing Class Certificates. On the Distribution Date
which concludes the Non-Payment Period, amounts
allocable to the Amortizing Class Certificates will be
applied first to scheduled payments of principal set forth
in the Amortization Table through and including such
Distribution Date, with the balance applied to interest on
the Amortizing Class Certificates (including, but not
limited to, scheduled interest as set forth in the
Amortization Table).
Amortizing Class Final Distribution ............... Absent a Payment Deferral, the Amortizing Class
Certificates will be paid in full on December 15, 2001;
however, in the event of a Payment Deferral, such
payment may occur as late as June 15, 2006.
Interest Deferral
on the Term Assets................................. The Term Assets Issuer has the right to defer payments
of interest on the Term Assets for a Non-Payment
Period not exceeding 10 consecutive semiannual periods
from the last date on which interest was paid (and in no
event extending beyond the Stated Maturity). At the end
of any such Non-Payment Period, the Term Assets
Issuer will pay all interest then accrued and unpaid
together with interest thereon compounded semiannually
at the Pass-Through Rate to the extent permitted by
applicable law. The commencement of a Non-Payment
Period by the Term Assets Issuer will result in a
Payment Deferral on the Term Assets until the end of
such Non-Payment Period. As a result, payment will be
deferred on any outstanding Amortizing Class
Certificates, and payment of interest will be deferred on
any outstanding ZTF Class Certificates (if such payment
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S-3
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would otherwise have been due), on any Distribution
Date during a Non-Payment Period.
If a Non-Payment Period ends on or before December
15, 2001 (which is the ZTF Class Accrual
Commencement Date), the ZTF Class Certificates will
not be affected by the occurrence of such Non-Payment
Period, as no interest accrues, and no payments are due,
on the ZTF Class Certificates until after such date. If a
Non-Payment Period ends after the ZTF Class Accrual
Commencement Date, interest will accrue on the ZTF
Class Certificates at the Pass-Through Rate compounded
semiannually from the date on which payment was
otherwise due on the ZTF Class Certificates, but
payment thereof will be deferred during such Non-
Payment Period and will not be paid semiannually on the
Distribution Dates. At the end of any Non-Payment
Period, all accrued and unpaid interest on the ZTF Class
Certificates will be immediately due and payable.
During any Non-Payment Period that begins prior to
December 15, 2001, interest will accrue on the Fixed
Payments payable on the Amortizing Class Certificates
at the Pass-Through Rate (which is greater than the
Amortizing Class Yield to Earliest Maturity Date),
though payment thereof will be deferred. At the end of
any Non-Payment Period, all due and unpaid Fixed
Payments originally scheduled to be made on or before
December 15, 2001, together with interest thereon at the
Pass-Through Rate, will be immediately due and payable
on the Amortizing Class Certificates.
Distribution Dates................................. Distributions on the Certificates, to the extent described
herein for each class and subject to any Payment
Deferral as described herein, will be made semiannually
on the 15th day of each June and December, or if any
such day is not a Business Day then on the immediately
following Business Day, commencing December 15,
1997; provided, however, that payment on each
Distribution Date shall be subject to prior payment of
interest or principal, as applicable, on the Term Assets.
Interest Accrual Period............................ For each Distribution Date, interest shall accrue on the
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 (i) with respect to the ZTF Class
Certificates will commence on the ZTF Class Accrual
Commencement Date, and (ii) with respect to the
Amortizing Class Certificates will commence on the
Closing Date.
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S-4
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Term Assets........................................ The Term Assets consist of $25,000,000 aggregate
principal amount of 7.83% Capital Securities due
December 15, 2026 issued by NB Capital Trust II,
having the characteristics described in a prospectus dated
November 27, 1996 and a supplement thereto dated
December 10, 1996. The Term Assets were issued and
sold as part of an underwritten public offering of
$365,000,000 aggregate principal amount of such
securities. Distributions are required to be made on the
Term Assets semiannually on the 15th day of each June
and December, or if such day is not a Business Day, on
the next succeeding Business Day. See "Description of
the Term Assets" herein. In the event of a dissolution
of NB Capital Trust II, the Trust may receive 7.83%
Junior Subordinated Notes of NationsBank Corporation
in exchange for the 7.83% Capital Securities issued by
NB Capital Trust II, in which case the 7.83% Junior
Subordinated Notes will become the Term Assets of the
Trust and NationsBank Corporation will become the
Term Assets Issuer.
Trustees appointed
under NB Capital Trust II
Declaration of Trust .............................. Initially, five trustees, including (1) three persons who
are employees or officers of, or who are affiliated with,
Nationsbank Corporation; (2) The Bank of New York,
as property trustee under the Declaration; and (3) The
Bank of New York (Delaware), as Delaware trustee
(collectively, the "Term Assets Trustees").
Warrant Exercise;
Warrant Exercise ZTF Redemption.................... Pursuant to the Call Warrants, the Term Assets may be
purchased in whole or in part at any time after the
Cross-Over Date by and at the option of Warrantholders
at a price of par plus accrued and unpaid interest thereon
at the Pass-Through Rate to the date of redemption. A
Warrantholder must provide at least 20 business days
notice to the Trustee of its intention to exercise a Call
Warrant. Any such exercise of a Call Warrant (a
"Warrant Exercise") shall cause the redemption of ZTF
Class Certificates at a price of $1,000 per ZTF Class
Certificate plus accrued and unpaid interest thereon at
the Pass-Through Rate to the date of redemption.
The Amortizing Class Certificates are not subject to
redemption except in connection with a Special Event
Redemption (as defined herein).
Special Event;
Special Event Redemption .......................... The Term Assets may be redeemed by the Term Assets
Issuer in whole but not in part prior to December 15,
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S-5
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2006 upon the occurrence of a Special Event (as defined
herein), at a price which will at least equal the
principal amount of the Term Assets plus accrued
and unpaid interest thereon at the Pass-Through Rate.
In such event, the Certificates will be redeemed. Each
holder of a ZTF Class Certificate will be paid a
redemption price equal to its Accreted Amount (as defined
herein). Each holder of an Amortizing Class Certificate
will be paid its Certificate Principal Balance plus
accrued and unpaid interest at the Amortizing Class Yield
to Earliest Maturity Date to the date of redemption. See
"Description of the Certificates--Special Event
Redemption Following Special Event" herein. In the event
of a Special Event Redemption, the Call Warrants will be
deemed automatically exercised with respect to the entire
principal amount of Term Assets (without the requirement
of any advance notice by the Warrantholders) and the
proceeds of redemption received by the Trustee from the
Term Assets Issuer will be applied first to pay the
applicable redemption prices to the holders of the
redeemed ZTF Class Certificates and Amortizing Class
Certificates, with the balance of such proceeds, if any,
being remitted to each Warrantholder as a cash settlement
of the deemed exercise of its Call Warrant. Upon such
deemed exercise of the Call Warrants, no payment of
Warrant Exercise Purchase Price (as defined herein) will
be due from any Warrantholder.
Optional Redemption................................ The Amortizing Class Certificates will be paid in full no
later than June 15, 2006. The Term Assets may be
redeemed by the Term Assets Issuer by Optional
Redemption in whole or part at any time on or after
December 15, 2006 at a price of 103.915%, which price
will decline ratably on each subsequent December 15 to
100% on December 15, 2016 and thereafter, in each
case plus accrued interest to the date of redemption at
the Pass-Through Rate. In the event of an Optional
Redemption, Call Warrants will be deemed automatically
exercised with respect to a Certificate Principal Balance
of the ZTF Class Certificates equal to the principal
amount of Term Assets subject to Optional Redemption
(without the requirement of any advance notice by the
Warrantholders), and the proceeds of redemption
received by the Trustee from the Term Assets Issuer will
be applied first to pay the ZTF Class Redemption Price
to the holders of the redeemed ZTF Class Certificates,
with the balance of such proceeds, if any, being remitted
to each Warrantholder as a cash settlement of the
deemed exercise of its Call Warrant. Upon such deemed
exercise of the Call Warrants, no payment of Warrant
</TABLE>
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<TABLE>
<S> <C>
Exercise Purchase Price (as defined herein) will be due
from any Warrantholder.
Acceleration of Term Assets........................ If a Declaration Event of Default occurs and the Term
Assets are accelerated, 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
ZTF Class Certificates 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 7.83% per annum to the date such acceleration
was declared. Such ratio will be calculated by Salomon
Brothers Inc, as calculation agent (the "Calculation
Agent").
Record Dates....................................... The Business 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................................... In the opinion of Orrick, Herrington & Sutcliffe LLP,
special tax counsel to the Depositor, if the Trust is
determined not to be a grantor trust, it will be a
partnership for federal income tax purposes, and not an
association (or publicly traded partnership) taxable as a
corporation. See "Federal Income Tax Consequences"
herein.
</TABLE>
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<TABLE>
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ERISA Considerations............................... An employee benefit or other plan subject to the
Employee Retirement Income Security Act of 1974, as
amended, or Section 4975 of the Internal Revenue Code,
including an individual retirement account or Keogh
plan, may purchase Certificates of a class if either (i) the
Company is able to confirm, to the best of its
knowledge, the existence of at least 100 separate
purchasers (independent of the Company) of the
Certificates of such class at the conclusion of the initial
offering thereof or (ii) the Plan can represent that its
purchase of the Certificates would not be prohibited
under ERISA or the Code because of the availability of
an applicable exemption. See "ERISA Considerations."
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 "a1" and "A-," respectively. The
Depositor has not 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 due on their Certificates, and
therefore addresses the likelihood that, absent a Payment
Deferral, the Certificateholders who hold their
Certificates to maturity will receive the yield implied
by their purchase prices. A security rating is not a
recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the
assigning rating agency. A security rating does not
address the likelihood of the exercise of Call Warrants,
or the corresponding effect on yield to investors. See
"Ratings" and "Special Considerations--Maturity and Yield
Considerations."
</TABLE>
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SPECIAL CONSIDERATIONS
Maturity and Yield Considerations
A Warrantholder is likely to exercise its right to purchase Term
Assets, if at all, at a time when the interest rates on potential reinvestments
are lower than the return that would have been earned over the remaining life of
the Certificates had they not been redeemed due to the exercise of a Call
Warrant. See "Yield on the Certificates" herein and "Special Considerations" and
"Maturity and Yield Considerations" in the Prospectus.
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 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--Acceleration of Term
Assets on Default" 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.
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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 Under the Declaration
If an event of default under the Declaration (as defined herein) (a
"Declaration Event of Default") occurs, the risk of loss with respect to the
Term Assets lies entirely with the Certificateholders. If a Declaration Event of
Default occurs, the Trustee will be required to exercise its voting rights as
securityholder pursuant to the Declaration in favor of directing, or to take
such other action as is permitted under the Declaration to direct, the Term
Assets Trustees to declare the unpaid principal amount of the Term Assets and
any accrued and unpaid interest thereon to the date of redemption to be
immediately due and payable.
The Underwriter and the Company
The Underwriter is an affiliate of the Company, and the Company intends
to offer and sell the Call Warrants to another of its affiliates.
FORMATION OF THE TRUST
TIERS Corporate Bond-Backed Certificates Trust NB Capital 1997-1 will
be formed under New York law pursuant to the Trust Agreement dated as of June
17, 1997, as supplemented by the Series NB Capital 1997-1 Supplement dated as of
June 17, 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 (i) the proceeds from the sale of the Certificates
to the Underwriter and (ii) the proceeds from the sale of the right to purchase
the Term Assets from the Trust pursuant to the terms of the Call Warrants, 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, subject to the rights of the Warrantholders.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Certificates and the Call Warrants will be deposited by the Company into the
Trust for the sole purpose of causing the Trust to purchase the Term Assets,
which, after the purchase thereof, 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.
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The Term Assets Issuer is a statutory business trust formed pursuant to
a certificate of trust filed with the Secretary of State of the State of
Delaware on November 1, 1996 and a declaration of trust dated as of October 29,
1996, executed by NationsBank Corporation and the trustees of the Term Assets
Issuer (such declaration, as amended and restated, the "Declaration").
Nationsbank Corporation, the holder of all of the Common Securities (as
such term is defined in the Term Assets Prospectus) of the Term Assets Issuer
and the obligor on the Junior Subordinated Notes (the sole asset of 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.
DESCRIPTION OF THE TERM ASSETS
The Deposited Assets of the Trust will consist solely of $25,000,000
aggregate principal amount of 7.83% Capital Securities due December 15, 2026
issued by NB Capital Trust II, 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 $365,000,000 aggregate
principal amount of such securities (such securities in the aggregate, issued
and outstanding as of any date, the "Term Assets Securities"), pursuant to a
registration statement on Form S-3 (File No. 333-15375-02) (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 June and December, or if such day is not a Business Day, on
the next succeeding Business Day (such dates, the "Term Assets Payment Dates").
In the event of a dissolution of NB Capital Trust II, the Trust may
receive 7.83% Junior Subordinated Notes of NationsBank Corporation in exchange
for the 7.83% Capital Securities, in which case the 7.83% Junior Subordinated
Notes will become the Term Assets of the Trust and NationsBank Corporation will
become the Term Assets Issuer.
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
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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
Declaration, (ii) the Term Assets Prospectus, and (iii) the Term Assets
Registration Statement, of which the Term Assets Prospectus and a form of the
Declaration are parts. 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 "a1" and "A-" 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."
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-
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current aggregate Certificate Principal Balance of all outstanding ZTF Class
Certificates and will equal the amount that the holder of such ZTF Class
Certificate is entitled to receive as distributions allocable to principal of
the Term Assets. Holders of ZTF Class Certificates will not be entitled to
receive any amount in respect of the Certificate Principal Balance of such
Certificates until the ZTF Class Final Distribution Date, which will be the
earliest of (i) the date of the Warrant Exercise ZTF Redemption which results in
the redemption of all remaining ZTF Class Certificates, (ii) the date of any
Special Event Redemption, (iii) the date of the Optional Redemption which
results in the redemption of all remaining ZTF Class Certificates, and (iv)
December 15, 2026, which is the Stated Maturity.
The aggregate "Certificate Principal Balance" of the Amortizing Class
Certificates will initially be $____________. On any Distribution Date, absent a
Payment Deferral, 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 Amortizing Class Yield to Earliest Maturity 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 Amortizing Class Certificates are not subject
to redemption except in connection with a Special Event Redemption (as defined
herein).
The "Accreted Amount" of each ZTF Class Certificate, as of any date of
determination, will equal:
(i) the Accreted Amount of such ZTF Class Certificate as of the
immediately preceding Distribution Date (or, in the case of
any date of determination prior to the initial Distribution
Date, the initial purchase price (without regard to any
accrued interest thereon) of such ZTF Class Certificate); plus
(ii) accretion on the amount determined in and from the date
specified in (i) above at the Yield to Stated Maturity; less
(iii) accrued and unpaid interest on the amount determined in and
from the date specified in (i) above at the Pass-Through Rate,
provided that such date occurs after December 15, 2001.
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 an acceleration of the Term Assets
in connection with a Special Event or a Declaration Event of Default, 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."
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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 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 ZTF Class Certificates have been authorized for listing, upon
official notice of issuance, with the NYSE. There can be no assurance that the
ZTF 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 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 (i) with respect to the ZTF Class
Certificates shall commence on the ZTF Class Accrual Commencement Date, and (ii)
with respect to the Amortizing Class Certificates shall commence on the Closing
Date.
Interest will accrue on the Certificate Principal Balance of each ZTF
Class Certificate for each Interest Accrual Period from and after December 15,
2001 (the "ZTF Class Accrual Commencement Date") at the Pass-Through Rate (such
accrued interest, the "ZTF Class Periodic Interest"). Interest will accrue on
each ZTF Class Certificate through the ZTF Class Final Distribution Date. Except
in the case of a Warrant Exercise ZTF Redemption, Special Event Redemption,
Optional Redemption or Payment Deferral (each as described herein), the ZTF
Class Periodic Interest shall be payable on the Distribution Dates related to
each applicable Interest Accrual Period. In the event of a Payment Deferral
which commences on or prior to December 15, 2001 and continues after December
15, 2001, interest will accrue from and after December 15, 2001 on the
Certificate Principal Balance of the ZTF Class Certificates at the Pass-Through
Rate, compounded semiannually, but no amount will be distributed in
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respect of interest on the ZTF Class Certificates until the Distribution Date
concluding the Non-Payment Period relating to such Payment Deferral.
Absent a Payment Deferral, 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 Amortizing Class Yield to
Earliest Maturity Date (such accrued interest, the "Amortizing Class Periodic
Interest"). In the event of a Payment Deferral commencing on or prior to
December 15, 2001, interest will accrue on Fixed Payments that have been
deferred at the Pass-Through Rate, compounded semiannually, to the extent
permitted by law. The Amortizing Class Final Distribution Date shall be the
later of (i) December 15, 2001 (the "Amortizing Class Initial Maturity Date"),
and (ii) the Distribution Date concluding any Non-Payment Period commencing on
or prior to and ending after December 15, 2001. Except in the case of a Special
Event Redemption or Payment Deferral, 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 solely to the extent of Available Funds:
(i) for the ZTF Class Certificates, on each Distribution Date
after the ZTF Class Accrual Commencement Date and through the
ZTF Class Final Distribution Date, 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--Purchase of Term Assets and Redemption of ZTF Class Certificates,"
"--Special Event Redemption," "--Optional Redemption," "--Payment Deferral," and
"--Acceleration of Term Assets on Default" herein. Distributions in respect of
the Certificate Principal Balance of the ZTF Class Certificates will be made on
the ZTF Class Final Distribution Date.
"Available Funds" means, as of any Distribution Date, the aggregate
amount received on or with respect to the Term Assets (including investment
income from Permitted Investments (as defined herein) and proceeds from the sale
of the Term Assets pursuant to the Call Warrants or otherwise during the period
from and including the preceding Distribution Date up to and including the first
Business Day preceding such Distribution Date (the "Record Date," and each such
period, a "Collection Period"), and deposited in the Collection Account and
available for distribution on such Distribution Date.
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 thereafter as if
such funds had constituted Available Funds on the Distribution Date immediately
preceding such Business Day; 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, including
but not limited to amounts received in connection with the exercise of the
Call Warrants and not distributed to Certificateholders on the date of receipt,
shall be invested by the Trustee in those investments which are acceptable to
each Rating Agency as being consistent with the rating of the Certificates, as
specified by each Rating Agency in the Trust Agreement (such investments,
"Permitted Investments"). Generally, Permitted Investments
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will be limited to obligations or securities that mature not later than the
Business Day prior to the next succeeding Distribution Date.
On each Distribution Date on and after the ZTF Class Accrual
Commencement Date, the Trustee will distribute all Principal Collections
constituting Available Funds for such Distribution Date in the Collection
Account to the ZTF Class Certificateholders. "Principal 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 principal (but not premiums) on the Term Assets.
On each Distribution Date, the Trustee will distribute Interest
Collections (as defined below) constituting Available Funds for such
Distribution Date in the Collection Account concurrently as follows:
(i) to 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; and
(ii) to ZTF Class Certificateholders for the payment of ZTF Class
Periodic Interest, but only to the extent that Interest
Collections were accrued on or after the ZTF Class Accrual
Commencement 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, (ii) penalties or other amounts required to be paid because of late
payments on the Term Assets, and (iii) investment income on Permitted
Investments.
The Trust will be terminated and any remaining Term Assets will be
distributed to Certificateholders on a pro rata basis on December 15, 2026 (the
"Trust Final Termination Date"), to the extent the Trust has not earlier been
terminated as described under "Description of the Certificates--Purchase of Term
Assets and Redemption of ZTF Class Certificates," "--Special Event Redemption
Following a Special Event" and "Description of the Trust Agreement--Termination
of the Trust" herein.
Purchase of Term Assets and Redemption of ZTF Class Certificates
Term Assets may be purchased at any time after the Amortizing Class
Certificates have been paid in full at the option of each Warrantholder (a
"Warrant Exercise") at a price of par plus accrued and unpaid interest thereon
at the Pass-Through Rate to the date of purchase (the "Warrant Exercise Purchase
Price"), upon at least 20 Business Days notice by such Warrantholder to the
Trustee of its intention to exercise its Call Warrant. Any such exercise of a
Call Warrant will cause the redemption of an equal principal amount of the ZTF
Class Certificates at a price of $1,000 per ZTF Class Certificate plus accrued
and unpaid interest thereon at the Pass-Through Rate to the date of redemption.
Such redemption will be effected from proceeds from the sale of the
Term Assets by the Trustee to the Warrantholders pursuant to the terms of the
Call Warrants. The Trustee will notify the ZTF Class Certificateholders, the
Rating Agencies and the NYSE of the notice received of a Warrantholder's intent
to exercise its Call Warrant.
On or before the Business Day preceding the date on which a Call
Warrant is to be exercised, the Warrantholder must make available for deposit
with the Trustee in immediately available funds an amount equal to the Warrant
Exercise Purchase Price for the Term Assets subject to exercise. If the Trustee
does not receive the required deposit, such Call Warrant will expire and will no
longer be considered outstanding. The Trustee will notify the
Certificateholders, the Rating Agencies and the NYSE of any such failure with
respect to a Call Warrant. If a Warrantholder fails to make the required
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deposit, the Term Assets subject to the Call Warrant will not be sold and the
related amount of ZTF Class Certificates will not be redeemed.
Under the terms of the Call Warrants and the Trust Agreement,
Certificateholders will not be entitled to terminate the Trust or cause the sale
or other disposition of the Term Assets. In addition, amendment of the Trust
Agreement may require, and amendment of the Call Warrants generally will
require, consent of the Warrantholders. See "Description of the Trust
Agreement-Voting Rights." Warrantholders may sell or assign all or a portion of
their Call Warrants in accordance with the terms of the Call Warrants. The Call
Warrants are not offered hereby.
The Amortizing Class Certificates are not subject to Warrant Exercise
ZTF Redemption.
Special Event Redemption Following a Special Event
The Term Assets may be redeemed by the Term Assets Issuer in whole but
not in part prior to December 15, 2006 upon the occurrence and continuation of a
Tax Event, Capital Treatment Event, or Investment Company Event (as defined in
the Term Assets Prospectus; each, a "Special Event"), at a price which will at
least equal the principal amount of the Term Assets plus accrued and unpaid
interest thereon at the Pass-Through Rate to the date of redemption. In such
event, the Certificates will be redeemed. Each holder of a ZTF Class Certificate
will be paid a redemption price equal to its Accreted Amount (as defined
herein). Each holder of an Amortizing Class Certificate will be paid its
Certificate Principal Balance plus accrued and unpaid interest at the Amortizing
Class Yield to Earliest Maturity Date to the date of redemption. In the event of
a Special Event Redemption, the Call Warrants will be deemed automatically
exercised with respect to the entire principal amount of Term Assets (without
the requirement of any advance notice by the Warrantholders) and the proceeds of
redemption received by the Trustee from the Term Assets Issuer will be applied
first to pay the applicable redemption prices to the holders of the redeemed ZTF
Class Certificates and Amortizing Class Certificates, with the balance of such
proceeds, if any, being remitted to each Warrantholder as a cash settlement of
the deemed exercise of its Call Warrant. Upon such deemed exercise of the Call
Warrants, no payment of Warrant Exercise Purchase Price (as defined herein) will
be due from any Warrantholder.
Optional Redemption
The Amortizing Class Certificates will be paid in full no later than
June 15, 2006. The Term Assets may be redeemed by the Term Assets Issuer by
Optional Redemption in whole or part at any time on or after December 15, 2006
at a price of 103.915%, which price will decline ratably on each subsequent
December 15 to 100% on December 15, 2016 and thereafter, in each case plus
accrued interest to the date of redemption at the Pass-Through Rate. In the
event of an Optional Redemption, the Call Warrants will be deemed automatically
exercised with respect to a Certificate Principal Balance of the ZTF Class
Certificates equal to the principal amount of Term Assets subject to Optional
Redemption (without the requirement of any advance notice by the
Warrantholders), and the proceeds of redemption received by the Trustee from the
Term Assets Issuer will be applied first to pay the ZTF Class Redemption Price
to the holders of the redeemed ZTF Class Certificates, with the balance of such
proceeds, if any, being remitted to Warrantholders as a cash settlement of their
Call Warrant exercise of the Call Warrants. Upon such deemed exercise of the
Call Warrants, no payment of the Warrant Exercise Purchase Price shall be due
from Warrantholders.
Acceleration of Term Assets on Default
If a Declaration Event of Default occurs and the Term Assets are
accelerated, 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 ZTF Class Certificates bears to (ii) the
present value of all scheduled future payments on the Amortizing Class
Certificates, discounted semiannually in each case
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at a rate of 7.83% per annum to the date such acceleration was declared.
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.
Payment Deferral
The Term Assets Issuer has the right to defer payments of interest on
the Term Assets for a NonPayment Period not exceeding 10 consecutive semiannual
periods (but not beyond the Stated Maturity). At the end of any such Non-Payment
Period, the Term Assets Issuer will pay all interest then accrued and unpaid
together with interest thereon compounded semiannually at the Pass-Through Rate
to the extent permitted by applicable law. The commencement of a Non-Payment
Period by the Term Assets Issuer will result in a Payment Deferral on the Term
Assets until the end of such Non-Payment Period. On any Distribution Date during
a Non-Payment Period, payment will be deferred on any outstanding Amortizing
Class Certificates, and payment of interest will be deferred on any outstanding
ZTF Class Certificates (if such payment would otherwise have been due).
If a Non-Payment Period ends on or before December 15, 2001 (which is
the ZTF Class Accrual Commencement Date), the ZTF Class Certificates will not be
affected by the occurrence of such NonPayment Period, as no interest accrues,
and no payments are due, on the ZTF Class Certificates until after such date. If
a Non-Payment Period ends after the ZTF Class Accrual Commencement Date,
interest will accrue on the ZTF Class Certificates at the Pass-Through Rate from
December 15, 2001, compounded semiannually, but payment thereof will be deferred
during such Non-Payment Period and will not be paid semiannually on the
Distribution Dates. At the end of any Non-Payment Period, all accrued and unpaid
interest on the ZTF Class Certificates will be immediately due and payable.
During any Non-Payment Period that begins on or prior to December 15,
2001, interest will accrue on the Fixed Payments payable on the Amortizing Class
Certificates at the Pass-Through Rate (which is greater than the Amortizing
Class Yield to Earliest Maturity Date), though payment thereof will be deferred.
On the Distribution Date concluding a Non-Payment Period, the due and unpaid
Fixed Payments originally scheduled to be made on or prior to December 15, 2001,
together with interest thereon at the Pass-Through Rate, will be immediately due
and payable to the holders of the Amortizing Class Certificates. During a
Non-Payment Period, no reductions will be made to the Certificate Principal
Balance of the Amortizing Class Certificates. On the Distribution Date which
concludes the NonPayment Period, amounts allocable to the Amortizing Class
Certificates will be applied first to scheduled payments of principal set forth
in the Amortization Table through and including such Distribution Date, with the
balance applied to interest on the Amortizing Class Certificates (including, but
not limited to, scheduled interest as set forth in the Amortization Table).
YIELD ON THE CERTIFICATES
In general, the effect of a Special Event Redemption or Warrant
Exercise ZTF Redemption on the yield to maturity of the ZTF Class Certificates
and/or the Amortizing Class Certificates, as applicable, will depend upon the
price at which any such Certificate is purchased. See "Maturity and Yield
Considerations" in the Prospectus, and "Special Considerations--Maturity and
Yield Considerations" herein.
DESCRIPTION OF THE TRUST AGREEMENT
General
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The Certificates will be issued pursuant to the Trust Agreement, a form
of which is filed as an exhibit to the Registration Statement (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.
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 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
The only event of default with respect to the Certificates under the
Trust Agreement (a "Certificate Event of Default") will consist of 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 (subject to any applicable grace period).
In the event of a default in the payment of any amount on the Term
Assets the Trustee is required to proceed on behalf of the Certificateholders to
enforce its rights under the Term Assets or otherwise protect the interests of
the Certificateholders. See "Description of the Trust Agreement--Collection and
Other Administrative Procedures" in the Prospectus.
No Certificateholder will have the contractual right to institute any
proceeding with respect to the Trust Agreement unless
(i) such holder previously has given to the Trustee written
notice of a continuing breach by the Term Assets Issuer,
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(ii) Certificateholders evidencing not less than 25% of the
aggregate Voting Rights of the Certificates have requested in writing
that the Trustee institute a proceeding against the Term Assets Issuer
in its own name as Trustee,
(iii) the Trustee has been offered reasonable indemnity,
(iv) the Trustee has for 15 days failed to institute such
proceeding, and
(v) no direction inconsistent with such written request has
been given to the Trustee during such 15-day period by
Certificateholders evidencing not less than the Required
Percentage-Remedies of the aggregate Voting Rights of the Certificates.
Voting Rights
While the Amortizing Class Certificates are outstanding, the ZTF Class
Certificateholders shall have 75% of the total Voting Rights, and the Amortizing
Class Certificateholders shall have 25% of the total Voting Rights. Thereafter,
the ZTF Class Certificates will have 100% 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%.
In addition to the other restrictions on modification and amendment,
the Trustee will not enter into any amendment or modification of the Trust
Agreement (i) which would adversely affect in any material respect the interests
of Warrantholders in the Term Assets without the consent of Warrantholders
representing 66-2/3% of the face amount of the Call Warrants or (ii) which would
alter the timing or amount of any payment of the Warrant Exercise Purchase Price
without the unanimous consent of Warrantholders; and provided, further, that no
such amendment or modification which would materially increase the risk that the
Trust would fail to qualify as a grantor trust for federal income tax purposes
will be permitted. See "Description of the Trust Agreement--Modification and
Waiver" in the Prospectus.
Further, no amendment to the Call Warrants will be permitted which
would adversely affect in any material respect the interests of the
Certificateholders without the consent of Certificateholders representing
66-2/3% of the aggregate Voting Rights of those Certificates that are materially
adversely affected by such modification or amendment and without confirmation by
each Rating Agency that such amendment will not result in a downgrading or
withdrawal of its rating of the Certificates; provided, however, that no such
amendment or modification will be permitted (i) which would alter the timing or
amount of any payment of the Warrant Exercise Purchase Price, without the
consent of Certificateholders representing 100% of the aggregate Voting Rights
of the Certificates, or (ii) which would materially increase the risk that the
Trust would fail to qualify as a grantor trust for federal income tax purposes.
In addition, the Call Warrants generally may not be amended without the consent
of 66-2/3% (or in certain circumstances, 100%) of the holders thereof.
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
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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, except upon the
occurrence of a Declaration Event of Default, and with the consent of
Certificateholders representing 100% of the aggregate Voting Rights of the
Certificates 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 Warrantholders and 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 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,
1997). 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 payment in full at maturity of
all the Term Assets, (ii) sale by the Trust of all the Term Assets in accordance
with the Call Warrants, or (iii) in-kind distribution of the Term Assets after
an acceleration thereof, and the distribution in full of all amounts due to the
Certificateholders. See "Description of the Trust Agreement--Termination" in the
Prospectus. Under the terms of the Trust Agreement and the Call Warrants, the
Certificateholders will not be entitled to terminate the Trust or cause the sale
or other disposition of the Term Assets if and for so long as any Call Warrant
remains outstanding, without the consent of Warrantholders.
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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 7.83% Capital Securities or the 7.83% Junior
Subordinated Notes) 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 other
entity created or organized in or under the laws of the United States or an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source. "Non-United States Holder" means any holder
that is not a United States Holder.
Tax Status of the Trust
The Trust is structured as a "grantor trust" and will likely be so
treated. Nonetheless, such treatment is not certain. However, upon the issuance
of the Certificates, Orrick, Herrington & Sutcliffe LLP, special tax counsel to
the Company, will deliver its opinion generally to the effect that, 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).
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 (or publicly traded partnership) taxable 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" 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 (i) purchased their pro rata interest of the Trust's underlying
assets and (ii) sold call options (the Call Warrants) with respect to the Term
Assets in an amount representing their pro rata interest in the Trust.
Prospective investors are hereby referred to the Prospectus pertaining
to the offering of the Term Assets and its description of certain of the tax
considerations relating to the Term Assets. As more fully described therein
under "United States Federal Income Taxation," counsel to the Term Assets Issuer
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rendered its opinion generally to the effect that under then current law and
assuming full compliance with the terms of the Indenture for the Junior
Subordinated Notes (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Junior Subordinated Notes will be
classified for United States federal income tax purposes as indebtedness of
NationsBank Corporation. Such counsel further rendered its opinion that, under
then current law and assuming full compliance with the terms of the Declaration
and the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Term Assets Issuer will be classified
for United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Special counsel has not independently
verified, and will not so verify, the classification of NB Capital Trust II or
the underlying Junior Subordinated Notes. The balance of this discussion assumes
that the Term Assets Issuer and the Junior Subordinated Notes will be
characterized as indicated above. Prospective investors should read the Term
Assets Tax Disclosure and consult with their own tax advisers regarding
alternative characterizations of the Term Assets and other consequences of the
purchase, ownership and disposition of the Term Assets.
The Trust has identified the Term Assets and the Call Warrants as part
of an integrated transaction within the meaning of Treasury Regulation ss.
1.1275-6. Among other consequences of such identification is the treatment
generally of each Certificate as a synthetic debt instrument issued on the date
it is acquired by the holder thereof. Prospective investors should be aware that
it is not absolutely certain that integration treatment is available for
transactions such as those contemplated by the Trust Agreement or that the
Trust's identification of the transaction as an integrated transaction is
effective on holders. While unlikely, it is possible, for example, that for such
treatment to apply each holder will be required to make the appropriate
identifications on its own books and records on or prior to the date it acquires
its Certificates. Because integrated transaction treatment is very likely to
apply, except for the immediately following two paragraphs, the balance of this
discussion assumes that the transaction will be treated as an integrated
transaction.
While unlikely, if the integrated transaction rules do not apply, a
portion of the interest payments made on a ZTF Class Certificate may be treated
as option premium for writing the Call Warrant instead of interest. (Although a
similar rule could theoretically apply to an Amortizing Class Certificate, the
effect is likely to be insignificant.) In such a case, such payments would not
be taken into account in accruing OID (or in the case of a ZTF Class Certificate
acquired after December 15, 2001, interest income) and thus would not be
includable in income periodically as accrued (or received). Instead, treatment
of such payments as option premium would generally cause the related income to
be deferred and give rise to short-term capital gain when the option expires
(upon maturity of the Certificate). Alternatively, the option premium may be
viewed as received in its entirety upon the issuance of the Certificates (though
it would still give rise to short-term capital gain upon expiration), in which
case the option premium would reduce the issue price of the Certificate,
decreasing its yield and thereby reducing the OID that accrues on the
Certificate. In the case of a ZTF Class Certificate acquired after December 15,
2001, the OID rules apparently will not apply, as discussed below. Therefore,
ongoing interest income would be reduced by the same amount as the option
premium, but only if the investor has an effective election in place to amortize
bond premium. If the investor does not elect to amortize bond premium, the
amount equal to the value of the option would give rise to a long-term capital
loss on the maturity of the Certificate.
Prospective investors should also be aware that it is possible that the
IRS will take the position that one or both classes of Certificates will be
recharacterized under general tax principles as debt issued on the Closing Date.
In such a case, the discussion of original issue discount ("OID") under "Income
of the Certificateholders" will not apply to the Amortizing Class Certificates.
Instead, the Amortizing Class Certificates will be treated as conventional debt
instruments issued without OID. Further, the OID on the ZTF Class Certificates
will accrue at the initial yield to maturity based on the Certificates, initial
offering price to the public (rather than a particular holder's yield). Further
still, the conventional rules for market discount and premium will apply to both
classes of Certificates for investors that acquire their Certificates at a price
other than their principal amount, or in the case of the ZTF Class Certificates
their
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adjusted issue price. Amortizing Class Certificateholders should be aware that
if an Amortizing Class Certificate is not considered to have OID, reporting the
income from the Certificate under the OID rules might be treated as an election
to treat all income on a discount or premium instrument as original issue
discount, which deemed election might apply to all of the discount or premium
debt instruments held or acquired by the holder in the year it acquires its
Certificate or thereafter.
Income of Certificateholders
Each Certificateholder (other than a ZTF Class Certificateholder that
purchases its Certificate after December 15, 2001) 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 determining the amount paid for the Certificate, a portion of
the purchase price for a Certificate may be separately allocated to accrued
interest and to amounts held pending distribution to the Certificateholder (the
recovery of which amounts would not be taxable). Any such allocation would
reduce the amount paid for (and the amount payable on) 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; it is unclear whether the holder of a ZTF Class
Certificate should, in calculating OID, assume that the Term Assets will, or
will not, be called pursuant to the Call Warrants.
The "adjusted issue price" of the Certificate at the beginning of any
accrual period is the purchase price for a Certificate allocable to the
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 initially 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.
If the Term Assets Issuer elects to defer payments of interest
on the Term Assets (as described above under "Description of the
Certificates--Payment Deferred"), income on the Certificates
S-24
<PAGE>
generally will continue to accrue in the same manner as if the deferred payment
had actually been actually made. Further, interest will accrue for tax purposes
on the entire deferred payment at the Pass-Through Rate. However, when the
deferred payment is actually made, neither the actual payment nor the interest
on the deferred payment will be included in income.
ZTF Certificates Acquired After December 15, 2001
While not absolutely certain, it appears that a ZTF Class Certificate
purchased after December 15, 2001 would not be treated as subject to the OID
rules described above, but, instead, would be treated as an indirect interest in
a conventional debt instrument issued without OID. (In such a case reporting the
income on the Certificate under the OID rules might be treated as an election to
treat all income on a discount or premium instrument as original issue discount,
which deemed election might apply to all of the discount or premium debt
instruments held or acquired by the holder in the year it acquires its
Certificate or thereafter.)
Purchase and Sale of a Certificate or Term Assets
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 or redeemed, 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.
Possible Recharacterization of the Trust as a Partnership
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 subject to uncertainty, the Trust should be eligible
for 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 and (ii) each Holder would
be required to separately take into account such Holder's distributive share of
the Trust's income (which would not necessarily be the same in any particular
year, for any particular holder, as the income computed under the grantor trust
rules). A Holder would take into account its distributive share of the Trust's
income for each taxable year of the Trust in the Holder's taxable year which
ends with or within the Trust's taxable year.
Backup Withholding
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
and is not an exempt recipient under applicable provisions of the Code.
S-25
<PAGE>
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.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on (a) an employee benefit
plan (as defined in Section 3(3) of ERISA), (b) a plan described in Section
4975(e)(1) of the Code, 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 ("parties in interest"
within the meaning of ERISA or "disqualified persons" within the meaning of the
Code). Thus, a Plan fiduciary considering an investment in Certificates should
also consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or Section 4975 of the Code. For example, a
prohibited transaction might arise if the Term Assets Issuer, the Underwriter or
the Trustee, or any affiliate thereof, were a fiduciary with respect to Plan
assets used to make an investment in Certificates.
An investment in Certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and Section 4975 of the Code. Neither
ERISA nor the Code defines the term "plan assets." Under Section 2510.3-101 of
the United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include 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 its share of the
underlying assets of the Trust unless (1) such Certificate is a
"publicly-offered security" or (2) equity participation in such Certificates by
benefit plan investors is not "significant."
A publicly-offered security is a security that is a (1) freely
transferable, (2) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another at the conclusion of the
initial offering, and (3) either is (A) part of a class of securities registered
under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the Plan as
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred.
Participation by benefit plan investors in the Certificates would not
be significant if immediately after the most recent acquisition of the
Certificates, whether or not from the Company or an Agent or Underwriter, less
than 25 percent of the value of such were held by benefit plan investors, which
are
S-26
<PAGE>
defined as Plans and employee benefit plans not subject to ERISA (for example,
governmental plans). There can be no assurance that less than 25 percent of the
value of the Certificates will be held by benefit plan investors.
Unless the Company has been able to determine that the ZTF Class
Certificates and/or the Amortizing Class Certificates are "publicly-offered
securities" for purposes of ERISA and Section 4975 of the Code, each purchaser
of a ZTF Class Certificate or Amortizing Class Certificate, as applicable, will
be deemed to have represented and warranted that its purchase and holding of
such Certificate will not constitute or result in a non-exempt prohibited
transaction, based on the applicability of one of the following prohibited
transaction class exemptions ("PTCEs") to such Plan's purchase and holding of
the Certificates: the qualified in-house investment manager ("INHAM") exemption
(PTCE 96-23), the insurance company general account exemption (PTCE 95-60), the
bank collective investment fund exemption (PTCE 91-38), the insurance company
pooled separate account exemption (PTCE 90-1), and the qualified professional
asset manager ("QPAM") exemption (PTCE 84-14).
If the assets of the Trust were deemed to be Plan assets, certain
transactions involving the Trust, including the acquisition of the Certificates
themselves by a Plan, could constitute or result in prohibited transactions. If,
for example, any Warrantholder were a party in interest or disqualified person
with respect to an acquiring Plan, the exercise of its Call Warrant could be
construed as a prohibited indirect sale by the Plan to such Warrantholder. Any
such prohibited transaction could be treated as exempt under ERISA and Section
4975 of the Code if the Certificates were acquired pursuant to and in accordance
with one or more "class exemptions" issued by the DOL, such as those described
in the preceding paragraph.
Any Plan investing in any class of Certificates, including any
insurance company investing assets treated as "plan assets" of a Plan, will be
deemed through its acquisition of a Certificate or any interest therein to
represent that the acquisition of a Certificate and subsequent transactions
involving the Trust would not constitute or result in prohibited transactions
under ERISA or Section 4975 of the Code. Alternatively, if the Company is able
to confirm, to the best of its knowledge at the conclusion of the initial
offering, the existence of at least 100 separate purchasers of the class of
Certificates who are independent of the Company, the foregoing representation
will not be a condition to the acquisition of such Certificates.
Any Plan or insurance company investing assets of its general account
proposing to acquire Certificates should consult with its counsel.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of June __, 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.
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 $_________.
Aggregate proceeds to the Company, before deducting expenses estimated at
$__________, will be $______________.
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. The Underwriter may
effect such transactions by selling Certificates to or through dealers and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter and any purchasers of
Certificates for whom they may act as agents. Concessions
S-27
<PAGE>
to dealers may vary but will not exceed ___%. The Underwriter and any dealers
that participate with the Underwriter in the distribution of Certificates may be
deemed to be underwriters, and any profit on the resale of Certificates by them
may be deemed to be underwriting discounts or commissions under the Securities
Act.
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 "a1" and "A-," 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. The ratings on the Certificates do not,
however, address the likelihood of the exercise of the Call Warrants, or the
corresponding effect on yield to investors.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. Each security rating should be evaluated independently
of 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-28
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Accreted Amount ...............................................................................................S-13
Amortization Table..............................................................................................S-2
Amortizing Class Initial Maturity Date.........................................................................S-15
Amortizing Class Periodic Interest.............................................................................S-15
Available Funds ...............................................................................................S-15
Certificate Event of Default...................................................................................S-19
Certificate Principal Balance............................................................................S-12, S-13
Certificateholders.............................................................................................(ii)
Certificates ...................................................................................................(i)
Clearing Agency ...............................................................................................S-13
Code ..........................................................................................................S-22
Collection Period .............................................................................................S-15
Commission ....................................................................................................S-11
Company ........................................................................................................(i)
Cross-Over Date ...............................................................................................(ii)
Declaration ...................................................................................................S-11
Declaration Event of Default...................................................................................S-10
Definitive Certificates........................................................................................S-14
Depositor ......................................................................................................(i)
Distribution Date .............................................................................................(ii)
DTC ..........................................................................................................(iii)
ERISA .........................................................................................................S-26
Exchange Act ..................................................................................................S-11
Fixed Payment .................................................................................................(ii)
Holder ........................................................................................................S-22
INHAM .........................................................................................................S-27
Interest Accrual Period........................................................................................S-14
Interest Collections...........................................................................................S-16
IRA ...........................................................................................................S-26
Junior Subordinated Notes.......................................................................................(i)
Keogh .........................................................................................................S-26
Moody's ........................................................................................................(i)
Non-Payment Period.............................................................................................(ii)
Non-United States Holder.......................................................................................S-22
NYSE ...........................................................................................................(i)
OID .....................................................................................................S-23, S-24
Optional Redemption............................................................................................(ii)
Participants .................................................................................................(iii)
Pass-Through Rate .............................................................................................(ii)
Payment Deferral ..............................................................................................(ii)
Permitted Investments..........................................................................................S-15
Plan ..........................................................................................................S-26
Principal Collections..........................................................................................S-16
Prospectus .....................................................................................................(i)
PTCEs .........................................................................................................S-27
QPAM ..........................................................................................................S-27
Rating Agencies ................................................................................................(i)
Ratings ........................................................................................................S-8
Record Date ...................................................................................................S-15
Regulation ....................................................................................................S-26
Salomon ........................................................................................................(i)
</TABLE>
S-29
<PAGE>
<TABLE>
<S> <C>
Securities Act ................................................................................................S-11
Special Event .................................................................................................S-17
Special Event Redemption.......................................................................................(ii)
Specified Currency.............................................................................................S-12
Standard & Poor's ..............................................................................................(i)
Stated Maturity ...............................................................................................(ii)
Term Assets ....................................................................................................(i)
Term Assets Issuer..............................................................................................(i)
Term Assets Payment Dates......................................................................................S-11
Term Assets Prospectus..........................................................................................(i)
Term Assets Registration Statement.............................................................................S-11
Term Assets Securities.........................................................................................S-11
Term Assets Trustees............................................................................................S-5
TIERS ..........................................................................................................(i)
Trust ..........................................................................................................(i)
Trust Agreement ................................................................................................(i)
Trust Final Termination Date...................................................................................S-16
Trust Indenture Act............................................................................................S-10
Trustee ........................................................................................................(i)
Underwriter ....................................................................................................(i)
Underwriting Agreement.........................................................................................S-27
United States Holder...........................................................................................S-22
Warrant Exercise ...............................................................................................S-5
Warrant Exercise Purchase Price................................................................................S-16
Warrant Exercise ZTF Redemption................................................................................(ii)
Warrantholder .................................................................................................(ii)
Yield to Earliest Maturity Date.................................................................................(i)
ZTF Class Accrual Commencement Date............................................................................S-14
ZTF Class Final Distribution Date..............................................................................S-14
ZTF Class Periodic Interest....................................................................................S-14
ZTF Class Redemption Price.....................................................................................(ii)
ZTF(R) Class Certificates.........................................................................................(i)
S-30
<PAGE>
APPENDIX A
Identification of the Term Assets
</TABLE>
<TABLE>
<S> <C>
Terms of Term Assets
Term Assets Issuer: NB Capital Trust II
Term Assets: 7.83% Capital Securities due December 15, 2026
Dated: December 10, 1996
Original Principal Maturity Date: December 15, 2026
Original Par Value Amount Issued: $365,000,000
CUSIP Number: ______________
Stated Interest Rate: 7.83%
Interest Payment Dates: June 15 and December 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: $25,000,000
</TABLE>
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-31
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
Amortizing Class Certificates
Schedule of Amortizing Payments
Total
Amortizing
Payment Date Interest Principal Payment Balance
- --------------------------------------------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C>
December 15, 1997
June 15, 1998
December 15, 1998
June 15, 1999
December 15, 1999
June 15, 2000
December 15, 2000
June 15, 2001
December 15, 2001
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B (cont.)
ZTF Class Certificates
Schedule of Accretion Through December 15, 2026
Cash
Payment Date Interest Flow Accretion Balance
- ---------------------------------------------- ---------- ------ ----------- --------
<S> <C> <C> <C> <C>
December 15, 1997
June 15, 1998
December 15, 1998
June 15, 1999
December 15, 1999
June 15, 2000
December 15, 2000
June 15, 2001
December 15, 2001
June 15, 2002
December 15, 2002
June 15, 2003
December 15, 2003
June 15, 2004
December 15, 2004
June 15, 2005
December 15, 2005
June 15, 2006
December 15, 2006
June 15, 2007
December 15, 2007
June 15, 2008
December 15, 2008
June 15, 2009
December 15, 2009
June 15, 2010
December 15, 2010
June 15, 2011
December 15, 2011
June 15, 2012
December 15, 2012
June 15, 2013
December 15, 2013
June 15, 2014
December 15, 2014
June 15, 2015
December 15, 2015
June 15, 2016
December 15, 2016
June 15, 2017
December 15, 2017
June 15, 2018
December 15, 2018
June 15, 2019
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
Cash
Payment Date Interest Flow Accretion Balance
- ---------------------------------------------- ---------- ------ ----------- --------
<S> <C> <C> <C> <C>
December 15, 2019
June 15, 2020
December 15, 2020
June 15, 2021
December 15, 2021
June 15, 2022
December 15, 2022
June 15, 2023
December 15, 2023
June 15, 2024
December 15, 2024
June 15, 2025
December 15, 2025
June 15, 2026
December 15, 2026
S-34
<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-35
</TABLE>
