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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1997
REGISTRATION NO. 333-31925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LTCB ASSET FUNDING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST AGREEMENT)
DELAWARE 132510713
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION OF REGISTRANT)
C/O THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
NEW YORK BRANCH
165 BROADWAY
NEW YORK, NEW YORK 10006
(212) 335-4400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
SAM ANGIONE
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
NEW YORK BRANCH
165 BROADWAY
NEW YORK, NEW YORK 10006
(212) 335-4400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF REGISTRANT)
WITH COPIES TO:
STEPHAN J. FEDER MARK J. WELSHIMER
SIMPSON THACHER & BARTLETT SULLIVAN & CROMWELL
425 LEXINGTON AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1997
C&I MASTER TRUSTS
ASSET BACKED CERTIFICATES
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
NEW YORK BRANCH
SERVICER
LTCB ASSET FUNDING COMPANY
SELLER
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Certificates of each Series will represent an undivided interest in a
specified Master Trust (each, a "Trust"). Trusts may be formed from time to
time, each pursuant to a pooling and servicing agreement to be entered into
among The Long-Term Credit Bank of Japan, Limited, New York Branch (the
"Branch"), as servicer, LTCB Asset Funding Company, a Delaware business trust
("LTCB Asset Funding"), as seller, and a trustee identified in the Prospectus
Supplement relating to the Series of Certificates representing interests in
such Trust. LTCB Asset Funding initially will own the remaining undivided
interest in each Trust not represented by the Certificates issued by such Trust
and the Branch initially will service the related Covered Obligations.
(continued on next page)
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE CONSIDERATIONS
SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 22 HEREIN, INCLUDING
CONSIDERATIONS RELATING TO THE FACT THAT THE COVERED OBLIGATIONS WILL BE
CONVEYED BY THE BRANCH TO LTCB ASSET FUNDING AND BY LTCB ASSET FUNDING TO THE
TRUST BY GRANT OF PARTICIPATION AND SUBPARTICIPATION INTERESTS INSTEAD OF BY
OUTRIGHT ASSIGNMENTS.
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THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUSTS ONLY AND WILL
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH, LTCB ASSET FUNDING COMPANY OR ANY OF THEIR
RESPECTIVE AFFILIATES. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE
CERTIFICATES NOR THE UNDERLYING LOAN AGREEMENTS OR ADVANCES ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Certificates may be sold by LTCB Asset Funding directly to purchasers,
through agents designated from time to time, through underwriting syndicates
led by one or more managing underwriters or through one or more underwriters
acting alone. If underwriters or agents are involved in the offering of the
Certificates of any Series offered hereby, the name of the managing underwriter
or underwriters or agents will be set forth in the related Prospectus
Supplement. If an underwriter, agent or dealer is involved in the offering of
the Certificates of any Series offered hereby, the underwriter's discount,
agent's commission or dealer's purchase price will be set forth in, or may be
calculated from, the related Prospectus Supplement, and the net proceeds to
LTCB Asset Funding from such offering will be the public offering price of such
Certificates less such discount in the case of an underwriter, the purchase
price of such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in each
case, the other expenses of LTCB Asset Funding associated with the issuance and
distribution of such Certificates. See "Plan of Distribution".
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS SEPTEMBER , 1997.
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(continued from previous page)
The property of each Trust will include the right to receive payments of
principal, interest and certain fees (the "Covered Obligations") arising under
certain loan agreements (the "Covered Loan Agreements") selected from a
portfolio of commercial and industrial loans (the "Loans") owned by the
branches and agencies of LTCB and LTCB Trust Company in the United States, all
monies due in payment of the Covered Obligations and certain other property,
as more fully described herein and, with respect to any Series, in the related
Prospectus Supplement. The Covered Loan Agreements will include multi-lender
loan facilities and direct (bilateral) loans to corporate and industrial
customers as well as fully-funded term loans and revolving credit facilities.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest
in the related Trust and the interest of the Certificateholders of each Class
or Series will include the right to receive a varying percentage of each
month's collections with respect to the Advances of such Trust at the times,
in the manner and to the extent described herein and, with respect to any
Series offered hereby, in the related Prospectus Supplement. Interest and
principal payments with respect to each Series offered hereby will be made as
specified in the related Prospectus Supplement. One or more Classes of a
Series offered hereby may be entitled to the benefits of a cash collateral
account or guaranty, a collateral interest, a letter of credit, a surety bond,
an insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series offered
hereby may include one or more Classes which are subordinated in right and
priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
thereof offered hereby will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of,
the Certificateholders of any previously issued Series.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
CERTIFICATES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a)
the initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Covered Obligations allocated
to such Series; (d) the expected date or dates on which the principal amount
of the Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate
Certificates included in such Series or such other type of Class of
Certificates; (g) the Distribution Dates and Payment Dates for the respective
Classes; (h) relevant financial information with respect to the Covered
Obligations and Covered Loan Agreements allocated to such Series; (i)
additional information with respect to any Enhancement relating to such
Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning each Trust and prepared by the
Servicer, will be sent on behalf of such Trust to Cede & Co., as nominee of
The Depository Trust Company ("DTC") and registered holder of the related
Certificates, pursuant to the related Agreement. See "Description of
Certificates--Book-Entry Registration", "--Reports to Certificateholders" and
"--Evidence as to Compliance". Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Seller does not intend to send any of its financial reports to
Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners"). The Servicer will file with the
Securities and Exchange Commission (the "Commission") such periodic reports
with respect to each Trust as are required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference", which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and are also available on the Commission's worldwide web
site at http://www.sec.gov. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of each
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for
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purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to Planning and Control Division, The Long-
Term Credit Bank of Japan, Limited, New York Branch, 165 Broadway, New York,
New York 10006. Telephone requests for such copies should be directed to The
Long-Term Credit Bank of Japan, Limited, New York Branch, at (212) 335-4400.
4
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PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in any accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus". Unless the context requires
otherwise, capitalized terms used in this Prospectus and in any accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
TYPE OF SECURITIES.......... Asset Backed Certificates (the "Certificates")
evidencing an undivided ownership interest in
the assets of a C&I Master Trust (each, a
"Trust") may be issued from time to time in one
or more series (each, a "Series") which will
consist of one or more classes of Certificates
(each, a "Class").
TRUSTS...................... Trusts (each such Trust, a "Trust") may be formed
from time to time, each pursuant to a pooling
and servicing agreement (each such agreement, an
"Agreement") to be entered into among The Long-
Term Credit Bank of Japan, Limited, New York
Branch (the "Branch"), as servicer, LTCB Asset
Funding Company, a Delaware business trust
("LTCB Asset Funding"), as seller, and a trustee
to be identified in the Prospectus Supplement
relating to the Series of Certificates
representing interests in such Trust (each
trustee under an Agreement, a "Trustee"). Each
Trust will be created as a master trust under
which one or more Series will be issued pursuant
to a series supplement to the related Agreement
(a "Series Supplement"). Any Series issued by a
Trust may or may not be a Series offered
pursuant to this Prospectus. Each Prospectus
Supplement will identify the related Trust and
all Series previously issued by such Trust.
TRUST ASSETS................
The assets of each Trust will include the right
to receive payments of principal, interest and
certain fees (the "Payment Obligations") arising
under certain commercial and industrial loan
agreements (the "Covered Loan Agreements")
selected from a portfolio of commercial and
industrial loans (the "Loans") owned by the
branches and agencies of The Long-Term Credit
Bank of Japan, Limited ("LTCB") and LTCB Trust
Company in the United States (the "LTCB
Portfolio"), all proceeds of the Covered
Obligations and all monies on deposit in certain
bank accounts of the Trust (including any
permitted investments in which any such monies
are invested, but excluding investment earnings
on such amounts unless otherwise specified in
the related Prospectus Supplement), and any
Enhancement with respect to any particular
Series or Class, as described in the related
Prospectus Supplement. The Covered Obligations
under the Covered Loan Agreements
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(the "Trust Portfolio") will be selected from
the LTCB Portfolio based on criteria provided in
the related Agreement. Under the First Tier
Participation Agreement and the Second Tier
Participation Agreement, Covered Obligations
arising under the Covered Loan Agreements from
time to time will automatically be included in
the Participation and Subparticipation,
respectively, conveyed thereunder without any
further action by the Branch or LTCB Asset
Funding being necessary. The term "Enhancement"
means, with respect to any Series or Class
thereof, any Credit Enhancement, guaranteed rate
agreement, maturity liquidity facility, interest
rate cap agreement, interest rate swap
agreement, currency swap agreement or other
similar arrangement for the benefit of the
Certificateholders of such Series or Class. The
term "Credit Enhancement" means, with respect to
any Series, the subordination, cash collateral
guaranty or account, collateral interest, letter
of credit, surety bond, insurance policy, spread
account, reserve account, cross-support feature
or any other contract or agreement for the
benefit of the Certificateholders of such Series
(or Certificateholders of a Class within such
Series) as designated in the applicable Series
Supplement.
The Covered Obligations will be conveyed by the
Branch to LTCB Asset Funding and, in turn, by
LTCB Asset Funding to the Trust by grant of
participation and subparticipation interests,
respectively, instead of by outright assignments
because of limitations in certain of the Covered
Loan Agreements on outright assignments of the
loans thereunder. Pursuant to a first tier
participation agreement (each, a "First Tier
Participation Agreement") between the Branch and
LTCB Asset Funding, the Branch will convey to
LTCB Asset Funding a 100% undivided
participation interest (a "Participation") in
all Covered Obligations existing under the
Covered Loan Agreements. In turn, pursuant to a
second tier participation agreement (each, a
"Second Tier Participation Agreement") between
LTCB Asset Funding (the "Seller") and the Trust,
LTCB Asset Funding will convey to the Trust a
100% undivided subparticipation interest (a
"Subparticipation") in LTCB Asset Funding's
Participation in the Covered Obligations
existing under the Covered Loan Agreements. The
Covered Loan Agreements will include multi-
lender loan facilities and direct (bilateral)
loans to corporate and industrial customers as
well as fully-funded term loans and revolving
credit facilities. In addition, each Agreement
will provide that the Branch and the Seller may
from time to time (subject to certain
limitations and conditions), and in some
circumstances will be obligated to, designate
additional
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eligible Loan Agreements from the LTCB Portfolio
to be included as Covered Loan Agreements (the
"Additional Loan Agreements"), the Payment
Obligations which will be included in the
related Trust as Covered Obligations, and may
remove the Payment Obligations under designated
Covered Loan Agreements ("Removed Loan
Agreements") from the Trust. "Covered
Obligations" shall include all Payment
Obligations under the Loan Agreements initially
conveyed to the Trust (the "Initial Loan
Agreements") and all Payment Obligations under
any Additional Loan Agreement from and after the
Addition Date with respect thereto. See "The
Loans" and "Description of Certificates--
Addition of Trust Assets" and "--Removal of Loan
Agreements".
CERTIFICATE INTEREST AND Each Series of Certificates will represent an
PRINCIPAL................... undivided interest in the assets of the related
Trust. Each Certificate of a Series will
represent the right to receive payments of (i)
interest at the specified rate or rates per
annum (each, a "Certificate Rate"), which may be
fixed, floating or other type of rate and (ii)
unless otherwise provided in the related
Prospectus Supplement, payments of principal
during the Controlled Amortization Period, the
Principal Amortization Period or, under certain
limited circumstances, the Rapid Amortization
Period (each, an "Amortization Period"), or on
Scheduled Payment Dates, in which case such
Series will have a Controlled Accumulation
Period and, under certain limited circumstances
if so specified in the related Prospectus
Supplement, a Rapid Accumulation Period (each,
an "Accumulation Period"), as well as, under
certain limited circumstances, a Rapid
Amortization Period, all as specified in the
related Prospectus Supplement.
Each Series of Certificates will consist of one
or more Classes, one or more of which may be
Senior Certificates ("Senior Certificates") and
one or more of which may be Subordinated
Certificates ("Subordinated Certificates"). Each
Class of a Series may evidence the right to
receive a specified portion of each distribution
of principal or interest or both. The
Certificates of a Class may also differ from
Certificates of other Classes of the same Series
in, among other things, the amounts allocated to
principal payments, priority of payments,
payment dates, maturity, interest rates,
interest rate and currency computation and
availability and form of Enhancement.
The assets of each Trust will be allocated among
the Certificateholders of each Series of such
Trust and the holder of the Seller Certificate
of such Trust and, in certain circumstances, the
related Credit Enhancement Provider.
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With respect to a Trust, the aggregate principal
amount of the interest of the Certificateholders
of a Series in such Trust is referred to herein
as the "Investor Interest" and is based on the
aggregate amount of the Principal Obligations in
such Trust allocated to such Series. The
aggregate principal amount of the interest of
the holder of the Seller Certificate in a Trust
is referred to herein as the "Seller Interest",
and is based on the aggregate amount of
Principal Obligations in such Trust not
allocated to the Certificateholders or any
Credit Enhancement Provider with respect to such
Trust. See "Description of Certificates--
General".
The Certificateholders of each Series will have
the right to receive (but only to the extent
needed to make required payments under the
related Agreement and the related Series
Supplement and subject to any reallocation of
such amounts if the related Series Supplement so
provides) varying percentages of the collections
of Interest Obligations and Principal
Obligations for each month and will be allocated
a varying percentage of the Default Amount for
such month (each such percentage, an "Investor
Percentage"). The related Prospectus Supplement
will specify the Investor Percentages with
respect to the allocation of collections of
Principal Obligations, Interest Obligations and
Payment Obligations under Defaulted Loan
Agreements during the Revolving Period, any
Amortization Period and any Accumulation Period,
as applicable. If the Certificates of a Series
offered hereby include more than one Class of
Certificates, the assets of the related Trust
allocable to the Certificates of such Series may
be further allocated among each Class in such
Series as described in the related Prospectus
Supplement. See "Description of Certificates--
Investor Percentage and Seller Percentage".
The Certificates of each Series will represent
interests in the related Trust only and will not
represent interests in or obligations of the
Branch, the Seller or any affiliate thereof. A
Certificate is not a deposit and neither the
Certificates nor the underlying Advances or Loan
Agreements are insured or guaranteed by the
Federal Deposit Insurance Corporation (the
"FDIC") or any other governmental agency.
PAYMENT OBLIGATIONS.... The right to receive payments of principal,
interest and certain fees (the "Payment
Obligations"; Payment Obligations arising under
a Covered Loan Agreement, "Covered Obligations")
held in each Trust will arise under Covered Loan
Agreements that have been selected from the LTCB
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Portfolio based on criteria provided in the
related Agreement and described in the related
Prospectus Supplement as applied initially on
the date (the "Cut-Off Date") specified in the
related Prospectus Supplement and, with respect
to certain Additional Loan Agreements, if any,
on the subsequent dates specified in the related
Prospectus Supplement. The Covered Obligations
will consist of (i) amounts loaned to commercial
and industrial borrowers (the "Covered Principal
Obligations"), plus (ii) the related periodic
payments of interest and amounts payable under
the Covered Loan Agreements in respect of
commitment fees, facility fees, letter of credit
and guarantee fees and other similar fees that
are calculated with reference to the amount of
Covered Principal Obligations under a Covered
Loan Agreement (the "Covered Interest
Obligations"). During the term of each Trust,
all new Payment Obligations arising in the
Covered Loan Agreements relating to such Trust
will be transferred automatically to such Trust
by the Seller. The total amount of Covered
Obligations in any Trust will fluctuate from day
to day because the amount of new Covered
Obligations arising under the Covered Loan
Agreements and the amount of payments collected
on existing Covered Obligations usually differ
each day. Pursuant to each Agreement, the Seller
will have the right (subject to certain
limitations and conditions), and in some
circumstances, such as the maintenance of the
Seller Interest at a specified minimum level
(the "Minimum Seller Interest"), will be
obligated, to designate additional Loans to be
included as Additional Loan Agreements and to
convey to the related Trust a Subparticipation
in all of the Payment Obligations under the
Additional Loan Agreements, whether such Payment
Obligations are then existing or thereafter
created. See "Description of Certificates--
Addition of Trust Assets". Pursuant to each
Agreement, the Seller will have the right
(subject to certain limitations and conditions),
and in some cases will be obligated, to
designate certain Loan Agreements as Removed
Loan Agreements and to terminate the
Subparticipation in Payment Obligations under
the Removed Loan Agreements whether such Payment
Obligations are then existing or thereafter
created. See "Description of Certificates--
Removal of Loan Agreements".
EXCHANGES................... Each Agreement will authorize the related Trustee
to issue two types of certificates: (i) one or
more Series of Certificates that will be
transferable and have the characteristics
described below and (ii) a certificate that
evidences the Seller Interest (the "Seller
Certificate"), which initially will be held by
the Seller and which will be transferable only
as provided in the related Agreement.
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Pursuant to any one or more Series Supplements
to the related Agreement, the holder of the
Seller Certificate may tender the Seller
Certificate or, if provided in the relevant
Series Supplement, Certificates representing any
Series (which may include Series offered
pursuant to this Prospectus) issued by such
Trust and the Seller Certificate, to the Trustee
in exchange for one or more new Series (which
may include Series offered pursuant to this
Prospectus) and a reissued Seller Certificate
(any such tender, an "Exchange"). Any such
Series may be offered to the public or other
investors under a prospectus or other disclosure
document (a "Disclosure Document") in offerings
pursuant to this Prospectus or in transactions
either registered under the Securities Act of
1933, as amended (the "Securities Act"), or
exempt from registration thereunder, directly or
through one or more other underwriters or
placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
An Exchange may occur only upon delivery to the
Trustee of the following: (i) a Series
Supplement specifying the principal terms of
such Series (the "Principal Terms"), (ii) (a) an
opinion of counsel to the effect that, unless
otherwise stated in the related Series
Supplement, the Certificates of such Series will
be characterized as indebtedness for federal
income tax purposes and (b) an opinion of
counsel to the effect that, for federal income
tax purposes, (1) such issuance will not
adversely affect the tax characterization as
debt of Certificates of any outstanding Series
or Class that were characterized as debt at the
time of their issuance, (2) following such
issuance the Trust will not be deemed to be an
association (or publicly traded partnership)
taxable as a corporation and (3) such issuance
will not cause or constitute an event in which
gain or loss would be recognized by any
Certificateholder or the Trust (an opinion of
counsel with respect to any matter to the effect
referred to in clause (b) with respect to any
action is referred to herein as a "Tax
Opinion"), (iii) if required by the related
Series Supplement, the form of Credit
Enhancement, (iv) if Credit Enhancement is
required by the Series Supplement, an
appropriate Credit Enhancement agreement with
respect thereto, (v) written confirmation from
each Rating Agency that the Exchange will not
result in such Rating Agency reducing or
withdrawing its rating on any then outstanding
Series rated by it, (vi) an officer's
certificate of the Servicer to the effect that
after giving effect to the Exchange, the Branch
and the Seller would not be required to cause
Additional Loan Agreements and the Payment
Obligations thereunder to become subject to the
Participation under the First Tier Participation
Agreement or the Subparticipation
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under the Second Tier Participation Agreement
and the Seller Interest would be at least equal
to the Minimum Seller Interest and (vii) the
existing Seller Certificate and, if applicable,
the Certificates representing the Series to be
exchanged. See "Description of Certificates--
Exchanges".
DENOMINATIONS............... Unless otherwise specified in the related
Prospectus Supplement, beneficial interests in
the Certificates will be offered for purchase in
denominations of $1,000 and integral multiples
thereof.
REGISTRATION OF Unless otherwise specified in the related
CERTIFICATES................ Prospectus Supplement, the Certificates of each
Series initially will be represented by
Certificates registered in the name of Cede &
Co., as the nominee of DTC. No Certificate Owner
will be entitled to receive a definitive
certificate representing such person's interest,
except in the event that Certificates in fully
registered, certificated form ("Definitive
Certificates") are issued under the limited
circumstances described herein. See "Description
of Certificates--Definitive Certificates".
CLEARANCE AND SETTLEMENT....
Unless otherwise provided in the related
Prospectus Supplement, Certificate Owners of
each Series offered hereby may elect to hold
their Certificates through any of DTC (in the
United States) or CEDEL or Euroclear (in
Europe). Transfers within DTC, CEDEL or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will
be effected in DTC through the relevant
Depositories of CEDEL or Euroclear. See
"Description of Certificates--Book-Entry
Registration".
THE SELLER..................
LTCB Asset Funding Company, a Delaware business
trust and a subsidiary of LTCB. The Branch will
transfer the Covered Obligations under each
Covered Loan Agreement to the Seller under a
First Tier Participation Agreement. The Seller
will then transfer each Covered Obligation under
a Covered Loan Agreement to the applicable Trust
under a Second Tier Participation Agreement. See
"--Trust Assets".
THE SERVICER................ The Long-Term Credit Bank of Japan, Limited, New
York Branch. The principal executive offices of
the Branch are located at 165 Broadway, New
York, New York 10006; telephone number (212)
335-4400. The Servicer will receive a fee as
servicing compensation from the related Trust in
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<PAGE>
respect of each Series in the amounts and at the
times specified in the related Prospectus
Supplement (the "Servicing Fee"). The Servicing
Fee may be payable from Covered Interest
Obligations or other amounts as specified in the
related Prospectus Supplement. In certain
limited circumstances, the Servicer may resign
or be removed, in which event the Trustee or a
third party servicer may be appointed as
successor servicer (the Branch, or any such
successor servicer, is referred to herein as the
"Servicer"). The Branch is the New York branch
of The Long-Term Credit Bank of Japan, Limited.
See "LTCB and LTCB Trust Company".
COLLECTIONS.................
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will deposit
all collections of Covered Obligations in an
account required to be established for such
purpose by the related Agreement (the
"Collection Account"). All amounts deposited in
the Collection Account with respect to a Trust
will be allocated by the Servicer between
amounts collected on Covered Principal
Obligations and amounts collected on Covered
Interest Obligations. All such amounts will then
be allocated in accordance with the respective
interests of the Certificateholders of each
Series of Certificates or Class thereof and the
holder of the Seller Certificate and, in certain
circumstances, certain Credit Enhancement
Providers. See "Description of Certificates--
Investor Percentage and Seller Percentage".
INTEREST PAYMENTS...........
Interest on each Series of Certificates or Class
thereof for each Monthly Period (each, an
"Interest Period") specified in the related
Prospectus Supplement will be distributed or
deposited into an escrow account or other
account for the benefit of such Series of
Certificates or Class thereof in the amounts and
on the dates (which may be monthly, quarterly,
semiannually or otherwise as specified in the
related Prospectus Supplement) (each, a
"Distribution Date") specified in the related
Prospectus Supplement. Interest payments or
deposits on each Distribution Date will be
funded from Collections of Covered Interest
Obligations allocated to the Investor Interest
during the preceding monthly period or periods
(each, a "Monthly Period"), as described in the
related Prospectus Supplement, and may be funded
from certain investment earnings on funds in
certain accounts of the related Trust and from
any applicable Enhancement, if necessary, or
certain other amounts as specified in the
related Prospectus Supplement. If the
Distribution Dates for payment or deposit of
interest for a Series or Class occur less
frequently than monthly, such Collections or
other amounts allocable to such Series or
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<PAGE>
Class may be deposited in one or more trust
accounts pending distribution to the
Certificateholders of such Series or Class, all
as described in the related Prospectus
Supplement. See "Description of Certificates--
Application of Collections", "--Shared Excess
Interest Collections", "Credit Enhancement" and
"Risk Factors--Structural Risks--Credit
Enhancement".
REVOLVING PERIOD............
Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series and any Class thereof, no principal will
be payable to Certificateholders until the
Principal Commencement Date or the Scheduled
Payment Date with respect to such Series or
Class, as described below. For the period
beginning on the date of issuance of the related
Series (the "Closing Date") and ending with the
commencement of an Amortization Period or an
Accumulation Period (the "Revolving Period"),
collections of Covered Principal Obligations
otherwise allocable to the Investor Interest
will, subject to certain limitations, be paid
from the Trust to the holder of the Seller
Certificate or, under certain circumstances and
if so specified in the related Prospectus
Supplement, will be treated as Shared Principal
Collections and paid to the holders of other
Series of Certificates issued by such Trust, as
described herein and in the related Prospectus
Supplement. See "Description of Certificates--
Pay Out Events" for a discussion of the events
which might lead to early termination of the
Revolving Period.
PRINCIPAL PAYMENTS.......... The principal of the Certificates of each Series
offered hereby will be scheduled to be paid
either in installments commencing on a date
specified in the related Prospectus Supplement
(the "Principal Commencement Date"), in which
case such Series will have either a Controlled
Amortization Period or a Principal Amortization
Period, as described below, or on an expected
date specified in, or determined in the manner
specified in, the related Prospectus Supplement
(the "Scheduled Payment Date"), in which case
such Series will have an Accumulation Period, as
described below. If a Series has more than one
Class of Certificates, a different method of
paying principal, Principal Commencement Date or
Scheduled Payment Date may be assigned to each
Class. The payment of principal with respect to
the Certificates of a Series or Class may
commence earlier than the applicable Principal
Commencement Date or Scheduled Payment Date, and
the final principal payment with respect to the
Certificates of a Series or Class may be made
later than the applicable expected payment date,
Scheduled Payment Date or other expected date,
if a Pay Out Event occurs and the Rapid
Amortization Period commences with respect to
such
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<PAGE>
Series or Class or under certain other
circumstances described herein. See "Description
of Certificates--Principal Payments".
CONTROLLED AMORTIZATION
PERIOD...................... If the Prospectus Supplement relating to a Series
so specifies, unless a Rapid Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the
"Controlled Amortization Period") during which
collections of Principal Obligations allocable
to the Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any Class
of such Series then scheduled to receive such
distributions. The amount to be distributed or
deposited on or before any Distribution Date
during the Controlled Amortization Period will
be limited to an amount (the "Controlled
Distribution Amount") equal to an amount
specified in the related Prospectus Supplement
(the "Controlled Amortization Amount") plus any
existing deficit controlled amortization amount
arising from prior Distribution Dates. If a
Series has more than one Class of Certificates,
each Class may have a separate Controlled
Amortization Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
such distributions. The Controlled Amortization
Period will commence at the close of business on
a date specified in the related Prospectus
Supplement and continue until the earliest of
(a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series or
Class and, if so specified in the related
Prospectus Supplement, of the Collateral
Interest, if any, with respect to such Series,
and (c) the Series Termination Date with respect
to such Series.
PRINCIPAL AMORTIZATION
PERIOD...................... If the Prospectus Supplement relating to a Series
so specifies, unless a Rapid Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the "Principal
Amortization Period") during which collections
of Covered Principal Obligations allocable to
the Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions or deposits with respect to the
Certificateholders of such Series or any Class
of such Series then scheduled to receive such
distributions. If a Series has more than one
Class of Certificates, the related Prospectus
Supplement may describe certain priorities
14
<PAGE>
among such Classes with respect to such
distributions. The Principal Amortization Period
will commence at the close of business on a date
specified in the related Prospectus Supplement
and continue until the earlier of (a) the
commencement of the Rapid Amortization Period,
(b) payment in full of the Investor Interest of
the Certificates of such Series or Class and, if
so specified in the related Prospectus
Supplement, of the Collateral Interest, if any,
with respect to such Series, and (c) the Series
Termination Date with respect to such Series.
CONTROLLED ACCUMULATION
PERIOD...................... If the Prospectus Supplement relating to a Series
so specifies, unless a Rapid Amortization Period
or, if so specified in the related Prospectus
Supplement, a Rapid Accumulation Period with
respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an accumulation period (the
"Controlled Accumulation Period") during which
collections of Principal Obligations allocable
to the Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be deposited
on the business day immediately prior to each
Distribution Date or other business day
specified in the related Prospectus Supplement
(each a "Transfer Date") in a trust account
established for the benefit of the
Certificateholders of such Series or Class (a
"Principal Funding Account") and used to make
distributions of principal to the
Certificateholders of such Series or Class on
the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account on
any Transfer Date will be limited to an amount
(the "Controlled Deposit Amount") equal to an
amount specified in the related Prospectus
Supplement (the "Controlled Accumulation
Amount") plus any deficit Controlled
Accumulation Amount arising from prior
Distribution Dates. If a Series has more than
one Class of Certificates, each Class may have a
separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to deposits of principal into such
Principal Funding Accounts. The Controlled
Accumulation Period will commence at the close
of business on a date specified in or determined
in the manner specified in the related
Prospectus Supplement and continue until the
earliest of (a) the commencement of the Rapid
Amortization Period or, if so specified in the
related Prospectus Supplement, the Rapid
Accumulation Period, (b) payment in full of the
Investor Interest of the Certificates of such
Series or Class and, if so specified in the
related Prospectus Supplement, of the Collateral
Interest, if any, with respect to such Series
and (c) the Series Termination Date with respect
to such Series.
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<PAGE>
Funds on deposit in any Principal Funding Account
may be invested in permitted investments or
subject to a guaranteed rate or investment
contract or other arrangement intended to assure
a minimum return on the investment of such
funds. Investment earnings on such funds may be
applied to pay interest on the related Series of
Certificates. In order to enhance the likelihood
of payment in full of principal at the end of an
Accumulation Period with respect to a Series of
Certificates, such Series may be subject to a
principal guaranty or other similar arrangement.
RAPID ACCUMULATION PERIOD...
If so specified and under the conditions set
forth in the Prospectus Supplement relating to a
Series having a Controlled Accumulation Period,
during the period from the day on which a Pay
Out Event has occurred until the earliest of (a)
the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series and,
if so specified in the related Prospectus
Supplement, of the Collateral Interest, if any,
with respect to such Series and (c) the related
Series Termination Date (the "Rapid Accumulation
Period"), collections of Covered Principal
Obligations allocable to the Investor Interest
of such Series (and certain other amounts if so
specified in the related Prospectus Supplement)
will be deposited on each Transfer Date in the
Principal Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or Class on
the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account
during the Rapid Accumulation Period will not be
limited to the Controlled Deposit Amount. The
term "Pay Out Event" with respect to a Series of
Certificates issued by a Trust means any of the
events identified as such in the related
Prospectus Supplement and any of the following:
(a) certain events of insolvency or receivership
relating to the Branch or the Seller, (b) the
Branch shall become unable for any reason to
give effect to its grant and sale of a
Participation in Covered Obligations arising
under the First Tier Participation Agreement or
the Seller shall become unable for any reason to
give effect to its grant and sale of a
Subparticipation in the Covered Obligations
arising under the Second Tier Participation
Agreement or (c) such trust becomes an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended. See
"Description of Certificates--Pay Out Events"
for a discussion of the events which might lead
to the commencement of a Rapid Accumulation
Period.
During the Rapid Accumulation Period, funds on
deposit in any Principal Funding Account may be
invested in Permitted Investments or subject to
a guaranteed rate or
16
<PAGE>
investment contract or other arrangement
intended to assure a minimum return on the
investment of such funds. Investment earnings on
such funds may be applied to pay interest on the
related Series of Certificates or make other
payments as specified in the related Prospectus
Supplement. In order to enhance the likelihood
of payment in full of principal at the end of
the Rapid Accumulation Period with respect to a
Series of Certificates, such Series may be
subject to a principal guaranty or other similar
arrangement.
RAPID AMORTIZATION PERIOD...
During the period from the day on which a Pay Out
Event has occurred with respect to a Series or,
if so specified in the Prospectus Supplement
relating to a Series with a Controlled
Accumulation Period, from such time specified in
the related Prospectus Supplement after a Pay
Out Event has occurred and the Rapid
Accumulation Period has commenced, to the
earlier of (a) the date on which the Investor
Interest of the Certificates of such Series and
the Enhancement Invested Amount or the
Collateral Interest, if any, with respect to
such Series have been paid in full and (b) the
related Series Termination Date (the "Rapid
Amortization Period"), collections of Covered
Principal Obligations allocable to the Investor
Interest of such Series (and certain other
amounts if so specified in the related
Prospectus Supplement) will be distributed as
principal payments to the Certificateholders of
such Series and, in certain circumstances, to
the Credit Enhancement Provider, monthly on each
Distribution Date with respect to such Series in
the manner and order of priority set forth in
the related Prospectus Supplement. During the
Rapid Amortization Period with respect to a
Series, distributions of principal will not be
subject to any Controlled Deposit Amount or
Controlled Distribution Amount. In addition,
upon the commencement of the Rapid Amortization
Period with respect to a Series, any funds on
deposit in a Principal Funding Account with
respect to such Series or any Class thereof will
be paid or deposited with respect to the
Certificateholders of such Series or Class on or
before the Distribution Date in the month
following the commencement of the Rapid
Amortization Period. See "Description of
Certificates--Pay Out Events" for a discussion
of the events which might lead to the
commencement of a Rapid Amortization Period.
SHARED EXCESS INTEREST
COLLECTIONS................
Any Series offered hereby may be included in a
group of Series (a "Group"). If so specified in
the related Prospectus Supplement, the
Certificateholders of a Series within a Group or
any Class thereof may be entitled to receive all
or
17
<PAGE>
a portion of Excess Interest Collections with
respect to another Series within such Group or
Class thereof to cover any shortfalls with
respect to amounts payable from collections of
Covered Interest Obligations allocable to such
Series or Class. Unless otherwise provided in
the related Prospectus Supplement, with respect
to any Series, "Excess Interest Collections" for
any Monthly Period will equal the excess of
collections of Covered Interest Obligations and
certain other amounts allocated to the Investor
Interest of such Series or Class over the sum of
(i) interest accrued for the current month
("Monthly Interest") and overdue Monthly
Interest on the Certificates of such Series or
Class (together with, if applicable, interest on
overdue Monthly Interest at the rate specified
in the related Prospectus Supplement
("Additional Interest")), (ii) accrued and
unpaid Investor Servicing Fees with respect to
such Series or Class payable from collections of
Covered Interest Receivables, (iii) the Investor
Default Amount with respect to such Series or
Class, (iv) unreimbursed Investor Charge-Offs
with respect to such Series or Class and (v)
other amounts specified in the related
Prospectus Supplement. The term "Investor
Servicing Fee" for any Series of Certificates or
Class thereof means the Servicing Fee allocable
to the Investor Interest with respect to such
Series or Class, as specified in the related
Prospectus Supplement. The term "Investor
Default Amount" means, for any Monthly Period
and for any Series or Class thereof, the
Investor Percentage of the Default Amount for
such Monthly Period. The term "Investor Charge-
Off" means, for any Monthly Period, and for any
Series or Class thereof, unless otherwise
specified in the applicable Prospectus
Supplement, the amount by which (a) the related
Monthly Interest and overdue Monthly Interest
(together with, if applicable, Additional
Interest), the accrued and unpaid Investor
Servicing Fees payable from collections of
Covered Interest Receivables, the Investor
Default Amount and any other required
distributions exceeds (b) amounts available to
pay such amounts out of collections of Covered
Interest Obligations, available Credit
Enhancement amounts, if any, and other sources
specified in the related Prospectus Supplement,
but not more than such Investor Default Amount.
See "Description of Certificates--Application of
Collections", "--Shared Excess Interest
Collections", "--Defaulted Obligations; Investor
Charge-Offs" and "Credit Enhancement".
SHARED PRINCIPAL
COLLECTIONS ............... If so specified in the related Prospectus
Supplement, to the extent that collections of
Covered Principal Obligations that are allocated
to the Investor Interest of any Series are not
needed to make payments or deposits with respect
to such
18
<PAGE>
Series, such collections ("Shared Principal
Collections") will be applied to cover principal
payments due to or for the benefit of
Certificateholders of another Series. If so
specified in the related Prospectus Supplement,
the allocation of Shared Principal Collections
may be among Series within a Group. Any such
reallocation will not result in a reduction in
the Investor Interest of the Series to which
such collections were initially allocated.
CREDIT ENHANCEMENT.......... Credit Enhancement with respect to a Series or
any Class thereof may be provided in the form or
forms of subordination, a letter of credit, a
cash collateral guaranty or account, a
collateral interest, a surety bond, an insurance
policy, a spread account, a reserve account or
other form of support as specified in the
related Prospectus Supplement. Credit
Enhancement may also be provided to a Class or
Classes of different Series by a cross-support
feature which requires that distributions of
principal and/or interest be made with respect
to Certificates of one or more Classes of a
particular Series before distributions are made
to one or more Classes of another Series.
The type, characteristics and amount of the
Credit Enhancement will be determined based on
several factors, including the characteristics
of the Covered Obligations and Covered Loan
Agreements included in the Trust Portfolio as of
the Closing Date with respect to any Series, and
will be established on the basis of requirements
of each Rating Agency rating the Certificates of
such Series. If so specified in the related
Prospectus Supplement, any such Credit
Enhancement will apply only in the event of
certain types of losses and the protection
against losses provided by such Credit
Enhancement will be limited. The terms of
the Credit Enhancement with respect to a Series,
and the conditions under which the Credit
Enhancement may be increased, reduced or
replaced, will be described in the related
Prospectus Supplement. See "Credit Enhancement"
and "Risk Factors--Risks Relating to the
Certificates--Certificate Rating".
OPTIONAL REPURCHASE......... With respect to each Series of Certificates, the
Investor Interest will be subject to optional
repurchase by the Seller on any Distribution
Date after the Investor Interest and the
Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount
less than or equal to 5% of the Initial Investor
Interest, or such other amount specified in the
related Prospectus Supplement, if certain
conditions set forth in the related Agreement
are met. Unless otherwise specified in the
related Prospectus Supplement, the repurchase
price will be equal to the Investor Interest
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<PAGE>
(less the amount, if any, on deposit in any
Principal Funding Account with respect to such
Series), plus the Enhancement Invested Amount,
if any, with respect to such Series, plus
accrued and unpaid interest on the Certificates
and interest or other amounts payable on the
Enhancement Invested Amount or the Collateral
Interest, if any, through the day preceding the
Distribution Date on which the repurchase
occurs. See "Description of Certificates--Final
Payment of Principal; Termination".
TAX STATUS..................
Except to the extent otherwise specified in the
related Prospectus Supplement, special counsel
to the Branch and the Seller will deliver its
opinion that under existing law the Certificates
of each Series offered for sale to investors
pursuant to such Prospectus Supplement (the
"Offered Certificates") will be characterized as
debt of the Branch for federal income tax
purposes. Except to the extent otherwise
specified in the related Prospectus Supplement,
the Certificateholders will agree to treat the
Certificates as debt for federal, state and
local income and franchise tax purposes. See
"Certain Federal Income Tax Consequences" for
additional information concerning the
application of federal income tax laws.
ERISA CONSIDERATIONS........ Subject to the considerations described below and
except to the extent otherwise specified in the
related Prospectus Supplement, the Seller
anticipates that each Class of Certificates will
be eligible for purchase by employee benefit
plan investors. Under a regulation issued by the
Department of Labor, the assets of each Trust
would not be deemed "Plan Assets" of an employee
benefit plan holding the Certificates of any
Class if certain conditions are met, including
that the Certificates of such Class must be
held, upon completion of the public offering
being made hereby and by the related Prospectus
Supplement, by at least 100 investors who are
independent of the Seller and of one another
("Independent Investors"). Except to the extent
otherwise disclosed in the related Prospectus
Supplement, the Seller expects that each Class
of Certificates will be held by at least 100
Independent Investors at the conclusion of the
initial public offering, although no assurance
can be given, and no monitoring or other
measures will be taken to ensure that such
condition will be met. The Seller anticipates
that the other conditions of the regulation will
be met. If the assets of a Trust were deemed to
be "Plan Assets" of an employee benefit plan
investor (e.g., if the 100 Independent Investor
criterion is not satisfied), violation of the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), could result and generate
excise tax
20
<PAGE>
and other liabilities under ERISA and Section
4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), unless a statutory,
regulatory or administrative exemption is
available. It is uncertain whether existing
exemptions from the "prohibited transaction"
rules of ERISA would apply to all transactions
involving such Trust's assets if such assets
were treated for ERISA purposes as "Plan Assets"
of employee benefit plan investors. Accordingly,
fiduciaries or other persons contemplating
purchasing Certificates or any Class on behalf
or with "Plan Assets" of any employee benefit
plan should consult their counsel before making
a purchase. See "ERISA Considerations".
CERTIFICATE RATING.......... It will be a condition to the issuance of the
certificates of each Series or Class thereof
offered pursuant to this Prospectus and the
related Prospectus Supplement that they be rated
in one of the four highest rating categories by
at least one nationally recognized rating
organization (the rating agency or agencies
selected by the Seller to rate any Series, the
"Rating Agency"). The rating or ratings
applicable to the Certificates of each Series or
Class thereof offered hereby will be set forth
in the related Prospectus Supplement.
A 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 rating should be evaluated
independently of any other rating. See "Risk
Factors--Risks Relating to Certificates--
Certificate Rating".
LISTING..................... If so specified in the Prospectus Supplement
relating to a Series, application will be made
to list the Certificates of such Series, or all
or a portion of any Class thereof, on the
Luxembourg Stock Exchange or any other specified
exchange.
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<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates. Additional risk
factors may be set forth in the accompanying Prospectus Supplement.
ASSET RISKS
LIMITATIONS REGARDING COVERED OBLIGATIONS. The collectibility of the Covered
Obligations is subject to credit, liquidity and interest rate risks and will
generally fluctuate in response to, among other things, market interest rates,
general economic conditions, the financial condition of the borrowers under
the Covered Loan Agreements (the "Borrowers") and other similar factors. In
addition, upon the exercise of remedies under an Agreement, First Tier
Participation Agreement or Second Tier Participation Agreement, the ability of
the Trust to sell a subparticipation or other interest in the Covered
Obligations will depend upon the availability of buyers therefor. If, subject
to the priority of distributions described in "Description of Certificates--
Investor Percentage and Seller Percentage" and "--Pay Out Events", the
collections on the Covered Obligations allocable to a particular Series or
Class of Certificates were not sufficient to pay all amounts due on such
Certificates, then holders thereof would bear their allocable percentage of
such insufficiency and any resulting loss.
LIMITATIONS VIS-A-VIS BORROWERS; PARTICIPATIONS. Pursuant to each First Tier
Participation Agreement, the Branch will transfer to the Seller, and pursuant
to each Second Tier Participation Agreement, the Seller will in turn transfer
to a Trust, a 100% Participation and a 100% Subparticipation, respectively, in
the Covered Obligations arising under the Covered Loan Agreements. Neither the
Covered Loan Agreements nor the Covered Obligations will be assigned directly
to the Seller or any Trust. Conveyance of the Covered Obligations by the
Branch to the Seller and by the Seller to the Trust is being made by grant and
sale of the Participation and Subparticipation, respectively, instead of by
outright assignment because of limitations in certain of the Covered Loan
Agreements on outright assignments of the Covered Loan Agreements and the
Covered Obligations thereunder. Accordingly, neither the Seller nor the Trust
will be in privity of contract with the Borrowers under the Covered Loan
Agreements and will not, in most circumstances have the right to assert claims
or effect remedies directly against the Borrowers. The Branch will continue to
be the named lender under the Covered Loan Agreements and as such will be
entitled to take any remedial actions or exercise any votes permitted to be
taken or given thereunder.
A portion of the Covered Obligations may be loans acquired by the Branch
through participations from LTCB Trust Company through a master participation
agreement (the "Master Participation Agreement"). Participations from other
institutions will not qualify as Eligible Loan Agreements. In purchasing
participations from LTCB Trust Company, the Branch has a contractual
relationship only with LTCB Trust Company, and not the Borrower. In such
event, the rights of the Branch will be similar to those of the Seller and the
Trust discussed in the preceding paragraph.
The Branch and the Seller will receive on the Closing Date a reasoned
opinion of Simpson Thacher & Bartlett, special counsel to the Branch and the
Seller, subject to the assumptions and qualifications contained therein, that
in the event the Superintendent took possession of the business and property
of the Branch pursuant to the New York State Banking Law and liquidated its
assets or otherwise dealt with the business and property of the Branch in
accordance with the provisions of the New York State Banking Law applicable to
the liquidation of banking organizations, the transfer by the Branch of the
Covered Obligations to LTCB Asset Funding pursuant to the First Tier
Participation Agreement will be a sale by the Branch to LTCB Asset Funding of
the Covered Obligations, and not a financing of the Branch, and thus the
Covered Obligations would not be property of the Branch to be dealt with by
the Superintendent in accordance with the provisions of the New York State
Banking Law. There can be no assurance, however, that a court would reach the
same conclusion.
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Generally speaking, in the event a lender becomes subject to a bankruptcy or
insolvency proceeding and a borrower from such lender maintains deposits with
such lender, the borrower will have the right to set off against its
obligation to repay its loans the obligation of such lender to repay the
borrower's deposits, unless the borrower has waived its set-off right. If the
Branch or LTCB Trust Company were to become subject to insolvency or
receivership proceedings, because Covered Obligations under Covered Loan
Agreements with the Branch and LTCB Trust Company are being conveyed to the
Seller and ultimately to the Trust by Participation and Subparticipation
interest (under the Master Participation Agreement, a First Tier Participation
Agreement and a Second Tier Participation Agreement), it is possible that
certain Borrowers may have and exercise an unwaived right to set-off their
obligations to repay Covered Obligations against deposits maintained at the
Branch or LTCB Trust Company, respectively. If such set-off rights were
exercised, amounts set off would be allocated solely to the Seller
Certificate.
The majority of the Covered Obligations will arise under loan agreements
having multiple lenders in which the exercise of remedies and the taking of
other actions (including the granting of amendments and waivers) may be
subject to the vote of a certain percentage (measured by outstanding loans or
commitments) of the lenders thereunder. In many such situations the Branch
will not have a sufficient interest to direct compliance by the Borrower with
the terms of the Covered Loan Agreement or to object to certain changes to the
applicable Covered Loan Agreement agreed to by the other lenders.
As described under "Description of Certificates--Collection and Other
Servicing Procedures", in servicing the Covered Obligations the Branch will be
required to exercise the same care and apply the same policies that it
exercises in servicing for its own account commercial and industrial loans
comparable to the Covered Obligations. Except as specified under "Description
of Certificates-- Collection and Other Servicing Procedures" or in any
Prospectus Supplement, there will be no restrictions on the Branch's ability
to change the terms of the Covered Loan Agreements and the Covered
Obligations. As a result, except as set forth above, each Trust is relying on
the ordinary business practices of the Branch with respect to the servicing,
collection, enforcement and administration of the Covered Obligations. There
can be no assurance that changes in applicable law, changes in the marketplace
or prudent business practice might not result in a determination by the Branch
to take actions which would change the terms of the Covered Loan Agreement and
the Covered Obligations. Further, in situations where the interest of the
Branch under a Covered Loan Agreement is inadequate to direct a particular
outcome, there can be no assurance that actions sought to be taken by the
Branch will be followed by the number of lenders required under such Covered
Loan Agreement to vote in favor of such action.
LENDER LIABILITY CONSIDERATIONS; EQUITABLE SUBORDINATION. In recent years, a
number of judicial decisions in the United States have upheld the right of
borrowers to sue lending institutions on the basis of various evolving legal
theories (collectively termed "lender liability"). Generally, lender liability
is founded upon the premise than an institutional lender has violated a duty
(whether implied or contractual) of good faith and fair dealing owed to the
borrower or has assumed a degree of control over the borrower resulting in
creation of a fiduciary duty owed to the borrower or its other creditors or
shareholders or has violated alleged promises to make additional loans or to
provide extensions of time for repayment or other accommodations. The Branch
could become subject to allegations of lender liability in connection with its
administration of the Loans and could be subject to damages. The Branch does
not believe that it or any selling institution from which it purchased an
interest in a Covered Loan Agreement has engaged and it does not intend to
engage in conduct that would form the basis for a successful cause of action
based upon theories of lender liability; however, there can be no assurances
that such a claim would not arise and, if a claim does arise, there may be
delays in or reductions of payments with respect to the Certificates.
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Courts have in some cases applied the doctrine of equitable subordination to
subordinate the claim of a lending institution against a borrower to claims of
other creditors of the borrower, when the lending institution is found to have
engaged in unfair, inequitable or fraudulent conduct. The Branch could become
subject to claims from creditors of a Borrower that Covered Obligations to
such Borrower should be equitably subordinated, because of action by the
Branch or the originator of such Covered Obligations in connection with the
administration of such Covered Obligations (or the related Covered Loan
Agreement) or because of other relationships or transactions with such
Borrower. The Branch does not believe that it or any selling institution from
which it purchased an interest in a Covered Loan Agreement has engaged and it
does not intend to engage in conduct that would form the basis for a
successful cause of action based upon the equitable subordination doctrine;
however, there can be no assurances that such a claim would not arise and, if
a claim does arise, there may be delays in or reductions of payments with
respect to the Certificates.
COMPETITION IN THE COMMERCIAL LENDING INDUSTRY. The commercial lending
industry is highly competitive and operates in a legal and regulatory
environment increasingly focused on the cost charged for commercial and
industrial loans. There is increased use of pricing competition as lenders
seek to expand or enter the market. If Borrowers choose to utilize competing
sources of credit, the rate at which Covered Obligations are repaid may be
increased. The Trust will be dependent upon the Branch's continued ability to
generate new Covered Obligations. If the rate at which new Covered Obligations
are generated declines significantly and the Branch does not add Additional
Loan Agreements to the Trust, a Pay Out Event could occur.
STRUCTURAL RISKS
EFFECT OF SUBORDINATION. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, unless otherwise specified in
the related Prospectus Supplement, payments of principal in respect of the
Subordinated Certificates of a Series will not commence until after the final
principal payment with respect to the Senior Certificates of such Series. In
addition, if so specified in the related Prospectus Supplement, if collections
of Interest Obligations allocable to the Certificates of a Series are
insufficient to cover required amounts due with respect to the Senior
Certificates of such Series, the Investor Interest with respect to the
Subordinated Certificates may be reduced, resulting in a reduction of the
portion of collections of Interest Obligations allocable to the Subordinated
Certificates in future periods and a possible delay or reduction in principal
and interest payments on the Subordinated Certificates. Moreover, if so
specified in the related Prospectus Supplement, in the event of a sale of
Covered Obligations due to the inability of the Trustee to act or find a
successor Servicer after a Servicer Default, the portion of the net proceeds
of such sale allocable to pay principal to the Certificates of a Series will
be used first to pay amounts due to the holders of Senior Certificates and any
remainder will be used to pay amounts due to the holders of Subordinated
Certificates.
BASIS RISK. Most Covered Loan Agreements will provide for the payment of
interest on Covered Principal Obligations at a variable rate above a
designated rate, such as LIBOR or another designated index. A Series of
Certificates issued by a Trust may bear interest at a fixed rate or at a
floating rate based on an index other than such designated rate or such other
designated index. If there is a decline in such designated rate or such other
designated index, the amount of collections of Covered Interest Obligations on
such Covered Loan Agreements may be reduced, whereas the amounts payable as
interest on such Series of Certificates and other amounts required to be
funded out of collections of Covered Interest Obligations with respect to such
Series may not be similarly reduced.
MASTER TRUST CONSIDERATIONS. A Trust may issue additional Series of
Certificates from time to time. The terms of any Series will be specified in a
Series Supplement and will not be subject to the prior review by, or consent
of, holders of the Certificates of any previously issued Series. Such terms
may include methods for determining applicable investor percentages and
allocating collections,
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provisions creating different or additional security or other Credit
Enhancement, provisions subordinating such Series to another Series or other
Series (if the Series Supplement relating to such Series so permits) to such
Series, and any other amendment or supplement to the Agreement which is made
applicable only to such Series. It is a condition precedent to the issuance of
any additional Series that each Rating Agency that has rated any outstanding
Series deliver written confirmation to the Trustee that the new Series will
not result in such Rating Agency reducing or withdrawing its rating on any
outstanding Series or class of certificates. There can be no assurance,
however, that the terms of any Series issued from time to time hereafter might
not have an impact on the timing and amount of payments received by a
Certificateholder of any other Series. See "Description of Certificates--
Exchanges".
ADDITION OF TRUST ASSETS. The Branch expects, and in some cases will be
obligated, to designate Additional Loan Agreements, the Covered Obligations
under which will be conveyed to a Trust. Such Additional Loan Agreements may
have been originated using criteria different from those which were applied to
the Covered Loan Agreements designated on the Cut-Off Date related to a Series
because such Covered Loan Agreements were originated at a different date or
were acquired from another institution. Consequently, there can be no
assurance that Additional Loan Agreements designated in the future will be of
the same credit quality as previously-designated Loan Agreements. The
designation of Additional Loan Agreements will be subject to the satisfaction
of certain conditions described herein under "Description of Certificates--
Addition of Trust Assets".
CONTROL. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
an Agreement or the related Series Supplement. However, each Agreement or
related Series Supplement may provide that under certain circumstances the
consent or approval of a specified percentage of the aggregate Investor
Interest of other Series or of the Investor Interest of a specified Class of
such other Series will be required to direct certain actions, including
requiring the appointment of a successor Servicer following a Servicer
Default, amending such Agreement in certain circumstances and directing a
repurchase of all outstanding Series upon the breach of certain
representations and warranties by the Branch. Certificateholders of such other
Series may have interests which do not coincide in any way with the interests
of Certificateholders of the subject Series. In such instances, it may be
difficult for the Certificateholder of such Series to achieve the results from
the vote that they desire.
CREDIT ENHANCEMENT. Although Credit Enhancement may be provided with respect
to a Series of Certificates or any Class thereof, the amount available will be
limited and will be subject to certain reductions. If the amount available
under any Credit Enhancement is reduced to zero, Certificateholders of the
Series or Class thereof covered by such Credit Enhancement will bear directly
the credit and other risks associated with their undivided interest in the
Trust. See "Credit Enhancement".
RISKS RELATING TO CERTIFICATES
PAYMENTS AND MATURITY. Payment Obligations may be paid at any time and there
is no assurance that there will be additional Covered Obligations created
under the Covered Loan Agreements. The commencement and continuation of a
Controlled Amortization Period or a Controlled Accumulation Period for the
Certificates will be dependent upon the continued generation of new Payment
Obligations to be conveyed to a Trust. A significant decline in the amount of
Covered Obligations generated could result in the occurrence of a Pay Out
Event and the commencement of the Rapid Amortization Period.
Certificateholders should be aware that the Branch's ability to continue to
compete in the current industry environment will affect the Branch's ability
to generate new Payment Obligations to be conveyed to the Trust and may also
affect payment patterns by borrowers under the Covered Loan Agreements. See
"Maturity Assumptions".
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CERTIFICATE RATING. Any rating assigned to the Certificates of a Series or a
Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under an Agreement and
will be based primarily on the value of the Covered Obligations in the related
Trust and the availability of any Enhancement with respect to such Series or
Class. However, any such rating will not, unless otherwise specified in the
related Prospectus Supplement with respect to any Class or Series offered
hereby, address the likelihood that the principal of, or interest on, any
Certificates of such Class or Series will be paid on a scheduled date. In
addition, any such rating will not address the possibility of the occurrence
of a Pay Out Event with respect to such Class or Series or the possibility of
the imposition of United States withholding tax with respect to non-United
States Certificateholders. The rating will not be a recommendation to
purchase, hold or sell Certificates of such Series or Class, and such rating
will not comment as to the marketability of such Certificates, any market
price or suitability for a particular investor. There is no assurance that any
rating will remain for any given period of time or that any rating will not be
lowered or withdrawn entirely by a Rating Agency if in such Rating Agency's
judgment circumstances so warrant.
The Branch will request a rating of the Certificates offered hereby of each
Series by at least one Rating Agency. There can be no assurance as to whether
any rating agency not requested to rate the Certificates will nonetheless
issue a rating with respect to any Series of Certificates or Class thereof,
and, if so, what such rating would be. A rating assigned to any Series of
Certificates or Class thereof by a rating agency that has not been requested
by the Branch to do so may be lower than the rating assigned by a Rating
Agency pursuant to the Branch's request.
NO PRIOR HISTORY FOR THE TRUSTS; NON-RECOURSE OBLIGATIONS. Each Trust will
be a newly formed entity and will have no prior operating history. No Trust
will have substantial assets other than its Subparticipation in the Covered
Obligations and its interest in Credit Enhancement as described herein. The
Certificates are not recourse obligations of the Branch, the Seller, the
related Trustee or any of their respective affiliates (other than such Trust).
LIMITED LIQUIDITY. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
it does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue for the life of such Certificates.
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede & Co.,
the nominee for DTC, and will not be registered in the names of the
Certificate Owners or their nominees. Unless and until Definitive Certificates
are issued for a Series, Certificate Owners will not be recognized by the
Trustee as Certificateholders, as that term will be used in each Agreement.
Hence, until such time, Certificate Owners will only be able to exercise the
rights of Certificateholders indirectly through DTC, CEDEL or Euroclear and
their participating organizations. See "Description of Certificates--Book-
Entry Registration" and "--Definitive Certificates".
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THE TRUST
Each Trust will be formed in accordance with the laws of the State of New
York pursuant to an Agreement. No Trust will engage in any business activity
other than acquiring and holding a Subparticipation in Covered Obligations
pursuant to a Second Tier Participation Agreement, issuing Series of
Certificates and the related Seller Certificate, making payments thereon and
engaging in related activities (including, with respect to any Series,
obtaining any Enhancement and entering into an Enhancement agreement relating
thereto). As a consequence, no Trust is expected to have any need for
additional capital resources other than the assets of such Trust.
LTCB AND LTCB TRUST COMPANY
The Long-Term Credit Bank of Japan, Limited ("LTCB") is a wholesale banking
institution whose operations are conducted through offices in Japan and a
network of branches, representative offices, subsidiaries and affiliates in
major international markets. LTCB was incorporated in 1952 for an unlimited
term under the Commercial Code of Japan and in accordance with the provisions
of the Long-Term Credit Bank Law under which it is licensed as a long-term
credit bank by the Minister of Finance. The New York branch of LTCB (the
"Branch") is licensed under Article V of the New York Banking Law to conduct
commercial banking activities in the United States. The New York Branch was
established in 1974. LTCB Trust Company, a wholly-owned subsidiary of LTCB, is
chartered under Article III of the New York Banking Law, pursuant to which it
has engaged in commercial banking and fiduciary activities since 1985. The
deposits of LTCB Trust Company are insured by the Federal Deposit Insurance
Corporation ("FDIC"); the deposits of the Branch are not insured by the FDIC.
The principal offices of the Branch and LTCB Trust Company are each located at
165 Broadway, New York, New York. The Prospectus Supplement for each Series of
Certificates will provide additional information relating to LTCB, the Branch
and LTCB Trust Company and their commercial and industrial lending activities.
LTCB'S U.S. COMMERCIAL AND INDUSTRIAL LENDING ACTIVITIES
GENERAL
With respect to each Series of Certificates, the Payment Obligations
conveyed to the related Trust will arise under commercial and industrial loan
agreements ("Covered Loan Agreements") that have been or will be entered into
by the branches and agencies of LTCB and LTCB Trust Company in the United
States (each, a "U.S. Lending Office"). The LTCB Portfolio of commercial and
industrial loans from which Covered Loan Agreements will be selected currently
includes and in the future will include loans arising under loan agreements
with multiple lenders and direct (bilateral) loans with corporate and
industrial customers. In the case of Covered Obligations arising out of
Covered Loan Agreements that are multi-lender loan facilities, the Branch or
LTCB Trust Company, as the case may be, is one of a number of lenders whose
loans rank pari passu with each other and are made and repaid, generally, pro
rata in proportion to the lender's commitments. The Branch or LTCB Trust
Company may or may not be the administrative agent through whom loans are
disbursed and repayments of loans are collected. The underwriting standards
applied by the Branch and LTCB Trust Company in deciding to become a lender in
a multi-lender facility are the same as the standards applied in connection
with their evaluation of direct (bilateral) loans. The Covered Loan Agreements
will include both fully funded term loans under which no additional borrowings
may be made and revolving credit facilities under which outstanding principal
amounts may be prepaid and reborrowed. Additionally, although the borrowers
under some of the Covered Loan Agreements will have pledged collateral to
secure their Payment Obligations, in no case will the Branch or LTCB Trust
Company have looked to such collateral as the primary source of repayment.
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UNDERWRITING AND APPROVAL OF NEW LOANS
Lending relationships with commercial and industrial customers are developed
through a variety of channels, including: (i) direct calling on existing and
prospective borrowers by a United States Lending Office's account
officers/relationship managers, (ii) promotional marketing to major commercial
and investment banks which agent and arrange broadly syndicated loans, (iii)
investing in selected equity funds sponsored by major buyout and merchant
banking firms which utilize substantial amounts of bank financing, (iv) print
advertising in select business publications, and (v) referrals from a variety
of business contacts in the legal and financial community.
Potential commercial and industrial loans are reviewed on an individual
basis by an account officer who meets with the customer's management and
reviews materials prepared by the customer and the agent bank (in the case of
syndicated loans). A United States Lending Office's credit analysis is based
on an assessment of the customer's prospects which is prepared by the account
officer and subject to review and input by various personnel during the credit
approval process.
The account officer of a United States Lending Office performs (i) a
business risk analysis involving an evaluation of the customer's competitive
position, management and strategies and an industry risk assessment, (ii) a
financial risk analysis focusing on profit potential, effective leverage, cash
flow and financial flexibility and (iii) an analysis of the specific terms and
conditions of the proposed transaction, including legal structure, covenants
and collateral values. In assessing the business risks, particular emphasis is
accorded to such factors as management experience and credibility, the
customer's reliance on particular individuals, certain customers and
suppliers, the ownership structure and the size of its customers. In
evaluating the customer's cash flow requirements as part of the financial risk
analysis, particular weight is accorded to the extent of the customer's
flexibility with respect to the timing of its capital requirements, its access
to various capital markets and the liquidity of its balance sheet. The
important factors which are taken into account in the transaction analysis
include the value of the pledged collateral and ability to enhance the credit
quality of the transaction by exerting greater control over the customer by
means of restrictive covenants. Each person involved with the preparation or
approval of a credit application is required to supply his or her initials or
stamp to the application before it is submitted to the next level for
approval. Each credit application is initially approved by a senior officer in
the business promotion group which prepared the application and by the senior
officer of the United States Lending Office. Following approval at the United
States Lending Office level, each credit application is submitted to The
Americas Division, a separate division of LTCB located in New York, which is
responsible for credit evaluation and analysis of all transactions arising in
the United States. Industry-specialized credit officers of The Americas
Division reevaluate each credit application. Each credit application must
generally receive the final approval of the Managing Director/Chief Executive
Officer of The Americas Division. After the completion of the documentation
but prior to the signing and closing of a transaction, a final application
including all revisions to the terms of the loan (if any) and all the
necessary details for booking the transaction are prepared. The final
application is reviewed and approved by all parties involved in the initial
credit approval process.
A key component of LTCB's credit approval and risk management system is its
risk rating system. Each credit transaction is assigned a credit ranking prior
to credit approval. The credit rankings are based upon a number of factors,
including rating agency ratings, where available, or upon an internal scoring
system developed and used by LTCB since 1992. The credit ranking influences
the pricing decisions, marketing plans and frequency of review of such credit
transaction. The credit ranking is reviewed at least annually, or at the time
of any new facility or any increase in an existing facility, or when the
company's public debt rating is changed by any rating agency.
Once a transaction has been executed, a copy of the final application is
forwarded to the loan administration section to prepare the transaction for
servicing.
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SERVICING OF LOANS
In the case of a direct loan by the Branch, the loan is serviced directly
between the borrower and the Branch. In a multi-lender loan transaction, the
loan is serviced by an agent bank (which may be the Branch or a third-party
bank). The approval process within the Branch for a proposed amendment to an
existing credit agreement will be dependent upon a number of factors including
the type of amendment, the risk rating of the borrower and the amount of the
Branch's commitment under that facility. In the case of material amendments
where the Branch's commitment is significant, the amendment approval process
may be the same as the initial approval process, while less material
amendments may be approved by a senior officer in a business promoting group
of the Branch. For each Series of Certificates, the Servicer will be
responsible for servicing and administering the Payment Obligations in
accordance with the Servicer's customary and usual policies and procedures for
servicing commercial and industrial loans comparable to the Obligations,
subject to certain limitations described under "Description of Certificates--
Collection and Other Servicing Procedures".
WRITE-OFF POLICY
Once a loan becomes delinquent it is reviewed on a monthly basis and
reported to the United States Lending Office's regulators in accordance with
applicable regulatory requirements. In some cases, delinquent loans are
managed by workout specialists in The Americas Division.
Generally, a loan is charged-off when its collectibility is sufficiently
questionable and LTCB can no longer justify reporting the loan as an asset on
its balance sheet. Circumstances which generally result in a charge-off
designation include the filing of a bankruptcy case, the execution of an
agreement which forgives some or all of the indebtedness and the
classification of the loan as a "Loss" by the United States Lending Office's
regulators.
The Branch generally pursues one of two options to maximize its recovery on
problem loans. It will either sell the loan in the secondary market or retain
the loan and pursue repayment through a restructuring of the borrower and its
debts or the application of proceeds arising from the liquidation of the
borrower or any collateral for the loan. In the latter case the Branch (or the
bank group in which the Branch is a syndicate member) often retains third-
party professionals to facilitate the restructuring and sale process.
THE LOANS
The Payment Obligations conveyed to each Trust ("Covered Obligations") will
arise under Loan Agreements ("Covered Loan Agreements") selected from the LTCB
Portfolio on the basis of criteria set forth in the related Agreement as
applied on the relevant Cut-Off Date and, with respect to Additional
Obligations, as of the related date of their designation (the "Trust
Portfolio"). Pursuant to a First Tier Participation Agreement, a Second Tier
Participation Agreement and an Agreement (collectively, the "Agreements"), the
Seller will have the right (subject to certain limitations and conditions set
forth therein), and in some circumstances will be obligated, to designate from
time to time Additional Loan Agreements and to transfer to the related Trust a
Subparticipation in all Covered Obligations under Additional Loan Agreements,
whether such Payment Obligations are then existing or thereafter created. Any
Additional Loan Agreements designated pursuant to the Agreements must be
Eligible Loan Agreements as of the date the Seller designates such Loan
Agreements as Additional Loan Agreements. Furthermore, pursuant to the
Agreements, the Seller has the right (subject to certain limitations and
conditions), and in certain circumstances will be obligated, to designate
certain Loan Agreements as Removed Loan Agreements and to require the Trustee
to terminate the Subparticipation (and the Branch to terminate the
Participation) with respect to all Payment Obligations under such Removed Loan
Agreements, upon payment by the Branch to the Seller of the amount of
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such Covered Obligations and a reduction of the Seller Interest in a
corresponding amount, whether such Obligations are then existing or thereafter
created. Throughout the term of each Trust, the related Loan Agreements from
which the Covered Obligations arise will be the Loan Agreements designated by
the Seller on the relevant Cut-Off Date plus any Additional Loan Agreements
minus any Removed Loan Agreements. With respect to each Series of
Certificates, the Seller will represent and warrant to the related Trust that,
as of the Closing Date and as of the date Additional Loan Agreements are
designated, such Loan Agreements meet certain eligibility requirements. See
"Description of Certificates--Representations and Warranties". The Prospectus
Supplement relating to each Series of Certificates will provide certain
information about the related Trust Portfolio as of the date specified.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Covered Principal
Obligations are expected to be distributed to the Certificateholders of such
Series or any specified Class thereof on each specified Distribution Date
during the Controlled Amortization Period or the Principal Amortization
Period, or are expected to be accumulated for payment to Certificateholders of
such Series or any specified Class thereof during an Accumulation Period and
distributed on a Scheduled Payment Date; provided, however, that if the Rapid
Amortization Period commences, collections of Covered Principal Obligations
will be paid to Certificateholders in the manner described herein and in the
related Prospectus Supplement. The related Prospectus Supplement will specify
when the Controlled Amortization Period, the Principal Amortization Period or
an Accumulation Period, as applicable, will commence, the principal payments
expected or available to be received or accumulated during such Controlled
Amortization Period, Principal Amortization Period or Accumulation Period, or
on the Scheduled Payment Date, as applicable, the manner and priority of
principal accumulations and payments among the Classes of a Series of
Certificates, the payment rate assumptions on which such expected principal
accumulations and payments are based and the Pay Out Events which, if any were
to occur, would lead to the commencement of a Rapid Amortization Period or, if
so specified in the related Prospectus Supplement, a Rapid Accumulation
Period.
No assurance can be given, however, that the Covered Principal Obligations
allocated to be paid to Certificateholders or the holders of any specified
Class thereof will be available for distribution or accumulation for payment
to Certificateholders on each Distribution Date during the Controlled
Amortization Period, the Principal Amortization Period or an Accumulation
Period, or on the Scheduled Payment Date, as applicable. In addition, the
Seller can give no assurance that the payment rate assumptions for any Series
will prove to be correct. The related Prospectus Supplement will provide
certain historical data relating to payments by borrowers, total charge-offs
and other related information relating to the LTCB Portfolio. There can be no
assurance that future events will be consistent with such historical data.
The amount of collections of Covered Obligations may vary from month to
month due to seasonal variations, general economic conditions, refinancings
and other factors. LTCB does not maintain detailed records with respect to the
historical payment rates of the LTCB Portfolio and is unable to predict future
payment rates for such Portfolio. There can be no assurance that collections
of Covered Principal Obligations with respect to any Trust Portfolio, and thus
the rate at which the related Certificateholders could expect to receive or
accumulate payments of principal on their Certificates during an Amortization
Period or Accumulation Period, or on any Scheduled Payment Date, as
applicable, will be similar to any historical experience set forth in a
related Prospectus Supplement. If a Pay Out Event occurs and the Rapid
Amortization Period commences, the average life and maturity of such Series of
Certificates could be significantly reduced. Payment rates on the Trust
Portfolio may be affected by a variety of factors, including the following:
(i) the Trust Portfolio will include both fully funded term loans and
revolving credit facilities; (ii) the term loans in the Trust Portfolio
generally
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provide for principal payments to be made during an amortization period that
follows an interest-only period during which no principal payments were due;
(iii) in some cases the scheduled amortization period for a term loan may be
longer than the period to maturity (requiring a balloon payment at maturity)
or the term loan may not provide for any amortization (requiring a payment of
the entire term loan at maturity); (iv) principal payments generally are not
required under a revolving credit facility until either the maturity date of
the facility or, in some cases, following a "draw" period, the revolving
credit facility will convert to an amortizing term loan; and (v) the term
loans and the revolving credit facilities in the Trust Portfolio generally
permit prepayments in whole or in part without payment of any prepayment
penalty. As a result, the principal payment rate experienced by the Trust
Portfolio will depend on many factors, including the mix of term loans and
revolving credit facilities, the interest only periods and amortization
schedules for the term loans, the scheduled maturities of the term loans and
the revolving credit facilities, and the prepayment provisions of the term
loans and the revolving credit facilities. In addition, in recent years there
has been a significant amount of prepayments linked to refinancings driven by
tighter interest rate spreads available to borrowers, improving credit ratings
of borrowers (which permit borrowers to refinance at better rates and on
better terms), and increased liquidity in the bank market (i.e., increased
supply of funds), which has resulted in increased competition among lenders.
Finally, the timing of repayment of any Series or Class will also depend on
other factors such as whether there are any other outstanding Series in their
revolving or accumulation period which would generate Shared Principal
Collections that might be available to such Series or Class.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of
collections of Covered Principal Obligations scheduled or available to be
distributed or accumulated for later payment to Certificateholders or any
specified Class thereof during an Amortization Period or an Accumulation
Period or on any Scheduled Payment Date, as applicable, or a Pay Out Event may
occur which could initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance
of such Series of Certificates to the final Distribution Date with respect to
the Certificates will equal the expected number of months.
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered hereby
will be paid to the Seller, which will in turn pay such proceeds to the Branch
for the purchase of the Participation under the First Tier Participation
Agreement. The Branch will use such proceeds for its general corporate
purposes, including for repayment of indebtedness and the making of
intercompany advances.
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DESCRIPTION OF CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the specified Trust other than the interests represented by any
other Series of Certificates issued by such Trust (which may include Series
offered pursuant to this Prospectus) and the Seller Certificate. Each Series
will be issued pursuant to an Agreement entered into by the Servicer, the
Seller and the Trustee named in the related Prospectus Supplement, a Series
Supplement to the Agreement, a First Tier Participation Agreement entered into
by the Branch and the Seller and a Second Tier Participation Agreement entered
into by the Seller and the Trust (collectively, the "Agreements"), a copy of
the form of each of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The Prospectus Supplement for each Series
will describe any provisions of the particular Agreements relating to such
Series which may differ materially from the Agreements filed as an exhibit to
the Registration Statement. The following summaries describe certain
provisions common to each Series of Certificates. The summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the related Agreements.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the related Trust, including the right to the applicable
Investor Percentage of all payments by Borrowers on the Payment Obligations
arising under the Covered Loan Agreements in such Trust. For each Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
the Investor Interest on any date will be equal to the initial Investor
Interest as of the related Closing Date for such Series (increased by the
principal balance of any Certificates of such Series issued after the Closing
Date for such Series) minus the amount of principal paid to the related
Certificateholders prior to such date and minus the amount of unreimbursed
Investor Charge-Offs with respect to such Certificates prior to such date. If
so specified in the Prospectus Supplement relating to any Series of
Certificates, under certain circumstances the Investor Interest may be further
adjusted by the amount of principal allocated to Certificateholders, the funds
on deposit in any specified account, and any other amount specified in the
related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. Each Class of a Series will evidence the right to
receive a specified portion of each distribution of principal or interest or
both. The Investor Interest with respect to a Series with more than one Class
will be allocated among the Classes as described in the related Prospectus
Supplement. The Certificates of a Class may differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments and deposits of interest and
principal will be made on Distribution Dates to Certificateholders in whose
names the Certificates were registered on the record dates specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates specified
in the related Prospectus Supplement.
For each Series of Certificates, the Seller initially will own the Seller
Certificate. The Seller Certificate will represent the undivided interest in
each Trust not represented by the Certificates issued and outstanding under
such Trust or the rights, if any, of any Credit Enhancement Providers to
receive payments from each Trust. The holder of the Seller Certificate will
have the right to a percentage (the "Seller Percentage") of all borrower
payments from the Covered Obligations in the Trust. If provided in the related
Agreement and Prospectus Supplement, the Seller Certificate may be transferred
in whole or in part subject to certain limitations and conditions set forth
therein. See "--Certain Matters Regarding the Seller and the Servicer".
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
amount of the Investor Interest in the Trust will remain constant except under
certain limited circumstances. See "--Defaulted Obligations; Investor Charge-
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Offs". The amount of Covered Principal Obligations in each Trust, however,
will vary each day as new Covered Principal Obligations are created and others
are paid. The amount of the Seller Interest will fluctuate each day,
therefore, to reflect the changes in the amount of the Covered Principal
Obligations in the Trust. When a Series is amortizing, the Investor Interest
of such Series will decline as payments of Covered Principal Obligations are
collected and distributed to or accumulated for distribution to the
Certificateholders. As a result, the Seller Interest will generally increase
to reflect reductions in the Investor Interest for such Series and will also
change to reflect the variations in the amount of Covered Principal
Obligations in the related Trust.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form only. The Seller has been
informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede & Co.
is expected to be the holder of record of each Series of Certificates. No
Certificate Owner acquiring an interest in the Certificates will be entitled
to receive a certificate representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described herein, all references herein
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to DTC or Cede &
Co., as the registered holder of the Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. See "--
Book-Entry Registration" and "--Definitive Certificates".
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or CEDEL or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede & Co., as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositories") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book entry changes in
accounts of Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
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Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depository to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. CEDEL Participants
and Euroclear Participants may not deliver instructions directly to the
Depositories.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day. Cash
received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC. For additional information regarding clearance
and settlement procedures for the Offered Certificates, and for information
with respect to tax documentation procedures relating to the Offered
Certificates, see Annex I.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal of and interest on the Certificates from the Trustee through the
Participants who in turn will receive them from DTC. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede & Co.,
as nominee for DTC. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Certificate Owners.
It is anticipated that the only "Certificateholder" will be Cede & Co., as
nominee of DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Agreement, and Certificate
Owners will only be permitted to exercise the rights of Certificateholders
indirectly through the Participants who in turn will exercise the rights of
Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate Owners
will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
Participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
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DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under any related Agreement only at the direction
of one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Seller that it will take such
actions with respect to specified percentages of the Investor Interest only at
the direction of and on behalf of Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of Participants those holdings include
such undivided interests.
Cedel Bank S.A. ("CEDEL") is incorporated under the laws of Luxembourg as a
professional depository. CEDEL holds securities for its participating
organizations ("CEDEL Participants") and facilitates the clearance and
settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may
be settled in CEDEL in any of 28 currencies, including United States dollars.
CEDEL provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces with
domestic markets in several countries. As a professional depository, CEDEL is
subject to regulation by the Luxembourg Monetary Institute. CEDEL Participants
are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the underwriters
of any Series of Certificates. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a CEDEL Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements
for cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with Euro-
clear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any Series of Certificates. Indirect
access to the Euroclear System is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without
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attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences". CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted
to be taken by a Certificateholder under related Agreement on behalf of a
CEDEL Participant or Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Seller advises the Trustee for
such Series in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to such Series of
Certificates, and the Trustee or the Seller is unable to locate a qualified
successor, (ii) the Seller, at its option, advises the Trustee in writing that
it elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, Certificate Owners representing not less
than 50% (or such other percentage specified in the related Prospectus
Supplement) of the Investor Interest advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interest of the
Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and
any principal payments on each Distribution Date will be made to Holders in
whose names the Definitive Certificates were registered at the close of
business on the related Record Date. Distributions will be made by check
mailed to the address of such Holder as it appears on the register maintained
by the Trustee. The final payment on any Certificate (whether Definitive
Certificates or the Certificates registered in the name of Cede & Co.
representing the Certificates), however, will be made only upon presentation
and surrender of such Certificate at the office or agency specified in the
notice of final distribution to Certificateholders. The Trustee will provide
such notice to registered Certificateholders not later than the fifth day of
the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange,
but the Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
The Transfer Agent and Registrar shall not be required to register the
transfer or exchange of Definitive
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Certificates for a period of fifteen days preceding the due date for any
payment with respect to such Definitive Certificates.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the relevant Closing Date on the applicable Investor Interest at the
applicable Certificate Rate, which may be a fixed, floating or other type of
rate as specified in the related Prospectus Supplement. Interest will be
distributed or deposited with respect to Certificateholders on the
Distribution Dates. Interest payments or deposits on any Distribution Date
will be funded from collections of Covered Interest Receivables allocated to
the Investor Interest during the preceding Monthly Period or Periods and may
be funded from certain investment earnings on funds held in accounts of the
related Trust and, from any applicable Credit Enhancement, if necessary, or
certain other amounts as specified in the related Prospectus Supplement. If
the Distribution Dates for payment or deposit of interest for a Series or
Class occur less frequently than monthly, such collections or other amounts
(or the portion thereof allocable to such Class) may be deposited in one or
more trust accounts (each, an "Interest Funding Account") pending distribution
to the Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The Prospectus
Supplement relating to each Series of Certificates and each Class thereof will
describe the amounts and sources of interest payments to be made, the
Certificate Rate, and, for a Series or Class thereof bearing interest at a
floating Certificate Rate, the initial Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index or
other method by which such Certificate Rates are determined.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the Closing
Date relating to such Series and ends on the day before an Amortization Period
or Accumulation Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization Period
or Principal Amortization Period, as applicable, which will be scheduled to
begin on the date specified in, or determined in the manner specified in, the
related Prospectus Supplement, and during the Rapid Amortization Period, which
will begin upon the occurrence of a Pay Out Event or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period, principal will
be paid to the Certificateholders in the amounts and on the dates specified in
the related Prospectus Supplement. During an Accumulation Period, principal
will be accumulated in a Principal Funding Account for later distribution to
Certificateholders on the Scheduled Payment Date in the amounts specified in
the related Prospectus Supplement. Principal payments for any Series or Class
thereof will be funded from collections of Covered Principal Obligations
received during the related Monthly Period or Periods as specified in the
related Prospectus Supplement and allocated to such Series or Class and from
certain other sources specified in the related Prospectus Supplement. In the
case of a Series with more than one Class of Certificates, the
Certificateholders of one or more Classes may receive payments of principal at
different times. The related Prospectus Supplement will describe the manner,
timing and priority of payments of principal to Certificateholders of each
Class.
Funds on deposit in any Principal Funding Account applicable to a Series may
be subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement specified in the related Prospectus Supplement intended to
assure a minimum rate of return on the investment of such funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
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CONVEYANCE OF COVERED OBLIGATIONS
With respect to each Trust, the Branch will grant, pursuant to a First Tier
Participation Agreement, a 100% Participation in all of its right, title and
interest in and to the Covered Obligations under the related Covered Loan
Agreements and all Covered Obligations thereafter created under such Covered
Loan Agreements and the Seller will grant at the time of formation of each
such Trust, pursuant to a Second Tier Participation Agreement, a 100%
Subparticipation in all of its right, title and interest in and to the Covered
Obligations under the related Covered Loan Agreements and all Covered
Obligations thereafter created under such Covered Loan Agreements.
In connection with each Covered Loan Agreement subject to a First Tier
Participation, the Branch, at its own expense, will continuously maintain in
its computer files relating to its commercial and industrial loans a notation
beside each related Covered Obligation and Covered Loan Agreement that a 100%
Participation interest therein has been granted and sold to the Seller with an
appropriate identifying symbol and will maintain its files of the original
signed copies of the Covered Loan Agreements and related documents separate,
apart and segregated from its other books and records (including its files
relating to Loan Agreements that are not Covered Loan Agreements) in a manner
clearly marked to indicate that such segregated files relate to the Covered
Loan Agreements subject to such First Tier Participation Agreement. The Branch
will also deliver to the Seller and the Trust as promptly as possible after
either of them may request a computer file or microfiche list containing a
true and complete list of all Covered Loan Agreements under the First Tier
Participation Agreement, each identified by relationship number. The Branch,
at its own expense, will continuously maintain in its books and records a
notation beside any index or filing of assets that includes Covered Loan
Agreements and related Covered Obligations or the Seller's rights under a
First Tier Participation Agreement a notation indicating that a 100%
Subparticipation therein has been granted and sold to the Trust by identifying
each such asset with an appropriate identifying symbol and, additionally, will
maintain its files with respect to each First Tier Participation Agreement and
related Covered Loan Agreements and Covered Obligations separate, apart and
segregated from its other books and records in a manner clearly marked to
indicate that such segregated files relate to the corresponding First Tier
Participation Agreement and Covered Loan Agreements. The Branch and the Seller
will file, with respect to each Trust, Uniform Commercial Code financing
statements and assignments thereof with respect to the related Covered Loan
Agreements and Covered Obligations meeting the requirements of the laws of the
State of New York. See "Risk Factors--Asset Risks--Limitations Regarding
Covered Obligations".
EXCHANGES
For each Series of Certificates, the related Agreement will provide for the
related Trustee to issue two types of certificates: (i) one or more Series of
Certificates which are transferable and have the characteristics described
below and (ii) the Seller Certificate, a certificate which evidences the
Seller Interest, which initially will be held by the Seller and will be
transferable only as provided in the related Agreement. The related Prospectus
Supplement may also provide that, pursuant to any one or more Series
Supplements, the holder of the Seller Certificate may tender such Seller
Certificate, or the Seller Certificate and the Certificates evidencing any
Series of Certificates issued by such Trust, to the related Trustee in
exchange for one or more new Series (which may include Series offered pursuant
to this Prospectus) and a reissued Seller Certificate. Pursuant to each
Agreement, the holder of the Seller Certificate may define, with respect to
any newly issued Series, all Principal Terms of such new Series. Upon the
issuance of an additional Series of Certificates, none of the Seller, the
Servicer, the Trustee or the related Trust will be required or will intend to
obtain the consent of any Certificateholder of any other Series previously
issued by such Trust. However, as a condition of an Exchange, the holder of
the Seller Certificate will deliver to the Trustee written confirmation that
the Exchange will not result in the reduction or withdrawal by any Rating
Agency of its rating of any outstanding Series or Class of Certificates. The
Seller may offer any Series under a Disclosure Document in offerings
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pursuant to this Prospectus or in transactions either registered under the
Securities Act or exempt from registration thereunder directly, through one or
more other underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
Unless otherwise specified in the related Prospectus Supplement, the holder
of the Seller Certificate may perform Exchanges and define Principal Terms
such that each Series issued under a Trust has a period during which
amortization or accumulation of the principal amount thereof is intended to
occur which may have a different length and begin on a different date than
such period for any other Series. Further, one or more Series may be in their
amortization or accumulation periods while other Series are not. Moreover,
each Series may have the benefit of a Credit Enhancement which is available
only to such Series. Under the related Agreement, the Trustee shall hold any
such form of Credit Enhancement only on behalf of the Series with respect to
which it relates. Likewise, with respect to each such form of Credit
Enhancement, the holder of the Seller Certificate may deliver a different form
of Credit Enhancement agreement. The holder of the Seller Certificate may
specify different rates and monthly servicing fees with respect to each Series
(or a particular Class within such Series). The holder of the Seller
Certificate will also have the option under the related Agreement to vary
between Series the terms upon which a Series (or a particular Class within
such Series) may be repurchased by the Seller or remarketed to other
investors. Additionally, certain Series may be subordinated to other Series,
or Classes within a Series may have different priorities. There will be no
limit to the number of Exchanges that may be performed under a related
Agreement.
Unless otherwise specified in the related Prospectus Supplement, an Exchange
may only occur upon the satisfaction of certain conditions provided in the
related Agreement. Under each Agreement, the holder of the Seller Certificate
may perform an Exchange by notifying the Trustee at least three days in
advance of the date upon which the Exchange is to occur. Under each Agreement,
the notice will state the designation of any Series to be issued on the date
of the Exchange and, with respect to each such Series: (i) its initial
principal amount (or method for calculating such amount) which amount may not
be greater than the current principal amount of the Seller Certificate, (ii)
its certificate rate (or method of calculating such rate) and (iii) the
provider of Credit Enhancement, if any, which is expected to provide support
with respect to it. Each Agreement will provide that, on the date of the
Exchange, the Trustee will authenticate any such Series only upon delivery to
it of the following, among others, (i) a Series Supplement specifying the
Principal Terms of such Series, (ii) (a) an opinion of counsel to the effect
that, unless otherwise stated in the related Series Supplement, the
Certificates of such Series will be characterized as indebtedness for Federal
income tax purposes and (b) a Tax Opinion, (iii) if required by the related
Series Supplement, the form of Credit Enhancement, (iv) if Credit Enhancement
is required by the Series Supplement, an appropriate Credit Enhancement
agreement with respect thereto executed by the Seller and the issuer of the
Credit Enhancement, (v) written confirmation from each Rating Agency that the
Exchange will not result in such Rating Agency's reducing or withdrawing its
rating on any then outstanding Series or Class of Certificates rated by it,
(vi) an officer's certificate of the Seller to the effect that, after giving
effect to the Exchange, the Seller would not be required to designate
Additional Loan Agreements pursuant to the Second Tier Participation Agreement
and the Seller Interest would be at least equal to the Minimum Seller
Interest, and (vii) the existing Seller Certificate and, if applicable, the
certificates representing the Series to be exchanged. Upon satisfaction of
such conditions, the Trustee will cancel the existing Seller Certificate and
the Certificates of the exchanged Series, if applicable, and authenticate the
new Series and a new Seller Certificate.
REPRESENTATIONS AND WARRANTIES
FIRST TIER PARTICIPATION AGREEMENT. Unless otherwise specified in the
Prospectus Supplement relating to a Series of Certificates, LTCB will make in
each First Tier Participation Agreement, certain representations and
warranties to the Seller to the effect that, among other things, (a) as of the
Closing Date, LTCB was duly organized and in good standing and that it has the
authority to consummate the
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transactions contemplated by the First Tier Participation Agreement, (b) as of
the Closing Date of each Series of Certificates issued by such Trust, (i) the
related Agreements to which LTCB is a party will constitute legal, valid and
binding obligations of LTCB, (ii) the grant and sale by the Branch to the
Seller, and the purchase by the Seller, of a 100% Participation in the Covered
Obligations pursuant to such First Tier Participation Agreement will effect a
valid transfer by the Branch to the Seller of the Branch's entire right, title
and interest in the Covered Obligations, and (iii) if and to the extent the
conveyance of a 100% Participation in the Covered Obligations hereunder is not
deemed to be or is not recognized as a sale, the First Tier Participation
Agreement will create a valid security interest in the Covered Obligations
(other than Covered Obligations created after the Cut-Off Date) and will
create a valid security interest in the Covered Obligations created after the
Cut-Off Date upon such creation, and upon the filing of an appropriate
financing statement, the Seller will have a valid first priority perfected
security interest in such property, (c) as of the relevant Cut-Off Date (or as
of the date of the designation of Additional Loan Agreements), (i) each
Covered Loan Agreement was an Eligible Loan Agreement, (ii) each such Covered
Loan Agreement was the valid, binding and enforceable obligation of each
obligor thereunder, (iii) each such Covered Loan Agreement was entered into by
the Branch or one or its affiliates in the ordinary course of LTCB's
commercial and industrial lending activities, (iv) the servicing and
collection practices used by the Branch or its affiliates with respect to
Covered Obligations under each such Covered Loan Agreement were in all
respects legal and customary for similar transactions, and (v) such Covered
Loan Agreement was not selected by the Branch for inclusion on any basis which
would have an adverse effect on the Seller, Certificateholders or their
successors or assigns, and (d) as of the relevant Cut-off Date (or as of the
date of designation of Covered Obligations under Additional Loan Agreements),
(i) each Covered Obligation outstanding on such date was an Eligible Payment
Obligation and (ii) a 100% Participation in each Covered Obligation was
conveyed to the Seller free and clear of any Lien of any Person claiming
through or under LTCB or any of its affiliates and in compliance, in all
material respects, with all requirements of law applicable to LTCB.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, in the event of a breach with respect to a Covered Obligation
of any representations and warranties set forth in clause (c)(ii) of the
preceding paragraph, or in the event that a Covered Obligation is not an
Eligible Payment Obligation as a result of the failure to create such Payment
Obligation in compliance with all applicable requirements of applicable law
and upon the satisfaction of certain conditions set forth in the First Tier
Participation Agreement, then, upon the earlier to occur of the discovery of
such breach or event by the Branch or receipt by the Branch of written notice
of such breach or event given by the Seller, the Trustee or the Servicer, the
100% Participation created in each such Covered Obligation shall terminate and
be repurchased by the Branch from the Seller and extinguished. In the event of
a breach of any of the other representations and warranties set forth in
clause (c) of the preceding paragraph or in clause (d) of the preceding
paragraph, and as a result of such breach the related Covered Loan Agreement
becomes a Defaulted Loan Agreement or the rights of the Seller or the Trust
in, to or under the related Covered Obligations or their proceeds are impaired
or the proceeds of such Covered Obligations are not available for any reason
to the Seller or the Trust free and clear of any lien, then, upon the
expiration of 60 days (or such longer period as may be agreed to by the Seller
or, if the Second Tier Participation Agreement is then in effect, the Trustee,
in its sole discretion but in no event later than 120 days) from the earlier
to occur of the discovery of any such event or receipt by the Branch of
written notice of any such event, the 100% Participation in the Covered
Obligations arising under such Covered Loan Agreement shall terminate and be
repurchased by the Branch from the Seller and extinguished; provided, however,
that no such termination, extinguishment and repurchase shall be required to
be made if, on any day within such applicable period, such representations and
warranties with respect to such Covered Obligation shall then be true and
correct in all material respects as if such Covered Obligation had been
created on such day.
When the provisions of a First Tier Participation Agreement require the
termination and extinguishment of the Participation in the Covered Obligations
arising under any Covered Loan
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Agreement and the repurchase by the Branch of such Covered Obligations then
outstanding, then on the date required for such repurchase, (x) the Branch
shall deposit into the Collection Account an amount equal to the outstanding
amount of such Covered Obligations on the day of repurchase, (y) upon such
payment such Covered Loan Agreement shall be deemed to be a Removed Loan
Agreement, and (z) the Seller (or, if the Second Tier Participation Agreement
is then in effect, the Trustee) shall deliver to the Branch such confirmation
of termination and extinguishment of the Participation in such Loan Agreement
and related Payment Obligations as the Branch may reasonably request.
In the event of a breach of any of the representations and warranties set
forth in clause (b) of the first paragraph under this subsection, the Seller,
the Trustee on behalf of the Trust or the holders of Certificates evidencing
more than 50% of the Investor Interests may direct that the Participation in
the Covered Obligations arising under all of the Covered Loan Agreements shall
terminate and be repurchased by the Branch from the Seller and extinguished
within 60 days of such notice (or within such longer period as may be
specified in such notice); provided, however, that no such termination,
extinguishment and repurchase shall be required to be made if, on any day
within such applicable period, the representations and warranties contained in
such clause (b) shall be true and correct in all material respects. On the
date specified in such notice, (x) the Branch shall deposit into the
Collection Account an amount equal to the outstanding amount of all of the
Covered Obligations on the day of repurchase, (y) upon such payment each of
the Covered Loan Agreements shall be deemed to be a Removed Loan Agreement and
(z) the Seller (or, if the Second Tier Participation Agreement is then in
effect, the Trustee) shall deliver to the Branch such confirmation of
termination and extinguishment of the participation interest in the Covered
Loan Agreements and related Covered Obligations as the Branch may reasonably
request. The obligation of LTCB set forth in this paragraph shall constitute
the sole remedy respecting any breach of the representations and warranties
set forth in the above-referenced subsection with respect to such Covered
Obligation failing to be an Eligible Payment Obligation available to
Certificateholders or the Trust on behalf of Certificateholders.
SECOND TIER PARTICIPATION AGREEMENT. Unless otherwise specified in the
Prospectus Supplement relating to a Series of Certificates, the Seller will
make in each Second Tier Participation Agreement, certain representations and
warranties to the Trust to the effect that, among other things, (a) as of the
Closing Date of each Series of Certificates issued by such Trust, the Seller
was duly organized and in good standing and that it has the authority to
consummate the transactions contemplated by the Second Tier Participation
Agreement, (b) as of the Closing Date of each Series of Certificates issued by
such Trust, (i) each of the related Agreements will constitute a legal, valid
and binding obligation of the Seller, (ii) the grant and sale by the Seller to
the Trust, and the purchase by the Trust, of a 100% Subparticipation in the
Covered Obligations pursuant to the Second Tier Participation Agreement will
effect a valid transfer by the Seller to the Trust of the Seller's entire
right, title and interest in the Covered Obligations and the First Tier
Participation Agreement, and (iii) if and to the extent the conveyance of a
100% Subparticipation interest in the Covered Obligations is not deemed to be
or is not recognized as a sale, the Second Tier Participation Agreement
creates a valid security interest in the First Tier Participation Agreement
and the Covered Obligations (other than Covered Obligations created after the
Cut-Off Date) and creates a valid security interest in the Covered Obligations
created after the Cut-Off Date and upon the filing of an appropriate financing
statement and an appropriate assignment of financing statement, the Trust will
have a valid first priority perfected security interest in such property, (c)
as of the Closing Date of each Series of Certificates issued by such Trust, to
the best of the Seller's knowledge, each representation and warranty made or
to be made by the Branch to the Seller under certain sections of the First
Tier Participation Agreement was or will be true and correct as of the date
made or deemed made, and (d) as of the relevant Cut-Off Date (or as of the
date of designation of Covered Obligations under Additional Loan Agreements),
a 100% Subparticipation in each Covered Obligation then existing was conveyed
to the Trust free and clear of any lien and in compliance, in all material
respects, with all requirements of law applicable to the Seller.
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In the event the Participation of the Seller in any Covered Obligation is
terminated, repurchased and extinguished pursuant to the First Tier
Participation Agreement, the 100% Subparticipation of the Trust in such
Covered Obligation shall terminate and be repurchased by the Seller from the
Trust and extinguished on the same date as the related Participation of the
Seller is repurchased by the Branch from the Seller and extinguished in
accordance with the First Tier Participation Agreement. In the event of a
breach of any of the representations and warranties set forth in clauses (c)
and (d) of the preceding paragraph, and as a result of such breach the rights
of the Trust in, to or under the related Covered Obligations or their proceeds
are impaired or the proceeds of such Covered Obligations are not available for
any reason to the Trust free and clear of any lien, then, upon the expiration
of 60 days (or such longer period as may be agreed to by the Trust in its sole
discretion but in no event later than 120 days) from the earlier to occur of
the discovery of any such event or receipt by the Seller of written notice of
any such event, the 100% Subparticipation in the Covered Obligations arising
under such Covered Loan Agreement shall terminate and be repurchased by the
Seller from the Trust and extinguished; provided, however, that no such
termination, extinguishment and repurchase shall be required to be made if, on
any day within such applicable period, such representations and warranties
with respect to such Covered Obligation shall then be true and correct in all
material respects as if such Covered Obligation had been created on such day.
When the provisions of the Second Tier Participation Agreement require the
termination and extinguishment of the Subparticipation in the Covered
Obligations arising under any Covered Loan Agreement and the repurchase by the
Seller of such Subparticipation in such Covered Obligations then outstanding
(such Covered Obligations, together with the related Covered Loan Agreements,
"Ineligible Obligations" and such termination, extinguishment and repurchase,
a "Removal" with respect to the Subparticipation in the affected Ineligible
Obligations), then such Removal shall be effected by the Servicer deducting
the principal balance of each such Ineligible Obligation from the Principal
Obligations included in the Covered Obligations in the Trust and decreasing
the Seller Interest by such amount. On and after the date of such Removal,
each Ineligible Obligation shall be deducted from the aggregate amount of
Principal Obligations used in the calculation of any Investor Percentage, the
Seller Percentage or the Seller Interest. In the event that the exclusion of
Ineligible Obligations from the calculation of the Seller Interest would cause
the Seller Interest to be reduced below the Minimum Seller Interest or would
otherwise not be permitted by law, the Seller shall concurrently make a
deposit in the Collection Account (for allocation as a Principal Obligation)
in immediately available funds prior to the Transfer Date related to such
Monthly Period in which such event occurred in an amount equal to the amount
by which the Seller Interest would be reduced below the Minimum Seller
Interest. The portion of such deposit allocated to the Certificates of each
Series shall be distributed to the Certificateholders of each Series in the
manner specified in the related Agreement, if applicable, on the Distribution
Date immediately following such Transfer Date. Upon Removal of an Ineligible
Obligation, the Trust shall automatically and without further action be deemed
to transfer, assign, set-over and otherwise convey to the Seller, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to such Ineligible Obligation (whether through the
subparticipation interest granted, sold and purchased or otherwise) and all
monies due or to become due with respect to such Ineligible Obligation. The
Trust shall deliver to the Seller such confirmation of termination and
extinguishment of the Subparticipation in such Ineligible Obligation and
related Loan Agreement as the Seller may reasonably request. The obligation of
the Seller set forth in this paragraph, or the automatic Removal of such
Ineligible Obligation from the Trust, as the case may be, shall constitute the
sole remedy respecting any breach of the representations and warranties set
forth in the above-referenced subsection with respect to such Ineligible
Obligation available to Certificateholders or the Trust on behalf of
Certificateholders.
In the event of a breach of any of the representations and warranties of the
Branch set forth in certain sections of the First Tier Participation Agreement
or of the Seller set forth in clause (b) of the first paragraph of this
section, the Trust or the holders of Certificates evidencing 50% or more of
the Investor Interests may direct that the 100% Subparticipation in the
Covered Obligations arising under
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all of the Covered Loan Agreements shall terminate and be repurchased by the
Seller from the Trust and extinguished within 60 days of such notice (or
within such longer period as may be specified in such notice); provided,
however, that no such termination, extinguishment and repurchase shall be
required to be made if, on any day within such applicable period, the
representations and warranties contained in such clauses shall be true and
correct in all material respects. On the date specified in such notice, (x)
the Seller shall deposit or cause to be deposited into the Collection Account
an amount equal to the outstanding amount of all of the Covered Obligations on
the day of repurchase, (y) upon such payment each of the Covered Loan
Agreements shall be deemed to be a Removed Loan Agreement, and (z) the Trust
shall deliver to the Seller such confirmation of termination and
extinguishment of the subparticipation interest in the Covered Loan Agreements
and related Covered Obligations as the Seller may reasonably request. The
obligation of LTCB set forth in this paragraph shall constitute the sole
remedy respecting any breach of the representations and warranties set forth
in the above-referenced subsection with respect to such Ineligible Obligation
available to Certificateholders or the Trust on behalf of Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Loan Agreement" will be
defined to mean, as of the relevant Cut-Off Date (or, with respect to
Additional Loan Agreements, as of their date of designation for inclusion in
the related Trust (the "Addition Date")), a Loan Agreement that (a) the Branch
is a named lender under such Loan Agreement (which term, as used in this
definition of "Eligible Loan Agreement" includes, where the Branch itself is a
participant, in addition to the participation agreement under which the Branch
holds its interest, the underlying loan agreement, credit agreement, guarantee
or other document or instrument to which the obligor(s) is a party); (b) the
Interest Obligations arising under such Loan Agreement are calculated only by
reference to one or more specified interest rate indices; (c) such Loan
Agreement provides that the place of payment by the obligor(s) thereunder is
the office of a commercial bank in the United States; (d) such Loan Agreement
does not prohibit the Branch from designating (either to the obligor(s) or an
agent bank) that payments with respect to Payment Obligations to the Branch
will be remitted to the Collection Account; (e) as of the date such Loan
Agreement became a Covered Loan Agreement, (w) the Payment Obligations arising
under such Loan Agreement are classified by the Branch as "corporate risk"
(that is, where the principal source of repayment is the continuing operations
of a going concern as opposed to, for example, a real estate loan, project
finance loan or other risk type) in accordance with the Branch's customary
policies and procedures, (x) no event of default (or similar term, as defined
in such Loan Agreement) exists or has occurred since such Loan Agreement was
initially entered into, (y) no Payment Obligations arising thereunder is
classified as a non-accruing asset in accordance with the Branch's customary
standards, policies and procedures and (z) such Loan Agreement is not a
Defaulted Loan Agreement; (f) the Borrower under such Loan Agreement is not an
affiliate of LTCB; (g) such Loan Agreement does not include any Payment
Obligation that is 60 days or more delinquent; (h) such Loan Agreement is not
a participation in a Loan Agreement originated by a party other than LTCB
Trust Company that has been granted to the Branch pursuant to the Master
Participation Agreement between the Branch and LTCB Trust Company; (i) such
Loan Agreement does not preclude the grant by the Branch hereunder of a
participation interest in Payment Obligations arising under such Loan
Agreement and (j) the Payment Obligations arising under such Loan Agreement
are not subordinated obligations. The definition of Eligible Loan Agreement
may be changed by amendment to an Agreement without the consent of the related
Certificateholders if (i) the Seller delivers to the Trustee a certificate of
an authorized officer to the effect that, in the reasonable belief of the
Seller, such amendment will not as of the date of such amendment adversely
affect in any material respect the interest of such Certificateholders, and
(ii) such amendment will not result in a Rating Agency's withdrawal or
reduction of the rating of any outstanding Series or Class under the related
Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Payment Obligation" will
be defined to mean each Payment Obligation that
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(a) arises under a Loan Agreement that was an Eligible Loan Agreement (i) as
of the Cut-Off Date and the date of the Agreement in the case of the Initial
Covered Loan Agreements and (ii) as of the applicable Addition Date in the
case of any Additional Loan Agreement; (b) is either (i) extended and payable
only in dollars and the Covered Loan Agreement under which such Payment
Obligation arises does not afford any obligor(s) the right to calculate the
amount due with respect to such Payment Obligation in any currency other than
dollars or (ii) extended and payable under a multi-currency facility;
provided, that any Payment Obligations payable in a currency other than
dollars shall be allocated solely to the Seller Interest unless (A) the Trust
has the benefit of a swap agreement which will swap payments with respect to
such Payment Obligation into dollars and (B) each Rating Agency shall have
confirmed that such arrangement shall not cause a withdrawal, downgrade or
qualification of the ratings of any Series or Class of Certificates; (c) was
created and extended in compliance, in all material respects, with all
requirements of law applicable to the Branch; (d) as to which (i) in the case
of Payment Obligations existing (x) under the Initial Covered Loan Agreements
on the Cut-off Date or (y) under an Additional Loan Agreement on the
applicable Addition Date, as of the Cut-Off Date or applicable Addition Date,
as the case may be, the Branch had good and marketable title thereto (subject
to the terms of the related Loan Agreement), free and clear of all Liens
arising under or through the Branch or any of LTCB's affiliates, and (ii) in
the case of Payment Obligations arising under the Initial Covered Loan
Agreements after the Cut-Off Date or Additional Loan Agreements after the
applicable Addition Dates, as of the date such Payment Obligations were
created the Branch had legal title thereto (subject to the terms of the
related Loan Agreement) and had not in any manner granted any interest in the
beneficial ownership thereof or any Liens thereon through the Branch or any of
LTCB's affiliates except pursuant to a First Tier Participation Agreement and
a Second Tier Participation Agreement; (e) is the legal, valid and binding
payment obligation of the primary obligor thereon, enforceable against such
primary obligor in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting the
enforcement of creditors' rights in general and except as such enforceability
may be limited by general principles of equity (whether considered in a suit
at law or in equity); and (f) does not constitute an "account" under and as
defined in Article 9 of the Uniform Commercial Code as in effect in the State
of New York on the date on which such Obligation arises.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, it will not be required or anticipated that the Trustee will
make any initial or periodic general examination of the Covered Obligations or
Covered Loan Agreements or any records relating to the Covered Obligations or
Covered Loan Agreements for the purpose of establishing the presence or
absence of defects, compliance with the Seller's representations and
warranties or for any other purpose. The Servicer, however, will deliver to
the Trustee on or before March 31 of each year (or such other date specified
in the related Prospectus Supplement) an opinion of counsel with respect to
the validity of the security interest of the Trust in and to the Covered
Obligations and certain other components of the Trust.
ADDITION OF TRUST ASSETS
If the Seller Interest is less than the Minimum Seller Interest or the
amount of Covered Principal Obligations is less than the Minimum Aggregate
Principal Obligations as of the close of business on the last business day of
any Monthly Period, the Branch shall on or prior to the close of business on
the twentieth calendar day following the last business day of such calendar
week, make an Addition to the Trust such that, after giving effect to such
Addition, the total amount of Seller Interest is at least equal to the Minimum
Seller Interest, and the amount of Covered Principal Obligations exceeds the
Minimum Aggregate Principal Obligations. An "Addition" will consist of Payment
Obligations arising under additional Eligible Loan Agreements from the LTCB
Portfolio.
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As described above under "The Loans", the Seller will have the right to
designate for each Trust, from time to time, Additional Loan Agreements to be
included as Covered Loan Agreements with respect to such Trust. The Seller
will grant to the related Trust a Subparticipation in all Covered Obligations
arising under such Additional Loan Agreements, whether such Advances are then
existing or thereafter created.
Each Additional Loan Agreement must be an Eligible Loan Agreement at the
time of its designation. However, Additional Loan Agreements may not be of the
same credit quality as the initial Covered Loan Agreements. Additional Loan
Agreements may have been originated by the Branch using credit criteria
different from those which were applied by the Branch to the Initial Covered
Loan Agreements or may have been acquired by the Branch from an institution
which may have had different credit criteria.
A grant by the Seller to a Trust of a Subparticipation in Covered
Obligations in Additional Loan Agreements is subject to the following
conditions, among others: (i) the Seller shall give the Trustee, each Rating
Agency and the Servicer written notice that Payment Obligations arising under
such Additional Loan Agreements will be included in the Trust, which notice
shall specify the approximate aggregate amount of such Payment Obligations to
be transferred; (ii) the Seller shall have delivered to the Trustee a computer
file or microfiche list, dated the date of such Subparticipation, containing a
true and complete list of such Additional Loan Agreements; (iii) the Seller
shall represent and warrant that (x) each Additional Loan Agreement is, as of
the Addition Date, an Eligible Loan Agreement, and each Payment Obligation
outstanding under such Additional Loan Agreement is, as of the Addition Date,
an Eligible Payment Obligation, (y) no selection procedures believed by the
Seller to be materially adverse to the interests of the Certificateholders
were utilized in selecting the Additional Loan Agreements from the available
Eligible Loan Agreements in the LTCB Portfolio, and (z) as of the Addition
Date, the Seller is not insolvent; (iv) the Seller shall deliver certain
opinions of counsel with respect to the grant of a Subparticipation in such
Advances in the Additional Loan Agreements; (v) the designation of such
Additional Loan Agreements and Additional Advances thereunder will not result
in the occurrence of a Pay Out Event; and (vi) with respect to the designation
of Additional Loan Agreements that would have the consequence of the Maximum
Addition Amount being exceeded, (A) the Rating Agency Condition shall have
been satisfied and (B) the Branch shall have delivered an officer's
certificate to the Seller and, if the Second Tier Participation Agreement is
in effect, the Trustee (with a copy to each Rating Agency) stating that the
grant, sale and purchase hereunder of a 100% Participation in such Additional
Loan Agreements will not result in an Adverse Effect.
"Maximum Addition Amount" means with respect to any Addition Date, unless
provided otherwise in a Series Supplement, an aggregate committed amount with
respect to Payment Obligations under each Loan Agreement proposed to be
designated an Additional Loan Agreement on such Addition Date that, together
with the aggregate committed amounts with respect to Payment Obligations under
each Covered Loan Agreement that was designated a Covered Loan Agreement on an
Addition Date during the 12-month period immediately preceding such Addition
Date, does not exceed a percentage (set forth in the related Prospectus
Supplement) of the aggregate committed amounts under all Covered Loan
Agreements after giving effect to the addition of such Additional Loan
Agreement.
If the obligor(s) under a Covered Loan Agreement request a renewal or
extension of the commitment period, maturity date or termination date (the end
of such period or such date, the "Initial Termination Date" for such Covered
Loan Agreement), the Payment Obligations under such Covered Loan Agreement
shall be Covered Obligations only if and to the extent such Loan Agreement as
so extended or renewed becomes an Additional Loan Agreement in accordance with
the conditions set forth in the second preceding paragraph.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of each Trust, a
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report on Form 8-K with respect to any grant to a Trust of a Subparticipation
in Covered Obligations in Additional Loan Agreements that would have a
material effect on the composition of the assets of such Trust.
REMOVAL OF LOAN AGREEMENTS
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, in the event the Branch, the Seller and the Trustee mutually
agree to terminate a Subparticipation in any Loan Agreement and the Payment
Obligations thereunder as a Covered Loan Agreement and related Covered
Obligations and cause the Branch to repurchase such Covered Obligations from
Seller, the purchase and termination shall be effected by the entering into
among the Branch, the Seller and the Trustee, if applicable, of a written
agreement identifying the Covered Loan Agreements that shall be deemed to be
"Removed Loan Agreements" and the date (the "Removal Date") as of which such
removal, repurchase and termination shall be effective. As described under "--
Representations and Warranties", and subject to the conditions described in
this paragraph, if there exists a breach of a representation or warranty by
the Seller with respect to an Ineligible Obligation, the Seller shall
designate the Covered Loan Agreement under which such Ineligible Obligation
was made as a Removed Loan Agreement. The Seller will be permitted to
designate and require termination of a Subparticipation in the Covered
Obligations from Removed Loan Agreements only upon satisfaction of the
following conditions: (i) the removal of any Covered Obligations of any
Removed Loan Agreements shall not, in the reasonable belief of the Seller,
cause a Pay Out Event to occur, (ii) the Seller shall have delivered to the
related Trustee for execution a written notice and a computer file or
microfiche list containing a true and complete list of all Removed Loan
Agreements identified by Loan Agreement number and the aggregate amount of the
Payment Obligations in such Removed Loan Agreements; (iii) the Seller shall
represent and warrant that no selection procedures believed by the Seller to
be materially adverse to the interests of the holders of any Series of
Certificates outstanding under such Trust were utilized in selecting the
Removed Loan Agreements to be removed from such Trust; (iv) each Rating Agency
then rating each Series of Certificates outstanding under such Trust shall
have received notice of such proposed removal of Loan Agreements and the
Seller shall have received notice from each such Rating Agency that such
proposed removal will not result in a withdrawal or reduction of its then-
current rating for any such Series; (v) after giving effect to removal, the
Seller Interest shall equal or exceed the Minimum Seller Interest and the
balance of Covered Principal Obligations shall equal or exceed the sum of the
initial Investor Interests for all outstanding Series on such date (the
"Minimum Aggregate Principal Obligations"); (vi) such other conditions as are
specified in the related Prospectus Supplement; and (vii) the Seller shall
have delivered to the Trustee an officer's certificate confirming the items
set forth in clauses (i) through (vi) above. Notwithstanding the above, the
Seller will be permitted to designate as a Removed Loan Agreement without the
consent of the related Trustee, Certificateholders or Rating Agencies any Loan
Agreement that has a zero balance and which the Seller will remove from its
computer file upon satisfaction of the conditions specified in clauses (i),
(ii), (iii), (v) and (vi) above.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing, collecting, enforcing and administering the Covered Obligations in
accordance with the Servicer's customary and usual policies and procedures for
servicing commercial and industrial loans comparable to the Covered
Obligations. The Servicer will be required to maintain fidelity bond coverage
insuring against losses through wrongdoing of its officers and employees who
are involved in the servicing of Covered Obligations covering such actions and
in such amounts as the Servicer believes to be reasonable from time to time.
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The Servicer will agree in each Agreement to service and administer the
Covered Loan Agreements and the Covered Obligations arising thereunder and to
collect payments due under the Covered Obligations in accordance with its
customary and usual servicing policies and procedures for its own portfolio of
commercial and industrial loans comparable to the Covered Obligations (the
"Servicing Standard"); provided, however, that the Servicer, in connection
with its servicing and administration of the Covered Loan Agreements and the
Covered Obligations arising thereunder shall act without regard to any credit
or other relationships apart from the Covered Loan Agreements that the
Servicer or any of its affiliates may have with any obligor, or any affiliate
of any obligor, with respect to any Covered Loan Agreement; provided, further,
that the actions and obligations of the Servicer only apply to the extent of
the Trust's interest in the Covered Obligations and related Covered Loan
Agreements (it being understood that (x) in many cases the 100% Participation
granted by the Branch to the Seller pursuant to the First Tier Participation
Agreement and, accordingly, the 100% Subparticipation granted by the Seller to
the Trust pursuant to the Second Tier Participation Agreement is a partial
interest in a syndicated facility with other lenders, (y) the Branch, as
Servicer, may not have the controlling vote with respect to actions taken by
lenders under the Covered Loan Agreements and (z) a party other than the
Branch, as Servicer, may have no vote with respect to actions taken by
lenders, including the Branch, under the Covered Loan Agreements).
The Servicer has agreed to not amend or modify any provision of the
Servicing Standard in any respect that would have an Adverse Effect on
Certificateholders (which determination shall be made without regard to
whether funds are then available to any Certificateholders of any Series
pursuant to any Credit Enhancement).
In connection with its servicing and administration of the Covered Loan
Agreements and Covered Obligations hereunder, the Servicer will have full
power and authority, acting alone or through any party properly designated by
it hereunder, to do any and all things in connection with such servicing and
administration that it may reasonably deem (x) necessary or desirable and
consistent with the Servicing Standard and (y) consistent with maximizing the
amount ultimately to be received by the Trust with respect to the Covered
Obligations and Covered Loan Agreements; provided, however, that:
(i) the Servicer will not consent or agree to (1) the extension or
deferral of any date on which a Covered Obligation is to be paid, (2) any
waiver of any covenant in any Covered Loan Agreement, (3) any amendment or
modification to any Covered Loan Agreement, (4) any change in the interest
rate or interest rate basis or spread applicable to any Covered Obligation
or Covered Loan Agreement or (5) any release of collateral securing
repayment of any Covered Obligation or Covered Loan Agreement, unless (x)
such extension, deferral, waiver, amendment, modification or other action
(A) will not cause a Pay Out Event to occur, (B) in the Servicer's
reasonable judgment, will not cause an Adverse Effect to occur, (C) in the
Servicer's reasonable judgment, is consistent with the Servicing Standard
(the satisfaction of clauses (A), (B) and (C) to be evidenced by an
Officer's Certificate delivered to the Trustee by the Servicer on or prior
to each Transfer Date with respect to all such actions taken in the prior
month) and (y) in the case of an extension or deferral of the date on which
a Covered Obligation is to be paid, the aggregate of all extensions or
deferrals with respect to the Covered Obligations under a Covered Loan
Agreement shall not exceed 6 months;
(ii) if, following one or more adverse credit-related developments with
respect to a Covered Loan Agreement, the Servicer would only sell to any
party other than LTCB or any affiliate thereof the Covered Loan Agreement
in accordance with its customary policies and procedures (if such Covered
Loan Agreement were the property of the Servicer) if the Servicer
reasonably believed such a sale would maximize the amount ultimately to be
received by the Trust with respect to such Covered Loan Agreement, then the
Servicer may sell the Covered Loan Agreement so long as such sale would not
cause a Pay-Out Event;
(iii) if any suit or proceeding is (x) commenced by any obligor under a
Covered Loan Agreement against the Branch (whether in its capacity as
Servicer or otherwise), any of its
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affiliates, the Seller or the Trust or (y) to the knowledge of the
Servicer, commenced by any obligor under any Covered Loan Agreement against
any other lending bank or agent or threatened against the Branch (whether
in its capacity as Servicer or otherwise), any lending bank or agent, the
Seller or the Trust, the Servicer shall give prompt written notice thereof
to the Trustee.
"Adverse Effect" means, with respect to any action, that such action will
(a) result in the occurrence of a Pay Out Event or (b) adversely affect the
amount of distributions to be made to the Certificateholders of any Series or
Class pursuant to an Agreement or the receipt of distributions on the
Certificates when expected.
In the event of a breach by the Servicer of any covenant or agreement under
the Agreement, and such breach has a material adverse effect on the
Certificateholders taken as a whole in the affected Covered Obligation or
Covered Loan Agreement (which determination shall be made without regard to
whether funds are then available to any Certificateholders of any Series
pursuant to any Credit Enhancement) and is not cured within 60 days (or such
longer period, not in excess of 150 days, as may be agreed to by the Trustee)
of the earlier to occur of the discovery of such event by the Servicer, or
receipt by the Servicer of written notice of such event given by the Trustee,
all Covered Obligations arising under the Covered Loan Agreement or Covered
Loan Agreements to which such event relates shall be sold and assigned to the
Servicer on the terms and conditions set forth below. If the Branch is the
Servicer, such sale and assignment shall be effected by the related Covered
Loan Agreement becoming a Removed Loan Agreement in accordance with the
applicable First Tier Participation Agreement and Second Tier Participation
Agreement. If the Branch is not the Servicer, such sale and assignment will be
effected by (i) the Trust selling and granting to the Servicer, and the
Servicer purchasing from the Trust, a 100% Participation in such Covered
Obligations and the Servicer paying for the same by depositing an amount equal
to the amount of such Covered Obligations in the Collection Account on the
Business Day preceding the Distribution Date following the Monthly Period
during which such obligation arises. Such sale and assignment to the Servicer
will constitute the sole remedy available to the Trust or the
Certificateholders in connection with any such breach.
In the event that the Seller is unable for any reason to transfer Covered
Obligations to the Trust in accordance with the provisions of the Second Tier
Participation Agreement or an Agreement then, in any such event, (i) the
Servicer shall allocate, after such date, all collections with respect to
Covered Principal Obligations, and all amounts which would have constituted
collections with respect to Covered Principal Obligations but for the Seller's
inability to transfer such Obligations (up to an aggregate amount equal to the
aggregate amount of Covered Principal Obligations in the Trust as of such
date) in accordance the applicable First Tier Participation Agreement; (ii)
the Servicer agrees to apply such amounts as collections in accordance with
the applicable Agreement, and (iii) for only so long as all collections and
all amounts which would have constituted collections are allocated and applied
in accordance with clauses (i) and (ii) above, Covered Principal Obligations
and all amounts which would have constituted Covered Principal Obligations but
for the Seller's inability to transfer Covered Obligations to the Trust that
are written off as uncollectible in accordance with the applicable Agreement
shall continue to be allocated in accordance with such Agreement and all
amounts which would have constituted Covered Principal Obligations but for the
Seller's inability to transfer Covered Obligations to the Trust shall be
deemed to be Covered Principal Obligations for the purpose of calculating the
applicable Investor Percentage thereunder. If the Servicer is unable pursuant
to any requirement of law to allocate payments on the Covered Loan Agreements
as described above, the Servicer will allocate, after the occurrence of such
event, payments under each Covered Loan Agreement with respect to Covered
Principal Obligations thereunder first to the oldest Covered Principal
Obligations under such Covered Loan Agreement and have such payments applied
as collections in accordance with the applicable Agreement.
In the event that, pursuant to the Agreements, Ineligible Obligations are
removed from the pool of Covered Obligations, then, in any such event, the
Servicer shall account for payments received with respect to such Ineligible
Obligations separately from its accounting for collections on Covered
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Principal Obligations retained by the Trust. If payments received from or on
behalf of an obligor are not specifically applicable either to an Ineligible
Obligation of such obligor reassigned to the Seller or to Covered Obligations
of such obligor retained in the Trust, then the Servicer shall agree to
allocate payments proportionately based on the total amount of Covered
Principal Obligations of such obligor retained in the Trust and the total
amount owing by such obligor on any Ineligible Obligations purchased by the
Seller, and the portion allocable to any Covered Principal Obligations
retained in the Trust shall be treated as collections and deposited in
accordance with the provisions of the applicable Agreement.
The Servicer will not be obligated to use servicing procedures, offices,
employees or accounts for servicing the Trust Portfolio that are separate and
apart from the procedures, offices, employees and accounts used by the
Servicer in connection with servicing and administering the LTCB Portfolio.
Pursuant to the Agreement, the Servicer has the right to delegate any of its
responsibilities and obligations as Servicer to any of its affiliates that
agrees to conduct such duties in accordance with the Agreement and the
Servicing Standard. Unless stated otherwise in the Prospectus Supplement, the
Servicer does not intend to delegate any of its servicing activities.
Notwithstanding any such delegation to any entity, the Servicer will continue
to be liable for all of its obligations under the Agreement. The majority of
the Covered Obligations will arise under loan agreements having multiple
lenders in which the exercise of remedies and the taking of other actions
(including the granting of amendments and waivers) may be subject to the vote
of a certain percentage (measured by outstanding loans or commitments) of the
lenders thereunder. In many such situations the Branch will not have a
sufficient interest to direct compliance by the Borrower with the terms of the
Covered Loan Agreement or to object to certain changes to the applicable
Covered Loan Agreement agreed to by the other lenders.
TRUST ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Trust,
the related Trustee will establish and maintain in the name of the Trust two
separate accounts in a segregated trust account (which needs not be a deposit
account), an "Interest Account" and a "Principal Account", for the benefit of
the Certificateholders of all related Series, including any Series offered
pursuant to this Prospectus. Each Agreement will provide that the Trustee
shall have the power to establish series accounts in Series Supplements,
including an Interest Funding Account, a Principal Funding Account, a Pre-
Funding Account or such other account specified in the related Series
Supplement, each of which series accounts shall be held for the benefit of the
Certificateholders of the related Series and for the purposes set forth in the
related Prospectus Supplement. The Trustee will also establish a "Distribution
Account" (a non-interest bearing segregated demand deposit account established
with a Qualified Institution). The Servicer will establish and maintain, in
the name of the Trust, for the benefit of Certificateholders of all Series
issued thereby including any Series offered pursuant to this Prospectus, a
Collection Account, which will be a non-interest bearing segregated account
established and maintained with the Servicer or with a "Qualified
Institution", defined as a depository institution, which may include the
Trustee, organized under the laws of the United States or any one of the
States thereof including the District of Columbia, the deposits in which are
insured by the FDIC and which at all times has a short-term unsecured debt
rating of at least A-1+ by Standard & Poor's Ratings Group ("Standard &
Poor's") and P-1 by Moody's Investors Service, Inc. ("Moody's") or (ii) a
depositary institution acceptable to the Rating Agency; provided, however,
that an institution which shall have corporate trust powers and which
maintains the Collection Account, the Principal Account, the Interest Account,
any series account or any other account maintained for the benefit of
Certificateholders as a fully segregated trust account with the trust
department of such institution shall not be required to meet the foregoing
rating requirements, and need only at all times have a long-term unsecured
debt rating of at least Baa3 by Moody's so long as Moody's is a Rating Agency
and BBB- by Standard & Poor's so long as Standard & Poor's is a Rating Agency.
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Unless otherwise specified in the related Prospectus Supplement, funds in
the Principal Account and the Interest Account for each Trust will be
invested, at the direction of the Servicer, in (a) book-entry securities or
negotiable instruments or securities represented by instruments in bearer or
registered form which evidence (i) obligations of or fully guaranteed by the
United States of America, (ii) time deposits or certificates of deposit of any
depositary institution or trust company incorporated under the laws of the
United States of America or any State thereof (or domestic branches of foreign
depository institutions or trust companies) and subject to supervision and
examination by federal or state banking or depositary institution authorities;
provided, however, that at the time of the Trust's investment or contractual
commitment to invest therein, the certificates of deposit or short-term
deposits of such depositary institution or trust company shall have a credit
rating from Moody's and Standard & Poor's of P-1 and A-1+, respectively, (iii)
commercial paper having, at the time of the Trust's investment or contractual
commitment to invest therein, a rating from Moody's and Standard & Poor's of
P-1 and A-1+, respectively, (iv) bankers' acceptances issued by any depository
institution or trust company described in clause (a)(ii) above, and (v)
investments in money market funds rated AAA-m or AAA-mg by Standard & Poor's
and AAA by Moody's or otherwise approved in writing by each Rating Agency; (b)
demand deposits in the name of the Trust or the Trustee in any depositary
institution or trust company referred to in clause (a)(ii) above; (c)
securities not represented by an instrument that are registered in the name of
the Trustee upon books maintained for the purpose by or on behalf of the
issuer thereof and identified on books maintained for that purpose by the
Trustee as held for the benefit of the Trust or the Certificateholders, and
consisting of shares of an open end diversified investment company which is
registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act") and which (i) invests its assets exclusively in
obligations of or guaranteed by the United States of America or any
instrumentality or agency thereof having in each instance a final maturity
date of less than one year from their date of purchase or other Permitted
Investments, (ii) seeks to maintain a constant net asset value per share,
(iii) has aggregate net assets of not less than $100,000,000 on the date of
purchase of such shares and (iv) which each Rating Agency designates in
writing will not result in a withdrawal or downgrading of its then current
rating of any Series rated by it; and (d) any other investment if each Rating
Agency confirms in writing that such investment will not adversely affect its
then current rating of the Certificates (such investments, "Permitted
Investments"). Unless otherwise specified in the related Prospectus
Supplement, a Permitted Investment may include an obligation of the Branch or
its affiliates if the conditions in this paragraph are satisfied. Investments
of funds in the Interest Account or Principal Account will be made by the
Servicer for the account of the related Trust and any losses on such
investments will be for the account of the related Trust. Unless otherwise
specified in the related Prospectus Supplement, any earnings (net of losses
and investment expenses) on funds in the Interest Account or the Principal
Account will be deposited into the Collection Account. Funds in any other
series account established by a Series Supplement may be invested in Permitted
Investments or otherwise as provided in the related Prospectus Supplement. The
Servicer will have the revocable power to withdraw funds from the Collection
Account and to instruct the Trustee to make withdrawals and payments from the
Interest Account and the Principal Account for the purpose of carrying out the
Servicer's duties under the Agreement. Unless otherwise specified in the
related Prospectus Supplement, the Trustee will initially be the paying agent
and will have the revocable power to withdraw funds from the Distribution
Account for the purpose of making distributions to the Certificateholders.
INVESTOR PERCENTAGE AND SELLER PERCENTAGE
For each Trust, the Servicer will allocate between the Investor Interest of
each Series issued by such Trust and outstanding (and between each Class of
each Series) and the Seller Interest, and, in certain circumstances, the
interest of certain Credit Enhancement Providers, all amounts collected on
Covered Interest Obligations, all amounts collected on Covered Principal
Obligations and all Covered Obligations under Defaulted Loan Agreements. The
Servicer will make each allocation by reference to the applicable Investor
Percentage of each Series and the Seller Percentage, and, in certain
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circumstances, the percentage interest of certain Credit Enhancement Providers
(the "Credit Enhancement Percentage") with respect to such Series. The
Prospectus Supplement relating to a Series will specify the Investor
Percentage and, if applicable, the Credit Enhancement Percentage with respect
to the allocations of collections of Principal Obligations, Interest
Obligations and Covered Obligations under Defaulted Loan Agreements during the
Revolving Period, any Amortization Period and any Accumulation Period, as
applicable. In addition, for each Series of Certificates having more than one
Class, the related Prospectus Supplement will specify the method of allocation
between each Class.
The Seller Percentage will, in all cases, be equal to 100% minus the
aggregate Investor Percentages and, if applicable, the Credit Enhancement
Percentages, for all Series then outstanding.
APPLICATION OF COLLECTIONS
Unless otherwise specified in the related Prospectus Supplement, for so long
as the Branch is the Servicer, the Branch, in such capacity, will (i) remit to
the Collection Account for the related Trust as soon as reasonably practicable
(x) by not later than the close of business on the business day received if
received by 1:00 P.M., New York City time, on such day and (y) otherwise, by
not later than 11:00 A.M., New York City time, on the next succeeding Business
Day, all amounts paid or payable with respect to Covered Obligations and
received by the Branch and (ii) in the event a Servicer Default occurs with
respect to the Branch while it is the Servicer, to the extent that it has
authority to do so under the Covered Loan Agreements, direct the obligors
thereunder or any agent bank, as applicable, to remit all amounts paid or
payable with respect to Covered Obligations to the Collection Account for the
related Trust. In the event any person other than the Branch is the Servicer
and collections are paid to or received by such Servicer, such Servicer shall
deposit all collections in the Collection Account for the related Trust as
promptly as possible after the date of processing of such collections, but in
no event later than the second Business Day following such date of processing;
provided, however, that if an event of bankruptcy or insolvency occurs with
respect to such Servicer, then from and after such occurrence such Servicer
shall deposit all collections in the Collection Account for the related Trust
immediately after the date of processing to the extent permitted by applicable
law.
Unless otherwise specified in the related Prospectus Supplement, with
respect to any Monthly Period, (i) the Servicer will only be required to
deposit collections from the Collection Account into the Interest Account, the
Principal Account or any Series account up to the required amount to be
deposited into any such deposit account or, without duplication, distributed
on or prior to the related Distribution Date to Certificateholders or to any
Credit Enhancement Provider and (ii) if at any time prior to such Distribution
Date the amount of collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer
will be permitted to withdraw the excess from the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will withdraw the following amounts from the Collection Account for
application as indicated:
(a) an amount equal to the Seller Percentage of the aggregate amount of
such deposits in respect of Covered Principal Obligations and Covered
Interest Obligations, respectively, will be paid or held for payment to the
holder of the Seller Certificate;
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Covered Interest
Obligations will be deposited into the Interest Account for allocation and
distribution as described in the related Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Covered Principal Obligations will be paid or held for payment to the
holder of the Seller Certificate, provided that if after giving effect to
the inclusion
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in the related Trust of all Covered Obligations on or prior to such date of
processing and the application of payments referred to in paragraph (a)
above the Seller Interest is reduced to zero, the excess will be deposited
in the Principal Account or other specified account and will be used as
described in the related Prospectus Supplement, including for payment to
other Series of Certificates issued by the related Trust;
(d) during the Controlled Amortization Period, Controlled Accumulation
Period or Rapid Ac- cumulation Period, as applicable, an amount equal to
the applicable Investor Percentage of such deposits in respect of Covered
Principal Obligations up to the amount, if any, as specified in the related
Prospectus Supplement will be deposited in the Principal Account or
Principal Funding Account, as applicable, for allocation and distribution
to Certificateholders as described in the related Prospectus Supplement,
provided that if collections of Covered Principal Obligations exceed the
principal payments which may be allocated or distributed to
Certificateholders, the amount of such excess will be paid to the holder of
the Seller Certificate until the Seller Interest is reduced to zero, and
thereafter will be deposited in the Principal Account or other specified
account and will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the related
Trust; and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Covered Principal Obligations
will be deposited into the Principal Account for application and
distribution as provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class
in the manner and order of priority described in the related Prospectus
Supplement.
Any amounts collected in respect of Covered Principal Obligations and not
paid to the Seller because the Seller Interest is zero as described above
(with respect to each Series, "Unallocated Principal Collections"), will be
paid to and held in the Principal Account and paid to the Seller if and to the
extent that the Seller Interest is equal to or greater than zero. If an
Amortization Period or Accumulation Period has commenced, Unallocated
Principal Collections will be held for distribution to the Certificateholders
on the dates specified in the related Prospectus Supplement or accumulated for
distribution on the Scheduled Payment Date, as applicable, and distributed to
the Certificateholders of each Class or held for and distributed to the
Certificateholders of other Series of Certificates issued by the related Trust
in the manner and order of priority specified in the related Prospectus
Supplement.
SHARED EXCESS INTEREST COLLECTIONS
Any Series offered hereby may be included in a Group. The Prospectus
Supplement relating to a Series will specify whether such Series will be
included in a Group and will identify any previously issued Series included in
such Group. If so specified in the related Prospectus Supplement, the
Certificateholders of a Series within a Group or any Class thereof may be
entitled to receive all or a portion of Excess Interest Collections with
respect to another Series within such Group to cover any shortfalls with
respect to amounts payable from collections of Interest Receivables allocable
to such Series or Class. See "Description of Certificates--Application of
Collections" and "--Defaulted Obligations; Investor Charge-Offs".
SHARED PRINCIPAL COLLECTIONS
If so specified in the related Prospectus Supplement, to the extent that
collections of Covered Principal Obligations and certain other amounts that
are allocated to the Investor Interest of any Series are not needed to make
payments or deposits with respect to such Series, such collections will
constitute Shared Principal Collections and will be applied to cover principal
payments due to or for
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the benefit of Certificateholders of other Series. If so specified in the
related Prospectus Supplement, the allocation of Shared Principal Collections
may be among Series within a Group. Any such reallocation will not result in a
reduction in the Investor Interest of the Series to which such collections
were initially allocated.
EXCESS FUNDING ACCOUNT
If, on any date, (a) the Seller Interest is less than or equal to the
Minimum Seller Interest, (b) the amount of Covered Principal Obligations is
less than or equal to the Minimum Aggregate Principal Obligations (as defined
below) or (c) if, at the end of any Monthly Period, the outstanding balance of
Covered Principal Obligations under Covered Loan Agreements which have a
stated maturity date on or prior to the Series Termination Date of any Series
is less than 100% of the aggregate Investor Interest of that Series and each
other Series that has a Series Termination Date on or prior to such Series
Termination Date, the Servicer shall not distribute to the Seller any Shared
Principal Collections that otherwise would be distributed to the Seller but,
instead, shall deposit such funds in an account therefor (the "Excess Funding
Account"). The Trustee, on instruction from the Seller, shall withdraw funds
on deposit in the Excess Funding Account and pay such funds to the Seller on
any Distribution Date to the extent that, after giving effect to such payment,
the Seller Interest exceeds the Minimum Seller Interest, the amount of Covered
Principal Obligations exceeds the Minimum Aggregate Principal Obligations and
the outstanding balance of Covered Principal Advances under Covered Loan
Agreements which have a stated maturity date on or prior to the Series
Termination Date of any Series is greater than [ ]% of the aggregate
Investor Interest of that Series and each other Series that has a Series
Termination Date on or prior to such Series Termination Date; provided,
however, that if an Accumulation Period or Amortization Period commences with
respect to any Series, any funds on deposit in the Excess Funding Account will
be released from the Excess Funding Account, deposited in the Collection
Account and treated as Shared Principal Collections to the extent needed to
cover principal payments due to or for the benefit of such Series. Funds on
deposit in the Excess Funding Account will be invested by the Trustee, at the
direction of the Servicer, in Permitted Investments. Any earnings (net of
losses and investment expenses) on funds on deposit in the Excess Funding
Account during any Monthly Period will be withdrawn from the Excess Funding
Account and treated as collections of Covered Interest Receivables with
respect to such Monthly Period. "Minimum Aggregate Principal Obligations"
shall mean, unless otherwise set forth in the related Prospectus Supplement,
as of any date of determination, an amount equal to the sum of the initial
Investor Interests for all outstanding Series on such date.
DEFAULTED OBLIGATIONS; INVESTOR CHARGE-OFFS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on the fourth business day preceding each Transfer
Date (the "Determination Date"), the Servicer will calculate the aggregate
Default Amount for the preceding Monthly Period. The "Default Amount" for a
Monthly Period will be an amount (not less than zero) equal to (a) the
aggregate amount of Covered Principal Obligations outstanding under each
Covered Loan Agreement that became a Defaulted Loan Agreement during such
Monthly Period, minus (b) the sum of (I) the aggregate amount of Covered
Principal Obligations outstanding under Defaulted Loan Agreements of which the
Seller or the Servicer became obligated to accept reassignment or assignment
during such Monthly Period unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Seller or the Servicer, in
which event the amount of such Covered Principal Obligations will not be added
to the sum so subtracted, (II) the aggregate amount of recoveries received in
such Monthly Period with respect to any Defaulted Loan Agreements and (III)
the excess, if any, for the immediately preceding Monthly Period of the sum
computed pursuant to this clause (b) for such Monthly Period over the amount
of Covered Principal Obligations outstanding under Covered Loan Agreements
which became Defaulted Loan Agreements in such Monthly Period. On or before
each Transfer Date, the Servicer will also
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calculate the Investor Default Amount for such preceding Monthly Period. The
term "Investor Default Amount" means, for any Monthly Period, the Floating
Investor Percentage of the Default Amount for such Monthly Period.
In the case of a Series of Certificates having more than one Class, the
Investor Default Amount will be allocated among the Classes in the manner
described in the related Prospectus Supplement. If so provided in the related
Prospectus Supplement, an amount equal to the Investor Default Amount for any
Monthly Period may be paid from other amounts, including collections in the
Interest Account or from Credit Enhancement, and applied to pay principal to
Certificateholders or the holder of the Seller Certificate, as appropriate. In
the case of a Series of Certificates having one or more Classes of
Subordinated Certificates, the related Prospectus Supplement may provide that
all or a portion of amounts otherwise allocable to such Subordinated
Certificates may be paid to the holders of the Senior Certificates to make up
any Investor Default Amount allocable to such holders of Senior Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs
for any Monthly Period. Investor Charge-Offs will be reimbursed on any
Distribution Date to the extent amounts on deposit in the Interest Account and
otherwise available therefor exceed such interest, fees and any aggregate
Investor Default Amount payable on such date. Such reimbursement of Investor
Charge-Offs will result in an increase in the Investor Interest with respect
to such Series. In the case of a Series of Certificates having more than one
Class, the related Prospectus Supplement will describe the manner and priority
of allocating Investor Charge-Offs and reimbursements thereof among the
Investor Interests of the several Classes.
If the amount due and payable in respect of any Covered Obligation is
reduced due to a set-off by, or other claim asserted by, a borrower, the
amount of the Seller Interest will be reduced by the net amount of such
reduction. After any such reduction in the amount of the Seller Interest
occurs, the amount of such Covered Obligation described above will be deducted
from Principal Obligations used in the calculation of the principal allocation
percentage and the floating allocation percentage applicable to any Series.
Furthermore, to the extent that the reduction in the amount of the Seller
Interest would reduce such interest below zero, the Seller will deposit into
the Collection Account in immediately available funds an amount equal to the
amount by which the Seller Interest would be reduced below zero on the
Distribution Date following such Due Period.
DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Seller may terminate its substantive obligations in respect of such Series or
the related Trust by depositing with the Trustee, from amounts representing,
or acquired with, collections of Covered Obligations, money or Permitted
Investments sufficient to make all remaining scheduled interest and principal
payments on such Series or all outstanding Series of Certificates of such
Trust, as the case may be, on the dates scheduled for such payments and to pay
all amounts owing to any Credit Enhancement Provider with respect to such
Series or all outstanding Series, as the case may be, if such action would not
result in a Pay Out Event for any Series. Prior to its first exercise of its
right to substitute money or Permitted Investments for Covered Obligations,
the Seller will deliver to the Trustee (i) an opinion of counsel to the effect
that such deposit and termination of obligations will not result in the
related Trust being required to register as an "investment company" within the
meaning of the Investment Company Act and (ii) a Tax Opinion.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Seller on any Distribution Date after the total Investor
Interest of such Series and the Enhancement Invested
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Amount, if any, with respect to such Series, is reduced to an amount less than
or equal to 5% of the Initial Investor Interest, if any (or such other amount
specified in the related Prospectus Supplement), if certain conditions set
forth in the related Agreement are met. Unless otherwise specified in the
related Prospectus Supplement, the repurchase price will be equal to the total
Investor Interest of such Series (less the amount, if any, on deposit in any
Principal Funding Account with respect to such Series), plus the Enhancement
Invested Amount, if any, with respect to such Series, plus accrued and unpaid
interest on the Certificates and interest or other amounts payable on the
Enhancement Invested Amount or the Collateral Interest, if any, through the
day preceding the Distribution Date on which the repurchase occurs.
The Certificates of each Series will be retired on the day following the
date on which the final payment of principal is scheduled to be made to the
Certificateholders, whether as a result of optional reassignment to the Seller
or otherwise. Each Prospectus Supplement will specify the final date on which
principal and interest with respect to the related Series of Certificates will
be scheduled to be distributed (the "Series Termination Date"); provided,
however, that the Certificates may be subject to prior termination as provided
above. If the Investor Interest is greater than zero on the Series Termination
Date, the Trustee or Servicer may be required to sell or cause to be sold
certain Obligations in the manner provided in the related Agreement and Series
Supplement and to pay the net proceeds of such sale and any collections on the
Covered Obligations, in an amount at least equal to the sum of the Investor
Interest and the Enhancement Invested Amount, if any, with respect to such
Series plus accrued interest due thereon.
Unless the Servicer and the holder of the Seller Certificate instruct the
Trustee otherwise, each Trust will terminate on the earlier of (a) the day
after the Distribution Date on which the aggregate Investor Interest and
Enhancement Invested Amount or Collateral Interest, if any, with respect to
each Series outstanding are zero, (b) September 1, 2018, or (c) if the Covered
Obligations are sold, disposed of or liquidated following the occurrence of an
Insolvency Event, immediately following such sale, disposition or liquidation
(such date, the "Trust Termination Date"). Upon the termination of each Trust
and the surrender of the Seller Certificate, the Trustee shall convey to the
holder of the Seller Certificate all right, title and interest of the Trust in
and to the Covered Obligations and other funds of the Trust.
PAY OUT EVENTS
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless a Pay Out Event occurs prior to
such date. A Pay Out Event will occur with respect to all Series issued by a
Trust upon the occurrence of any of the following events:
(a) certain events of bankruptcy, insolvency, conservatorship or
receivership relating to LTCB, the Branch or the Seller;
(b) the Branch shall become unable for any reason to give effect to its
grant and sale of a Participation in Covered Obligations arising under the
First Tier Participation Agreement or the Seller shall become unable for
any reason to give effect to its grant and sale of a Subparticipation in
the Covered Obligations arising after the date hereof under the Second Tier
Participation Agreement;
(c) such Trust becomes an "investment company" within the meaning of the
Investment Company Act.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the related Prospectus Supplement.
On the date on which a Pay Out Event is deemed to have occurred, the Rapid
Amortization Period or, if so specified in the related Prospectus
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Supplement, the Rapid Accumulation Period will commence. If, because of the
occurrence of a Pay Out Event, the Rapid Amortization Period begins earlier
than the scheduled commencement of an Amortization Period or prior to a
Scheduled Payment Date, Certificateholders will begin receiving distributions
of principal earlier than they otherwise would have, which may shorten the
average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above, unless
otherwise specified in the related Prospectus Supplement, if the Branch
voluntarily enters liquidation, the Seller becomes a debtor in a bankruptcy
proceeding or a receiver or conservator is appointed for the Branch, on the
day of such event the Branch or the Seller, as applicable, will immediately
cease to transfer Covered Principal Obligations to the Trust and promptly give
notice to the Trustee of such event.
If the only Pay Out Event to occur is either the insolvency of the Branch or
the Seller, the bankruptcy or the appointment of a conservator or receiver for
the Branch or the Seller, the conservator or receiver may have the power to
prevent the commencement of a Rapid Amortization Period or, if applicable with
respect to a Series as specified in the related Prospectus Supplement, a Rapid
Accumulation Period. In addition, a conservator or receiver may have the power
to cause the early sale of the Covered Obligations and the early retirement of
the Certificates.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, the Servicer's compensation for its servicing
activities and reimbursement for its expenses will take the form of the
payment to it of the Servicing Fee payable at the times and in the amounts
specified in the related Prospectus Supplement. The Investor Servicing Fee
will be funded from collections of Covered Interest Receivables allocated to
the Investor Interest and will be paid each month, or on such other specified
periodic basis, from amounts so allocated and on deposit in the Interest
Account or, in certain limited circumstances, from amounts available from
Enhancement and other sources, if any. The remainder of the servicing fee for
each Trust will be allocable to the Seller Interest, the Investor Interests of
any other Series issued by such Trust and the interest represented by the
Enhancement Invested Amount or the Collateral Interest, if any, with respect
to such Series, as described in the related Prospectus Supplement.
Neither the Trust nor the Certificateholders will have any obligation to pay
the portion of the servicing fee allocable to the Seller Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Covered Obligations including,
without limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the related Trust or the
Certificateholders other than any tax imposed on or measured by income,
including any federal, state and local income and franchise taxes, if any, of
the Trust or the Certificateholders.
CERTAIN MATTERS REGARDING THE SELLER AND THE SERVICER
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the related Agreement, except upon
determination that performance of its duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or
a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the related Agreement.
Each Agreement will provide that the Servicer will indemnify the related
Trust and Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of any acts
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or omissions or alleged acts or omissions of the Servicer with respect to the
activities of the Trust or the Trustee; provided, however, that the Servicer
shall not indemnify (a) the Trustee for liabilities imposed by reason of
fraud, negligence or willful misconduct by the Trustee in the performance of
its duties under the Agreement, (b) the Trust, the Certificateholders or the
Certificate Owners for liabilities arising from actions taken by the Trustee
at the request of Certificateholders, (c) the Trust, the Certificateholders or
the Certificate Owners for any losses, claims, damages or liabilities incurred
by any of them in their capacities as investors, including without limitation,
losses incurred as a result of Defaulted Obligations or Obligations which are
written off as uncollectible, or (d) the Trust, the Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any federal, state or local income or franchise
tax or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
required to be paid by the Trust, the Certificateholders or the Certificate
Owners in connection with the Agreement to any taxing authority.
Each Agreement will provide that neither the Seller nor the Servicer nor any
of their respective directors, officers, employees or agents will be under any
other liability to the related Trust, Trustee, Certificateholders or any other
person for any action taken, or for refraining from taking any action, in good
faith pursuant to the Agreement. Neither the Seller, the Servicer, nor any of
their respective directors, officers, employees or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Seller, the Servicer or any
such person in the performance of its duties or by reason of reckless
disregard of obligations and duties thereunder. In addition, each Agreement
will provide that the Servicer is not under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
Each Agreement will provide that the Seller may transfer its interest in all
or a portion of the Seller Certificate, provided that prior to any such
transfer (a) the Trustee receives written notification from each Rating Agency
that such transfer will not result in a withdrawal or reduction of its then-
existing rating of the Certificates of each outstanding Series rated by it and
(b) the Trustee receives a written opinion of counsel confirming that such
transfer would not adversely affect the treatment of the Certificates of each
outstanding Series as debt for federal income tax purposes and will not cause
a taxable event to holders of any Certificates of any Series.
Any person into which, in accordance with each Agreement, the Seller or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Seller or the Servicer is a party, or any person
succeeding to the business of the Seller or the Servicer, upon execution of a
supplement to this Agreement, delivery of an opinion of counsel with respect
to the compliance of the transaction with the applicable provisions of the
Agreement, will be the successor to the Seller or the Servicer, as the case
may be, under the Agreement.
SERVICER DEFAULT
Unless otherwise specified in the related Prospectus Supplement, in the
event of any Servicer Default (as defined below), either the Trustee or
Certificateholders representing undivided interests aggregating more than 50%
of the Investor Interests for all Series of Certificates of the related Trust,
by written notice to the Servicer (and to the Trustee if given by the
Certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Covered Obligations
and the proceeds thereof and the Trustee may appoint a new Servicer (a
"Servicer Transfer"). The rights and interest of the Seller under the related
Agreement and in the Seller Interest will not be affected by such termination.
The related Trustee shall as promptly as possible appoint a successor Servicer
(a "Successor Servicer"). If no such Servicer has been appointed and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all authority, power
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and obligations of the Servicer under the Agreement shall pass to and be
vested in the Trustee. If the Trustee is unable to obtain any bids from
eligible servicers and the Servicer delivers an officer's certificate to the
effect that it cannot in good faith cure the Servicer Default which gave rise
to a transfer of servicing, and if the Trustee is legally unable to act as
Successor Servicer, then the Trustee shall give the Seller the right of first
refusal to purchase the Covered Obligations on terms equivalent to the best
purchase offer as determined by the Trustee. The obligations disclosed above
shall not relieve the Servicer from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement.
Unless otherwise specified in the related Prospectus Supplement, "Servicer
Default" under any Agreement refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or deposit
or to give instructions or notice to the Trustee or to instruct the Trustee
to make any required drawing, withdrawal, or payment under any Credit
Enhancement on or before the date occurring five Business Days after the
date such payment, transfer, deposit, withdrawal or drawing or such
instruction or notice is required to be made or given, as the case may be,
under the terms of the related Agreement;
(b) failure on the part of the Servicer duly to observe or perform in any
respect any other covenants or agreements of the Servicer set forth in the
related Agreement, which has a material adverse effect on the
Certificateholders of any Series and which continues unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by
the Trustee, or to the Servicer and the Trustee by the holders of
Certificates evidencing undivided interests aggregating not less than 50%
of the Investor Interest of any Series adversely affected thereby and
continues to materially adversely affect such Certificateholders for such
period;
(c) any representation, warranty or certification made by the Servicer in
the related Agreement or in any certificate delivered pursuant to the
related Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Certificateholders of any Series and which
continues to be incorrect in any material respect for a period of 60 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee, or to
the Servicer and the Trustee by the holders of Certificates evidencing
undivided interests aggregating not less than 50% of the Investor Interest
of any Series adversely affected thereby and continues to materially
adversely affect such Certificateholders for such period;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer; or
(e) such other event specified in the related Prospectus Supplement.
The Branch, as named lender under the Covered Loan Agreements, to the
fullest extent permitted by each Covered Loan Agreement will act at the
direction of the Successor Servicer with respect to the Branch's actions
relating to the Covered Advances and Covered Loan Agreements (including,
without limitation, executing and delivering such certificates or instruments
from time to time as the Successor Servicer may reasonably request).
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred
to in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or other similar occurrence. Upon the occurrence of
any such event, the Servicer shall not be relieved from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
the Agreement, and the Servicer
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shall provide the Trustee, any provider of Enhancement and/or any issuer of
any third-party Credit Enhancement (a "Credit Enhancement Provider"), the
Seller and the holders of Certificates of each Series issued and outstanding
under the related Trust prompt notice of such failure or delay by it, together
with a description of the cause of such failure or delay and its efforts to
perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or
the majority of the Certificateholders from effecting a Servicer Transfer.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates on each Distribution Date, or as soon thereafter as is
practicable, as specified in the related Prospectus Supplement, the Paying
Agent will forward to each Certificateholder of record a statement prepared by
the Servicer setting forth, among other things: (a) the total amount
distributed, (b) the amount of the distribution on such Distribution Date
allocable to principal on the Certificates, (c) the amount of such
distribution allocable to interest on the Certificates, (d) the amount of
collections of Covered Principal Obligations processed during the preceding
month or months since the last Distribution Date and allocated in respect of
the Certificates, (e) the aggregate amount of Covered Principal Obligations,
the Investor Interest and the Investor Interest as a percentage of the
aggregate amount of the Covered Principal Obligations in the Trust as of the
end of the last day of the preceding Monthly Period or Periods since the last
Distribution Date, (f) the aggregate outstanding balance of Covered Loan
Agreements which are 30 or more days delinquent by class of delinquency as of
the end of the last day of the preceding Monthly Period or Periods since the
last Distribution Date, (g) the aggregate Investor Default Amount for the
preceding Monthly Period or Periods since the last Distribution Date, (h) the
amount of Investor Charge-Offs for the preceding Monthly Period or Periods
since the last Distribution Date and the amount of reimbursements of previous
Investor Charge-Offs for the preceding Monthly Period or Periods since the
last Distribution Date, (i) the amount of the Investor Servicing Fee for the
preceding Monthly Period or Periods since the last Distribution Date, (j) the
amount available under any Enhancement and Credit Enhancement, if any, as of
the close of business on such Distribution Date, (k) the "pool factor" as of
the close of business on the last day of the preceding Monthly Period
(consisting of a seven-digit decimal expressing the ratio of the Investor
Interest to the initial Investor Interest), (l) the aggregate amount of
collections on Interest Obligations during the preceding Monthly Period or
Periods since the last Distribution Date, (m) the Portfolio Yield for the
preceding Monthly Period or Periods since the last Distribution Date, and (n)
certain information relating to the floating or variable Certificate Rates, if
applicable, for the Monthly Period or Periods ending on such Distribution
Date. In the case of a Series of Certificates having more than one Class, the
statements forwarded to Certificateholders will provide information as to each
Class of Certificates, as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will furnish
to each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing
the information required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the Trustee or
the Servicer deems necessary or desirable to enable the Certificateholders to
prepare their United States tax returns.
The Servicer will file with the Commission such periodic reports with
respect to each Trust as are required under the Exchange Act and the rules and
regulations of the Commission thereunder. The
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Servicer does not intend to file with the Commission periodic reports with
respect to any Trust for any Series following completion of the reporting
period required by Rule 15d-1 of Regulation 15D under the Exchange Act.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that on or before August 31 of each calendar
year or such other date as specified in the related Prospectus Supplement, the
Servicer will cause a firm of independent certified public accountants to
furnish a report to the effect that such accounting firm has made a study and
evaluation of the Servicer's internal accounting controls relative to the
servicing of the Covered Loan Agreements and that, on the basis of such
examination, such firm is of the opinion that, assuming the accuracy of
reports by the Servicer's third party agents, the system of internal loan
accounting controls in effect on the date of such statement relating to
servicing procedures performed by the Servicer, taken as a whole, was
sufficient for the prevention and detection of errors and irregularities in
amounts that would be material to the financial statements of the Servicer and
that such servicing was conducted in compliance with the sections of the
related Agreement during the period covered by such report (which shall be the
period from July 1 (or for the initial period, the relevant Closing Date) of
the preceding calendar year to and including June 30 of such calendar year),
except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
Each Agreement will provide for delivery to the Trustee on or before August
31 of each calendar year or such other date as specified in the related
Prospectus Supplement, of an annual statement signed by an officer of the
Servicer to the effect that the Servicer has fully performed its obligations
under the Agreement throughout the preceding year, or, if there has been a
default in the performance of any such obligation, specifying the nature and
status of the default.
AMENDMENTS
Unless otherwise specified in the related Prospectus Supplement, each
Agreement and any Series Supplement may be amended by the Seller, the Servicer
and the related Trustee, without the consent of Certificateholders of any
Series then outstanding, for any purpose, provided that (i) the Seller
delivers an opinion of counsel acceptable to the Trustee to the effect that
such amendment will not adversely affect in any material respect the interest
of such Certificateholders, and (ii) such amendment will not result in a
withdrawal or reduction of the rating of any outstanding Series under the
related Trust.
Each Agreement and any related Series Supplement may be amended by the
Seller, the Servicer and the related Trustee, without the consent of the
Certificateholders of any Series then outstanding, to provide for additional
Enhancement or substitute Enhancement with respect to a Series, to change the
definition of Eligible Loan Agreement or to provide for the addition to the
Trust of a Participation, provided that (i) the Seller delivers to the Trustee
a certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, such amendment will not as of the date of such amendment
adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust.
Each Agreement and the related Series Supplement may be amended by the
Seller, the Servicer and the related Trustee with the consent of the holders
of Certificates evidencing undivided interests aggregating not less than 66
2/3% (or such other percentage specified in the related Prospectus Supplement)
of the Investor Interests for all Series of the related Trust, for the purpose
of adding any provisions to, changing in any manner or eliminating any of the
provisions of the Agreement or the related Series Supplement or of modifying
in any manner the rights of Certificateholders of any
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outstanding Series of the Trust. No such amendment, however, may (a) reduce in
any manner the amount of, or delay the timing of, distributions required to be
made on the related Series or any Series, (b) change the definition of or the
manner of calculating the interest of any Certificateholder of such Series or
any Certificateholder of any other Series issued by the Trust or (c) reduce
the aforesaid percentage of undivided interests the holders of which are
required to consent to any such amendment, in each case without the consent of
all Certificateholders of the related Series and Certificateholders of all
Series adversely affected. Promptly following the execution of any amendment
to the Agreement, the Trustee will furnish written notice of the substance of
such amendment to each Certificateholder. Any Series Supplement and any
amendments regarding the addition or removal of Obligations from the Trust
will not be considered an amendment requiring Certificateholder consent under
the provisions of the related Agreement and any Series Supplement.
Each First Tier Participation Agreement may be amended in writing from time
to time by the Branch and the Seller, without the consent of any
Certificateholders but subject to the Trustee having consented in writing to
such amendments; provided that such action shall not, as evidenced by an
opinion of counsel for the Branch addressed and delivered to the Trustee,
adversely affect in any material respect the interest of any owners or holders
of Investor Certificates; provided further that each Rating Agency shall have
notified the Branch, the Seller, the Servicer and the Trustee in writing that
such action will not result in a reduction or withdrawal of the rating of any
outstanding Series or Class with respect to which it is a Rating Agency. Each
Second Tier Participation Agreement may be amended from time to time by the
Seller and the Trustee, without the consent of any of the Certificateholders;
provided that such action shall not, as evidenced by an opinion of counsel for
the Seller addressed and delivered to the Trustee, adversely affect in any
material respect the interest of any owners or holders of Investor
Certificates; and provided further that each Rating Agency shall have notified
the Seller, the Servicer and the Trustee in writing that action will not
result in a reduction or withdrawal of the rating of any outstanding Series or
Class with respect to which it is a Rating Agency. The Seller will agree not
to consent to any amendment to a First Tier Participation Agreement without
having received the prior written consent thereto of the Trustee.
LIST OF CERTIFICATEHOLDERS
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest, the Trustee after
having been adequately indemnified by such Certificateholders for its costs
and expenses, and having given the Servicer notice that such request has been
made, will afford such Certificateholders access during business hours to the
current list of Certificateholders of the Trust for purposes of communicating
with other Certificateholders with respect to their rights under the
Agreement. See "--Book-Entry Registration" and "--Definitive Certificates"
above.
THE TRUSTEE
The Prospectus Supplement for each Series will specify the Trustee under the
related Agreement. The Seller, the Servicer and their respective affiliates
may from time to time enter into normal banking and trustee relationships with
the Trustee and its affiliates. The Trustee, the Seller, the Servicer and any
of their respective affiliates may hold Certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a Company-trustee
or separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the
Trustee and such separate trustee or Company-trustee jointly, or, in any
jurisdiction in which the Trustee shall be incompetent or unqualified to
perform
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certain acts, singly upon such separate trustee or Company-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee. The Seller may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Seller will be obligated to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee does not become
effective until acceptance of the appointment by the successor Trustee.
CREDIT ENHANCEMENT
GENERAL
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the
subordination of one or more Classes of the Certificates of such Series, a
letter of credit, the establishment of a cash collateral guaranty or account,
a collateral interest, a surety bond, an insurance policy, a spread account, a
reserve account, the use of cross support features or another method of Credit
Enhancement described in the related Prospectus Supplements, or any
combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be structured so as to be drawn
upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable
under such Credit Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material
provision of any agreement relating to such Credit Enhancement.
Additionally, the related Prospectus Supplement may set forth certain
information with respect to any Credit Enhancement Provider, including (i) a
brief description of its principal business activities, (ii) its principal
place of business, place of incorporation and the jurisdiction under which it
is chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies which exercise primary jurisdiction over the conduct of
its business and (iv) its total assets, and its stockholders' or policy
holders' surplus, if applicable, and other appropriate financial information
as of the date specified in the Prospectus Supplement. If so specified in the
related Prospectus Supplement, Credit Enhancement with respect to a Series may
be available to pay principal of the Certificates of such Series following the
occurrence of certain Pay Out Events with respect to such Series. In such
event, the Credit Enhancement Provider will have an interest in certain cash
flows in respect of the Covered Obligations to the extent described in such
Prospectus Supplement (the "Enhancement Invested Amount").
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more of any
Series will be subordinated as described in the related Prospectus Supplement
to the extent necessary to fund payments with respect to the Senior
Certificates. The rights of the holders of any such Subordinated
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Certificates to receive distributions of principal and/or interest on any
Distribution Date for such Series will be subordinate in right and priority to
the rights of the holders of Senior Certificates, but only to the extent set
forth in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, subordination may apply only in the event of certain
types of losses not covered by another Credit Enhancement. The related
Prospectus Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates in a Series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Certificates will be distributed to
holders of Senior Certificates. If collections of Covered Obligations
otherwise distributable to holders of a Subordinated Class of a Series will be
used as support for a Class of another Series, the related Prospectus
Supplement will specify the manner and conditions for applying such a cross-
support feature.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain
losses in addition to or in lieu of other Credit Enhancement. The issuer of
the letter of credit (the "L/C Bank") will be obligated to honor demands with
respect to such letter of credit, to the extent of the amount available
thereunder, to provide funds under the circumstances and subject to such
conditions as are specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related
Prospectus Supplement of the initial Investor Interest of a Series or a Class
of such Series. The maximum amount available at any time to be paid under a
letter of credit will be determined in the manner specified therein and in the
related Prospectus Supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain Permitted
Investments in an Account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the
Cash Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments are made to beneficiaries of the Cash Collateral Guaranty
from the Cash Collateral Account or from the Cash Collateral Account directly.
COLLATERAL INTEREST
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on
deposit therein, if any, as specified in the Prospectus Supplement which will
be increased (i) to the extent the Seller elects, subject to certain
conditions specified in the related Prospectus Supplement, to apply
collections of Covered Principal Obligations allocable to the Collateral
Interest to decrease the Collateral Interest, (ii) to the extent collections
of Principal Obligations allocable to the Collateral Interest are required to
be deposited into the Cash Collateral Account as specified in the related
Prospectus Supplement and (iii) to the extent excess collections of Covered
Interest Receivables are required to be deposited into the Cash Collateral
Account as
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specified in the related Prospectus Supplement. The total amount of the Credit
Enhancement available pursuant to the Collateral Interest and, if applicable,
the Cash Collateral Guaranty or Cash Collateral Account will be the lesser of
the sum of the Collateral Interest and the amount on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments which otherwise would be made to holders of the
Collateral Interest will be distributed to holders of Certificates and, if
applicable, the circumstances under which payment will be made under the Cash
Collateral Guaranty or under the Cash Collateral Account.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with respect
to a Series or one or more Classes thereof will be provided by one or more
insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class or such Series
to assure distributions of interest or principal with respect to such Series
or Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
EXCESS SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Excess Spread Account") intended to assist with subsequent distribution of
interest and principal on the Certificates of such Class or Series in the
manner specified in the related Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account").
The Reserve Account may be funded, to the extent provided in the related
Prospectus Supplement, by an initial cash deposit, the retention of certain
periodic distributions of principal or interest or both otherwise payable to
one or more Classes of Certificates, including the Subordinated Certificates,
or the provision of a letter of credit, guarantee, insurance policy or other
form of credit or any combination thereof. The Reserve Account will be
established to assist with the subsequent distribution of principal or
interest on the Certificates of such Series or Class thereof or such other
amount owing on any Enhancement thereto in the manner provided in the related
Prospectus Supplement.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material United States federal
income tax consequences relating to the purchase, ownership and disposition of
an Offered Certificate (defined in the Prospectus Supplement to which this
Prospectus is attached). This discussion is based on the present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder and judicial and administrative
interpretations thereof, all of which are subject to change, possibly on a
retroactive basis. Unless otherwise stated, this discussion deals only with
Certificateholders who purchase their Offered Certificates upon original
issuance at their original issue price and who hold their Offered Certificates
as capital assets. The tax treatment of a Certificateholder may vary depending
upon such Certificateholder's particular situation. This discussion does not
address all of the United States federal income tax consequences that may be
relevant to a particular Certificateholder in light of that
Certificateholder's circumstances, and some Certificateholders, such as banks,
real estate investment trusts, regulated investment companies, insurance
companies or tax-exempt investors, may be subject to special tax treatment. In
addition, this summary does not discuss the alternative minimum tax or the
state, local or foreign tax consequences that may be relevant to a
Certificateholder. Accordingly, Certificateholders should consult their own
tax advisers in determining the United States federal, state, local and
foreign income tax consequence that may result from their purchase, ownership
and disposition of a Certificate. No ruling on any of the issues discussed
below will be sought from the Internal Revenue Service (the "IRS").
For purposes of this discussion, the term "U.S. Person" means (i) a citizen
or resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of
any state thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of such trust and one or more United States fiduciaries
have the authority to control all substantial decisions of such trust. The
term "United States Certificateholder" means any beneficial owner of an
Offered Certificate that is either a U.S. Person or any other person to the
extent that the income attributable to a Certificate is effectively connected
with that person's conduct of a trade or business within the United States.
For purposes of this discussion, the term "non-United States
Certificateholder" means any beneficial owner of an Offered Certificate that
is not a United States Certificateholder.
The conclusions of law expressed in this discussion are based upon the
opinion of Simpson Thacher & Bartlett, counsel to the Branch and the Seller
("Tax Counsel").
TREATMENT OF THE CERTIFICATES AS DEBT
LTCB Asset Funding and the Certificateholders will express in each Agreement
their intent that, for all United States tax purposes, the Offered
Certificates will be debt of the Branch secured by the Covered Obligations.
LTCB Asset Funding, by entering into an Agreement, and each Certificateholder,
by acceptance of a beneficial interest in an Offered Certificate, will agree
to treat the Offered Certificates as debt for all United States tax purposes.
However, the transfer of Covered Obligations is sometime referred to as a
"sale" in each Agreement, and because different criteria are used in
determining the non-tax accounting treatment of the transaction, LTCB Asset
Funding will treat each Agreement, for non-tax accounting purposes, as causing
a transfer of an ownership interest in the Covered Obligations and not as
creating a debt obligation.
A basic premise of United States federal income tax law is that the economic
substance of a transaction generally will determine the United States federal
income tax consequences of such transaction. The form of a transaction, while
a relevant factor, is not conclusive evidence of its economic substance. In
appropriate circumstances, the courts have allowed taxpayers, as well as the
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IRS, to treat a transaction in accordance with its economic substance, as
determined under United States federal income tax law, even though the
participants in the transaction have characterized it differently for non-tax
purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the seller has relinquished (and the purchaser has
obtained) substantial incidents of ownership in such property. Among those
factors, the primary factors examined are whether the purchaser has the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Except to the extent otherwise
specified in the related Prospectus Supplement, based upon its analysis of
such factors, Tax Counsel will deliver its opinion that (i), although no
transaction closely comparable to that contemplated herein has been the
subject of any Treasury regulation, revenue ruling or judicial decision, the
Offered Certificates will be properly characterized as debt secured by the
Covered Obligations for United States federal income tax purposes and (ii),
based upon such opinion, the relevant Trust will not be classified as an
association or publicly traded partnership taxable as a corporation for such
purposes. Except where indicated to the contrary, the following discussion
assumes that the Offered Certificates will be treated as debt for United
States federal income tax purposes.
TAXATION OF INTEREST INCOME OF UNITED STATES CERTIFICATE OWNERS
GENERAL. If the Offered Certificates are considered to have been issued with
"original issue discount" ("OID") within the meaning of Section 1273(a) of the
Code, a United States Certificateholder will be subject to special tax
accounting rules which will require such U.S. Certificateholder to include
such OID in gross income on a daily economic accrual basis (using the
constant-yield-to-maturity method of accrual described in Code Section
1272(a)) regardless of the United States Certificateholder's regular method
(i.e., cash or accrual) of tax accounting. The stated interest on the Offered
Certificates will be considered OID (and, thus, a United States
Certificateholder will be required to include such interest in gross income on
a daily economic accrual basis) unless such interest is considered
"unconditionally payable."
Under the applicable Treasury regulations, the stated interest on the
Offered Certificates will be considered to be "unconditionally payable" only
if the terms and conditions of the Offered Certificates make the likelihood of
late payment or nonpayment of interest on the Offered Certificates a "remote
contingency." Since the Trust and the Trustee have no discretion to withhold,
delay or otherwise defer scheduled monthly payments of interest on the Offered
Certificates (provided the Trust has sufficient cash on hand to allow the
Trustee to make such interest payments), LTCB Asset Funding intends to take
the position that late payment or nonpayment of stated interest on the Offered
Certificates is a remote contingency. Accordingly, a U.S. Certificateholder
generally will include stated interest on an Offered Certificate in gross
income in accordance with such U.S. Certificateholder's regular method of tax
accounting.
If, however, the stated interest on the Offered Certificates is not paid in
full on a Scheduled Payment Date, the Offered Certificates may at such time,
and at all times thereafter, be considered to be issued with OID and all U.S.
Certificateholders would be required to include such stated interest in gross
income (as OID) on a daily economic accrual basis as described below.
ORIGINAL ISSUE DISCOUNT. If stated interest on the Offered Certificates is
not considered "unconditionally payable" or the Offered Certificates are
otherwise issued with OID, the provisions of sections 1271 through 1273 and
1275 of the Code will apply to the Offered Certificates. Under those
provisions, a United States Certificateholder (including a cash basis United
States Certificateholder) generally would be required to accrue the OID on an
Offered Certificate for United States federal income tax purposes on a
constant yield basis, resulting in the inclusion of OID in income in advance
of receipt of the cash attributable to that income.
If stated interest on the Offered Certificates is considered
"unconditionally payable," an Offered Certificate will be treated as having
been issued with OID only if the stated principal amount of the
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Offered Certificate exceeds the original "issue price" of such Offered
Certificate by an amount that is greater than the product of 0.25% and the
weighted average life of such Offered Certificate (determined by taking into
account only the number of complete years following issuance for any partial
principal payments). In this instance, an Offered Certificate would be
considered to have been issued with OID to the extent that the stated
principal amount of such Offered Certificate exceeds the original "issue
price" of such Offered Certificate. The original "issue price" of an Offered
Certificate generally will be the first price at which a substantial amount of
the issue of which such Offered Certificate is a part is sold to investors by
(or on behalf of) the Trust.
SALE OF CERTIFICATES
Upon a sale or other taxable disposition of an Offered Certificate, a U.S.
Certificateholder generally will recognize gain or loss equal to the
difference between the amount realized on such sale or disposition (except to
the extent that such amount realized is characterized as a payment of accrued
but unpaid interest on such Offered Certificates that the United States
Certificateholder has not previously included in gross income) and the U.S.
Certificateholder's adjusted tax basis in such Offered Certificate. The
adjusted tax basis of an Offered Certificate generally will equal its cost,
increased by any OID includible in income with respect to the Offered
Certificate prior to its sale and reduced by any principal payments previously
received with respect to the Offered Certificate and any amortized premium.
Such gain or loss generally will be capital gain or loss and will be long-term
capital gain or loss. Under recently enacted legislation, capital gains of
individuals derived in respect to capital assets held for at least one year
are eligible for reduced rates of taxation depending upon the holding period
for such capital assets. Prospective investors should consult their own tax
advisors with respect to the tax consequences of the new legislation. The
deductibility of capital losses is subject to limitations.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS
Although as described above, it is the opinion of Tax Counsel that Offered
Certificates will be properly characterized as debt for United States federal
income tax purposes, such opinion is not binding on the IRS and thus no
assurance can be given that such a characterization will prevail. If the IRS
were to contend successfully that some or all of the Offered Certificates were
not debt obligations for United States federal income tax purposes, the
related Trust would be classified as a publicly traded partnership for such
purposes. Because in the opinion of Tax Counsel the Offered Certificates will
be characterized as debt for United States federal income tax purposes, no
attempt will be made to comply with any IRS reporting or other requirements
that would apply if the Trust were considered a publicly traded partnership.
If the Trust was treated as a publicly traded partnership taxable as a
corporation, the Trust's net income would be subject to United States federal
income tax at the applicable corporate income tax rates. No distributions from
the Trust would be deductible in computing the net income of the deemed
corporation, except to the extent that any Offered Certificates were treated
as debt of such corporation, and distributions to the related
Certificateholders were treated as payments of interest thereon. Such tax
treatment could result in reduced distributions to Certificateholders. In
addition, distributions made by such corporation in respect of any Offered
Certificates that are not treated as debt for United States federal income tax
purposes would be treated as dividends to the Certificateholders holding such
Offered Certificates to the extent of the current and accumulated earnings and
profits of such deemed corporation.
Alternatively, if such a Trust was not considered to be engaged in a
"financial business" for purposes of Section 7704(d)(2) of the Code, such
Trust, although it would still be considered a publicly traded partnership,
would not be taxable as a corporation. In this instance, such Trust would not
be subject to United States federal income tax and each item of income, gain,
loss and deduction of such partnership generated through the ownership of the
related Covered Obligations would be taken into account directly in computing
taxable income of the LTCB Asset Funding (or the holder of the Seller
Certificate) and any Certificateholders treated as partners in accordance with
their respective
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partnership interests therein. The amount and timing of income reportable by
any Certificateholders treated as partners would likely differ from that
reportable by such Certificateholders had they been treated as owning debt.
Moreover, unless the partnership were treated as engaged in a trade or
business, an individual's share of expenses of the partnership would be
miscellaneous itemized deductions that, in the aggregate, are allowed as
deductions only to the extent they exceed two percent of the individual's
adjusted gross income, and would be subject to reduction under section 68 of
the Code if the individual's adjusted gross income exceeded certain limits. As
a result, the individual may be taxed on a greater amount of income than the
stated rate on the Offered Certificates. In addition, if the partnership is a
"publicly traded partnership" (as defined in section 469(k)(2) of the Code),
even if it qualifies for exemption from taxation as a corporation, all or a
portion of any taxable income allocated to a U.S. Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be
taxable to the holder under the Code.
NON-UNITED STATES CERTIFICATE OWNERS
Assuming the Offered Certificates are classified as debt for United States
federal income tax purposes, under present United States federal income and
estate tax law, and subject to the discussion below concerning backup
withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Branch, LTCB Funding or any Paying Agent
of principal or interest on an Offered Certificate owned by a non-United
States Certificateholder, provided (i) that the non-United States
Certificateholder does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of LTCB entitled to
vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) the non-United States Certificateholder is not
a controlled foreign corporation that is related to LTCB through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on an Offered Certificate is described in section 881(c)(3)(A) of
the Code and (iv) the non-United States Certificateholder satisfies the
statement requirement (described generally below) set forth in section
871(h) and section 881(c) of the Code and the regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain realized by a non-U.S. Certificateholder upon the
sale, exchange or retirement of an Offered Certificate; and
(c) an Offered Certificate beneficially owned by an individual who at the
time of death is a non-United States Certificateholder will not be subject
to United States federal estate tax as a result of such individual's death,
provided that such individual does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of LTCB
entitled to vote within the meaning of section 871(h)(3) of the Code and
provided that the interest payments with respect to such Offered
Certificate would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United
States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the non-United
States Certificateholder or a financial institution holding the Offered
Certificate on behalf of such non-United States Certificateholder, must
provide, in accordance with specified procedures, LTCB Asset Funding or its
Paying Agent with a statement to the effect that the non-United States
Certificateholder is not a U.S. Person. Pursuant to current temporary Treasury
regulations, these requirements will be met if (1) the non-United States
Certificateholder provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. Person, (which classification may
be made on an IRS Form W-8 (or successor form)) or (2) a financial institution
holding the Offered Certificate on behalf of the non-United States
Certificateholder certifies, under penalties of perjury, that such statement
has been received by it and furnishes LTCB Asset Funding or its Paying Agent
with a copy thereof.
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Payments of interest (including OID, if any,) on, or with respect to, the
Certificates made by the Branch, LTCB Asset Funding or any paying Agent to
non-U.S. Certificateholders who cannot satisfy the requirements of paragraph
(a) above will be subject to a 30% United States withholding tax unless the
non-United States Certificateholder provides the Branch, LTCB Asset Funding or
the relevant Paying Agent with a properly executed (1) IRS Form 1001 (or
successor form) claiming a reduction of, or an exemption from, such
withholding tax under the benefit of a United States tax treaty or (2) IRS
Form 4224 (or successor form) stating that interest paid on the Offered
Certificate is not subject to such withholding tax because it is effectively
connected with the non-U.S. Certificateholder's conduct of a trade or business
in the United States.
If a non-United States Certificateholder is engaged in a trade or business
in the United States and interest paid with respect to such
Certificateholder's Offered Certificates is effectively connected with the
conduct of such trade or business, the non-United States Certificateholder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest income on a net income basis
in the same manner as if it were a United States Certificateholder. In
addition, if such non-United States Certificateholder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such interest income would be included in such
foreign corporation's earnings and profits.
Any gain realized upon the sale or other taxable disposition of Offered
Certificates by a non-U.S. Certificateholder generally will not be subject to
United States federal income tax unless (i) such gain is effectively connected
with a trade or business carried on in the United States by such non-United
States Certificateholder, (ii) in the case of a non-United States
Certificateholder who is an individual, such individual is present in the
United States for 183 days or more in the taxable year of such sale or
disposition, and certain other conditions are met, or (iii) in the case of any
gain representing accrued interest on such Offered Certificates, the
requirements described above are not satisfied.
The discussion set forth herein assumes that the Offered Certificates will
be classified as debt for United States federal income tax purposes. If,
however, the Offered Certificates were treated as an interest in a partnership
(other than a publicly traded partnership taxable as a corporation), the
recharacterization could cause a non-U.S. Certificateholder to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. Certificateholder would be required to file a United States federal
income tax return and, in general, would be subject to United States federal
income tax (including, in the case of a non-United States Certificateholder
that is a corporation, the branch profits tax) on its allocable share of the
net income from the partnership. Further, certain withholding obligations
apply with respect to the share of the income allocable or distributions made
to a foreign partner. That withholding may be at a rate as high as 39.6% in
the case of a non-U.S. Certificateholder that is an individual. Alternatively,
if some or all of the Offered Certificates were treated as equity interests in
a publicly traded partnership taxable as a corporation, any related dividend
distributions to a non-U.S. Certificateholder generally would be subject to
United States withholding tax at the rate of 30%, unless that rate were
reduced under an applicable United States tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of an Offered Certificate to a registered
owner who is not an "exempt recipient" and who fails to provide certain
identifying information (such as the registered owner's taxpayer
identification number) in the manner required. Generally, individuals are not
exempt recipients whereas corporations and certain other entities are exempt
recipients. Payments made in respect of a U.S. Certificateholder must be
reported to the IRS, unless the U.S. Certificateholder is an exempt recipient
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or otherwise establishes an exemption. Compliance with the identification
procedures (described in the preceding section) would establish an exemption
from backup withholding for a non-U.S. Certificateholder who is not an exempt
recipient.
In addition, upon the sale of an Offered Certificate to (or through) a
"broker," the broker must withhold 31% of the entire purchase price, unless
either (i) the broker determines that the seller is a corporation or other
exempt recipient or (ii) the seller provides identifying information in the
required manner, and in the case of a non-U.S. Certificateholder certifies
that the seller is a non-U.S. Certificateholder (and certain other conditions
are met). Such a sale must also be reported by the broker to the IRS, unless
either (i) the broker determines that the seller is an exempt recipient or
(ii) the seller certifies its non-U.S. status (and certain other conditions
are met). Certification of the registered owner's non-United States status
normally would be made on an IRS Form W-8 under penalties of perjury, although
in cases under proposed Treasury regulations it may be possible to submit
other documentary evidence. As defined by Treasury regulations, the term
"broker" includes all persons who stand ready to effect sales made by others
in the ordinary course of a trade or business, as well as brokers and dealers
registered as such under the laws of the United States or a state. These
requirements generally will apply to a United States office of a broker, and
the information reporting requirements generally will apply to a foreign
office of a United States broker as well as to a foreign office of a foreign
broker (i) that is a controlled foreign corporation within the meaning of
section 957(a) of the Code or (ii) 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the foreign broker
has been in existence) was effectively connected with the conduct of a trade
or business within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificateholder would be allowed as a refund or a credit against such
Certificateholder's United States federal income tax, provided that the
required information is furnished to the IRS.
RECENT LEGISLATION
Recent legislation passed by Congress and signed into law by the President
on August 20, 1996 adds Sections 860H through 860L to the Code (the "FASIT
Provisions") which will provide for a new type of entity for United States
federal income tax purposes known as a "financial asset securitization
investment trust" (a "FASIT"). The legislation providing for the new FASIT
entity, however, is not to be effective until September 1, 1997, and many
technical issues are to be addressed in Treasury regulations yet to be
drafted. On or after September 1, 1997, any C&I Master Trust may elect,
pursuant to the transition rules set forth in the FASIT legislation, to be
taxed under the FASIT Provisions; provided, however, that any such election
shall be made only in accordance with the amendment provisions of the relevant
Agreement.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of the purchase,
ownership or disposition of an Offered Certificate under any foreign, state or
local tax law. Each investor should consult its own tax adviser regarding the
state and local tax consequences of investing in the Offered Certificates.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans and entities which are
deemed to hold the assets of any such plan (collectively, "Plans") from
engaging in certain actions involving the assets of any Plan ("Plan Assets")
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to the Plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and Section 4975 of the Code for such persons, unless a statutory,
regulatory or
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administrative exemption is available. Plans that are governmental plans (as
defined in Section 3(32) of ERISA) and certain church plans (as defined in
Section 3(33) of ERISA) are not subject to ERISA requirements, but
governmental plans may be subject to similar regulation under applicable state
law.
Subject to the considerations described below and except to the extent
otherwise specified in the related Prospectus Supplement, the Seller
anticipates that each Class of Offered Certificates will be eligible for
purchase by Plan investors.
A violation of the prohibited transaction rules could occur if any Series of
Offered Certificates were to be purchased with assets of any Plan if the
Seller, the Trustee, any underwriters of such Series or any of their
affiliates were a "party in interest" or a "disqualified person", with respect
to such Plan, unless a statutory, regulatory or administrative exemption is
available from the Department of Labor (the "DOL"). The Seller, the Trustee,
any underwriters of a Series and their affiliates are likely to be "parties in
interest" and "disqualified persons" with respect to many Plans. Before
purchasing Offered Certificates, a Plan fiduciary or other Plan investor
should consider whether a prohibited transaction might arise by reason of the
relationship between the Plan and the Seller, the Trustee, any underwriters of
such Series or any of their affiliates and consult their counsel regarding the
purchase in light of the considerations described below. The DOL has issued
five class exemptions that may apply to otherwise prohibited transactions
arising from the purchase or holding of the Offered Certificates: DOL
Prohibited Transaction Exemptions 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-house Asset Managers), 95-60 (Class Exemption
for Certain Transactions Involving Insurance Company General Accounts), 91-38
(Class Exemption for Certain Transactions Involving Bank Collective Investment
Funds), 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts) and 84-14 (Class Exemption for Plan Asset
Transactions Determined by Independent Qualified Professional Asset Managers).
Under certain circumstances, regulations issued by the DOL (the "Plan Asset
Regulation") treats the assets of an entity in which a Plan holds an equity
interest as Plan Assets. Because the Offered Certificates will represent
beneficial interests in a Trust, and despite the agreement of the Seller and
the Certificate Owners to treat each Series of Offered Certificates as debt
instruments, the Offered Certificates are likely to be considered equity
interests in the Trust for purposes of the Plan Asset Regulation, with the
result that the assets of the Trust are likely to be treated as Plan Assets of
the investing Plans for purposes of ERISA and Section 4975 of the Code, unless
either of the following exceptions applies.
The first exception applies to a "publicly-offered security". A publicly-
offered security is a security that is (a) freely transferable, (b) part of a
class of securities that is owned, immediately subsequent to the initial
offering, by 100 or more investors who were independent of the issuer and of
one another ("Independent Investors") and (c) either is (i) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act, or
(ii) sold 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. For purposes of the 100 Independent
Investor criterion, except to the extent otherwise disclosed in the related
Prospectus Supplement, each Class of Offered Certificates should be deemed to
be a "class" of securities that would be tested separately from any other
securities that may be issued by the Trust. Except to the extent otherwise
disclosed in the related Prospectus Supplement, it is anticipated that each
Class of Offered Certificates will meet the foregoing criteria for treatment
as "publicly-offered securities". No restrictions will be imposed on the
transfer of the Offered Certificates. Except to the extent otherwise disclosed
in the related Prospectus Supplement, the Seller expects that each Class of
Offered Certificates will be held by at least 100 Independent Investors at the
conclusion of the initial public offering although no assurance can be given,
and no monitoring or other measures will be taken to ensure, that such
condition is met. Each
71
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Class of Offered Certificates will be sold as part of an offering pursuant to
an effective registration statement under the Securities Act and then will be
timely registered under the Exchange Act.
The second exception applies if equity participation in the entity by
"benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be Plan Assets) is not "significant". Benefit plan
investors' equity participation in a Trust is not significant on any date on
which any Series of Offered Certificates is issued and outstanding if,
immediately after the most recent acquisition of any equity interest in the
related Trust, less than 25% of the value of each class of equity interests in
the Trust (excluding interests held by the Seller, the Trustee or their
affiliates) is held by benefit plan investors. No assurance can be given by
the Seller as to whether the value of each class of equity interests in any
Trust held by benefit plan investors will be "significant" upon completion of
the offering of any Series of Offered Certificates or thereafter, and no
monitoring or other measures will be taken with respect to the satisfaction of
the conditions to this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to a Trust and the Trust were considered to hold Plan
Assets, transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to a Plan that is a Certificate Owner
might be prohibited under Section 406 of ERISA and/or Section 4975 of the Code
and result in excise tax and other liabilities under ERISA and Section 4975 of
the Code unless an exemption were available. The five DOL class exemptions
mentioned above may not provide relief for all transactions involving the
assets of a Trust even if they would otherwise apply to the purchase of a
Certificate by a Plan.
The Offered Certificates of any Series may not be purchased with the assets
of a Plan if the Seller, the Servicer, the Trustee or any of their affiliates
(a) has investment or administrative discretion with respect to such Plan
Assets; (b) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Plan Assets, for a fee and pursuant to
an agreement or understanding that such advice (i) will serve as a primary
basis for investment decisions with respect to such Plan Assets, and (ii) will
be based on the particular investment needs of such Plan; or (c) is an
employer maintaining or contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Offered Certificates on behalf of Plan Assets should consult
their own counsel regarding whether the Trust assets represented by the
Offered Certificates would be considered Plan Assets, the consequences that
would apply if the Trust's assets were considered Plan Assets, and the
possibility of exemptive relief from the prohibited transaction rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion
of the Plan's assets in the Offered Certificates. Accordingly, among other
factors, Plan fiduciaries and other Plan investors should consider whether the
investment (i) satisfies the diversification requirement of ERISA or other
applicable law, (ii) is in accordance with the Plan's governing instruments,
and (iii) is prudent in light of the "Risk Factors" and other factors
discussed herein and in the related Prospectus Supplement.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each Series
of Offered Certificates, the Seller will agree to sell to Goldman, Sachs & Co.
and/or each of the other underwriters named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree to
purchase from the Seller, the principal amount of Offered Certificates set
forth therein and in the related Prospectus Supplement (subject to
proportional adjustment on the terms and conditions set forth in the related
Underwriting Agreement in the event of an increase or decrease in the
aggregate amount of Offered Certificates offered hereby and by the related
Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Offered
Certificates offered hereby and by the related Prospectus Supplement if any of
such Offered Certificates are purchased. In the event of a default by any
underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may be
increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Offered Certificates or Class being offered thereby initially will be offered
to the public and any concessions that may be offered to certain dealers
participating in the offering of such Offered Certificates. After the initial
public offering, the public offering price and such concessions may be
changed.
In connection with an offering, the underwriters may purchase and sell the
Offered Certificates in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover short positions
created by the underwriters in connection with an offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Offered
Certificates; and short positions created by the underwriters involve the sale
by the underwriters of a greater number of Offered Certificates than they are
required to purchase from the Trust in the offering. The underwriters also may
impose a penalty bid, whereby selling concessions allowed to broker-dealers in
respect of the securities sold in the offering may be reclaimed by the
underwriters if such Offered Certificates are repurchased by the underwriters
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Offered Certificates,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected in the over-the-counter market or
otherwise.
Each Underwriting Agreement will provide that the Seller will indemnify the
related underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
The place and time of delivery for any Series of Offered Certificates in
respect of which this Prospectus is delivered will be set forth in the
accompanying Prospectus Supplement.
VALIDITY OF CERTIFICATES
Certain legal matters relating to the validity of the Certificates will be
passed upon for the Seller by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), New York, New York, special counsel to
the Branch and the Seller, and for the underwriters by Sullivan & Cromwell,
New York, New York. Certain legal matters relating to the federal tax
consequences of the issuance of the Certificates will be passed upon for the
Seller by Simpson Thacher & Bartlett.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Accumulation Period................................................. 7
Addition Date....................................................... 43
Additional Interest................................................. 18
Additional Loan Agreements.......................................... 7
Adverse Effect...................................................... 48
Agreement........................................................... 5
Agreements.......................................................... 29, 32
Amortization Period................................................. 7
Borrowers........................................................... 22
Branch.............................................................. 1, 5, 27
Cash Collateral Account............................................. 63
Cash Collateral Guaranty............................................ 63
CEDEL............................................................... 35
CEDEL Participants.................................................. 35
Certificateholders.................................................. 3
Certificate Owners.................................................. 3
Certificate Rate.................................................... 7
Certificates........................................................ 1, 5
Class............................................................... 2, 5
Closing Date........................................................ 13
Code................................................................ 21, 65
Collateral Interest................................................. 63
Collection Account.................................................. 12
Commission.......................................................... 3
Controlled Accumulation Amount...................................... 15
Controlled Accumulation Period...................................... 15
Controlled Amortization Amount...................................... 14
Controlled Amortization Period...................................... 14
Controlled Deposit Amount........................................... 15
Controlled Distribution Amount...................................... 14
Cooperative......................................................... 35
Covered Interest Obligations........................................ 9
Covered Interest Receivables........................................ 2
Covered Loan Agreements............................................. 5, 27, 29
Covered Obligations................................................. 2, 7, 8, 29
Covered Principal Obligation........................................ 9
Credit Enhancement.................................................. 6
Credit Enhancement Percentage....................................... 51
Credit Enhancement Provider......................................... 59
Cut-Off Date........................................................ 9
Default Amount...................................................... 53
Defaulted Loan Agreement............................................ 54
Definitive Certificates............................................. 11
Depositories........................................................ 33
Depository.......................................................... 33
Determination Date.................................................. 53
Disclosure Document................................................. 10
Distribution Account................................................ 49
Distribution Date................................................... 12
DOL................................................................. 71
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
DTC..................................................................... 3, A-1
Eligible Loan Agreement................................................. 43
Eligible Payment Obligation............................................. 43
Enhancement............................................................. 6
Enhancement Invested Amount............................................. 62
ERISA................................................................... 20
Euroclear............................................................... 35
Euroclear Operator...................................................... 35
Euroclear Participants.................................................. 35
Excess Funding Account.................................................. 53
Excess Interest Collections............................................. 18
Excess Spread Account................................................... 64
Exchange................................................................ 10
Exchange Act............................................................ 3
FASIT................................................................... 70
FASIT Provisions........................................................ 70
FDIC.................................................................... 8, 27
First Tier Participation Agreement...................................... 6
Global Securities....................................................... A-1
Group................................................................... 17, A-1
Holders................................................................. 36
Independent Investors................................................... 20, 71
Indirect Participants................................................... 33
Ineligible Obligations.................................................. 42
Initial Loan Agreements................................................. 7
Initial Termination Date................................................ 45
Interest Account........................................................ 49
Interest Funding Account................................................ 37
Interest Period......................................................... 12
Investment Company Act.................................................. 50
Investor Charge-Off..................................................... 18
Investor Default Amount................................................. 18, 54
Investor Interest....................................................... 8
Investor Percentage..................................................... 8
Investor Servicing Fee.................................................. 18
IRS..................................................................... 65
L/C Bank................................................................ 63
Loans................................................................... 2, 5
LTCB.................................................................... 5, 27
LTCB Asset Funding...................................................... 1, 5
LTCB Portfolio.......................................................... 5
Master Participation Agreement.......................................... 22
Maximum Addition Amount................................................. 45
Minimum Aggregate Principal Obligations................................. 46, 53
Minimum Seller Interest................................................. 9
Monthly Interest........................................................ 18
Monthly Period.......................................................... 12
Moody's................................................................. 49
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Non-U.S. Certificateholder.............................................. 65
Offered Certificates.................................................... 20
OID..................................................................... 66
Participants............................................................ 33
Participation........................................................... 6
Payment Obligations..................................................... 5, 8
Pay Out Event........................................................... 16
Permitted Investments................................................... 50
Plan Asset Regulation................................................... 70, 71
Plan Assets............................................................. 70
Plans................................................................... 70
Principal Account....................................................... 49
Principal Amortization Period........................................... 14
Principal Commencement Date............................................. 13
Principal Funding Account............................................... 15
Principal Terms......................................................... 10
Prospectus Supplement................................................... 1
Qualified Institution................................................... 49
Rapid Accumulation Period............................................... 16
Rapid Amortization Period............................................... 17
Rating Agency........................................................... 21
Removal................................................................. 42
Removal Date............................................................ 46
Removed Loan Agreements................................................. 7, 46
Reserve Account......................................................... 64
Revolving Period........................................................ 13
Scheduled Payment Date.................................................. 13
Second Tier Participation Agreement..................................... 6
Securities Act.......................................................... 10
Seller.................................................................. 6
Seller Certificate...................................................... 9
Seller Interest......................................................... 8
Seller Percentage....................................................... 32
Senior Certificates..................................................... 7
Series.................................................................. 5, A-1
Series Supplement....................................................... 5
Series Termination Date................................................. 55
Servicer................................................................ 12
Servicer Default........................................................ 58
Servicer Transfer....................................................... 57
Servicing Fee........................................................... 12
Servicing Standard...................................................... 47
Shared Principal Collections............................................ 19
Standard & Poor's....................................................... 49
Subordinated Certificates............................................... 7
Subparticipation........................................................ 6
Successor Servicer...................................................... 57
Tax Counsel............................................................. 65
Tax Opinion............................................................. 10
Terms and Conditions.................................................... 35
Transfer Date........................................................... 15
Trust................................................................... 1, 5
Trustee................................................................. 5
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Trust Portfolio......................................................... 6, 29
Trust Termination Date.................................................. 55
Unallocated Principal Collections....................................... 52
Underwriting Agreement.................................................. 73
U.S. Certificateholder.................................................. 65
U.S. Lending Office..................................................... 27
U.S. Person............................................................. 65, A-4
</TABLE>
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered C&I Trusts
Asset Backed Certificates (the "Global Securities") to be issued in Series
from time to time (each, a "Series") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities
through any of The Depository Trust Company ("DTC"), CEDEL or Euroclear. The
Global Securities will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary
trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional Eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations. Secondary cross-market trading between CEDEL or
Euroclear and DTC Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositories of CEDEL
and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
Depositories, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the customary settlement practices applicable to settlement of Global
Securities. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the customary procedures applicable to
settlement of Global Securities in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL Participant's or
Euroclear Participant's account. The Global Securities credit will appear the
next day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the CEDEL or Euroclear cash debit will be valued instead as of the
actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date. The payment
will then be reflected in the account of the CEDEL Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the back-
valuation will extinguish any
A-2
<PAGE>
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date. Finally, day traders
that use CEDEL or Euroclear and that purchase Global Securities from DTC
Participants for delivery to CEDEL Participants or Euroclear Participants
should note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the
A-3
<PAGE>
appropriate form to the person through whom it holds (the clearing agency,
in the case of persons holding directly on the books of the clearing
agency). Form W-8 and Form 1001 are effective for three calendar years and
Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States, any state thereof, or any political subdivision of either (including
the District of Columbia), (iii) an estate the income of which is includible
in gross income for United States tax purposes regardless of its source or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United
States fiduciaries have authority to control all substantial decisions of such
trust. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the Global Securities.
Further, the IRS has recently proposed new regulations that would revise some
aspects of the current system for withholding on amounts paid to foreign
persons. Under these proposed regulations, interest or OID paid to a
nonresident alien would continue to be exempt from U.S. withholding taxes
(including backup withholding) provided that the holder complies with the new
certification procedures.
A-4
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fee under the Securities Act of 1933, as amended....... $304
Blue Sky fees and expenses (including counsel fees)................. *
Fees of rating agencies............................................. *
Trustees' fee and expenses.......................................... *
Printing and engraving.............................................. *
Accounting services................................................. *
Legal fees of Registrant's counsel.................................. *
Miscellaneous....................................................... *
----
Total............................................................. $ *
====
</TABLE>
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*To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is amended to the Underwriting Agreement which is filed as Exhibit
1 to this Registration Statement.
Under the Trust Agreement, each Trust will agree to indemnify the Trustee or
any predecessor Trustee for, and to hold the Trustee harmless against, any
loss, damage, claims, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of such Trust Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties under such Trust
Agreement.
ITEM 16. EXHIBITS.
EXHIBIT
1 Form of Underwriting Agreement*
4(a)
Form of Pooling and Servicing Agreement*
4(b)
Form of First Tier Participation Agreement*
4(c)
Form of Second Tier Participation Agreement*
4(d)Form of Series Supplement for Pooling and Servicing Agreement*
4(e)
Form of Interest Rate Swap Agreement*
5
Opinion of counsel as to legality of the Asset Backed Certificates*
8
Opinion of counsel as to certain federal income tax matters*
- --------
*To be filed by amendment.
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
each Registrant pursuant to the provisions described
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<PAGE>
under Item 15 above, or otherwise, each Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by each Registrant of expenses incurred or
paid by a director, officer or controlling person of each Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, each Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Each of the undersigned Registrants hereby also undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by a Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) to provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(5) That, for the purposes of determining any liability under the
Securities Act of 1933:
(i) The information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and obtained
in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(ii) Each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, LTCB ASSET
FUNDING COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, AND STATE OF NEW YORK ON
THE 3RD DAY OF SEPTEMBER, 1997.
By: LTCB Asset Funding Company,
as Depositor
/s/ Tsuyoshi Monri
By: _________________________________
Tsuyoshi Monri
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