<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
LTCB ASSET FUNDING COMPANY
(Exact name of each registrant as
specified in its Trust Agreement)
DELAWARE TO BE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization of Identification No.)
each 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 each
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 each
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
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: From time to time after the
Registration Statement becomes effective.
------------------------------------
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. / /
------------------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per unit(1) offering price(1) registration fee
- ------------------------------------------------ ----------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates of C&I Master Trusts.. $1,000,000 100% $1,000,000 $304
- ------------------------------------------------ ----------------- ------------------- --------------------- -------------------
Total........................................... $1,000,000 100% $1,000,000 $304
</TABLE>
================================================================================
(1) Estimated solely for the purpose of computing the Registration Fee.
------------------------------------
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.
================================================================================
<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED JULY 23, 1997
PROSPECTUS
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. The property of each Trust will include certain loan
advances (the "Covered Advances") arising under certain loan agreements (the
"Covered Loan Agreements") selected from a portfolio of commercial and
industrial loans (the "Loans"), all monies due in payment of the Covered
Advances and certain other property, as more fully described herein and, with
respect to any Series, in the related Prospectus Supplement. 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 Advances.
(continued on next page)
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 19 HEREIN.
------------------
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 COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
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.
------------------
SEPTEMBER , 1997.
----
<PAGE> 3
(continued from previous page)
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 Certificate holders 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".
2
<PAGE> 4
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 Advances 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 or such other type of Class of Certificates; (g) the
Distribution Dates for the respective Classes; (h) relevant financial
information with respect to the Advances and 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 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.
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<PAGE> 5
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
<PAGE> 6
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 Agree-
ment (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
certain loan advances (the "Covered
Advances") 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 monies due or to become
due in payment of the Covered Advances,
all proceeds of the Covered Advances 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 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.
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<PAGE> 7
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
an undivided participation interest (a
"Participation") in all Covered Advances
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 an
undivided subparticipation interest (a
"Subparticipation") in the Covered
Advances existing under the Covered Loan
Agreements. The Covered Advances under
the Covered Loan Agreements (the "Trust
Portfolio") will be selected from the
LTCB Portfolio based on criteria
provided in the related Agreement. The
Branch and LTCB Asset Funding will also
convey additional Advances arising under
such Covered Loan Agreements from time
to time thereafter until termination of
the related Trust. 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 eligible Loan Agreements from
the LTCB Portfolio to be included as
Covered Loan Agreements (the "Additional
Loan Agreements"), the Advances of which
will be included in the related Trust
and may remove the Advances under
designated Covered Loan Agreements
("Removed Loan Agreements") from the
Trust. "Covered Advances" shall include
all Advances under the Loan Agreements
initially conveyed to the Trust (the
"Initial Loan Agreements") and all
Advances 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
PRINCIPAL....................Each Series of Certificates will represent
an 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,
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<PAGE> 8
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 Enhance ment Provider.
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
Advances 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 Advances 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 Receivables and
Principal Advances 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
Advances, Interest Receivables and
Advances 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.
ADVANCES ...........................The Advances held in each Trust will arise
under Covered Loan Agreements that have
been selected from the LTCB 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 Advances will
consist of amounts loaned to commercial
and industrial borrowers (the "Covered
Principal Advances"), plus the related
periodic interest and amounts charged to
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
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<PAGE> 9
reference to the amount of an Advance
under a Loan Agreement (the "Covered
Interest Receivables"). During the term
of each Trust, all new Advances 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
Advances in any Trust will fluctuate
from day to day because the amount of
new Advances arising in the Covered Loan
Agreements and the amount of payments
collected on existing Advances 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 Advances
under the Additional Loan Agreements,
whether such Advances 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 the Advances
under the Removed Loan Agreements
whether such Advances 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. 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
8
<PAGE> 10
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 convey a
participation interest in Additional
Loan Agreements pursuant to the First
Tier Participation Agreement or 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 the 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 CERTIFICATES ...... Unless otherwise specified in the related
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
Certificate--Book-Entry Registration".
THE SELLER..........................LTCB Asset Funding Company, a Delaware
business trust and a subsidiary of LTCB.
The Branch will transfer the Covered
Advances under each Covered Loan
Agreement to the Seller under a First
Tier Participation Agreement. The Seller
will then transfer each Covered Advance
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
9
<PAGE> 11
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 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 Receivables 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
Advances 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 Advances and amounts collected
on Covered Interest Receivables. 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 accrual 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 Receivables 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
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 Spread",
"Credit Enhancement" and "Risk
Factors--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,
10
<PAGE> 12
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
Advances 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 Series or
Class or under certain other circum-
stances 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 Advances
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
11
<PAGE> 13
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
Advances 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 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
Advances 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
12
<PAGE> 14
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.
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
Advances 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 Advances 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 Advances 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
13
<PAGE> 15
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 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 Supple ment 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 Advances 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 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
Receivables 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 Receivables 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
14
<PAGE> 16
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
aggregate amount of the Investor
Percentage of Principal Advances in
Defaulted Loan Agreements. The term
"Investor Charge-Off" means, for any
Monthly Period, and for any Series or
Class thereof, 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
fees exceeds (b) amounts available to
pay such amounts out of collections of
Interest Receivables, 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 Advances; 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
Advances 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
("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.
FUNDING PERIOD .....................The Prospectus Supplement relating to a
Series of Certificates may specify that
for a period beginning on the Closing
Date and ending on a specified date
before the commencement of an
Amortization Period or Accumulation
Period with respect to such Series (the
"Funding Period"), the aggregate amount
of Covered Principal Advances in the
related Trust allocable to such Series
may be less than the aggregate principal
amount of the Certificates of such
Series and that the amount of such
deficiency (the "Pre-Funding Amount")
will be held in a trust account
established with the related Trustee for
the benefit of Certificateholders of
such Series (the "Pre-Funding Account")
pending the transfer of additional
Principal Advances to the Trust or
pending the reduction of the Investor
Interests of other Series issued by the
related Trust. The related Prospectus
Supplement will specify the initial
Investor Interest on the Closing Date
with respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the "Full
Investor Interest") and the date by
which the Investor Interest is expected
to equal the Full Investor Interest. The
Investor Interest will
15
<PAGE> 17
increase as Principal Advances are
delivered to the related Trust or as the
Investor Interests of other Series of
the related Trust are reduced. The
Investor Interest may also decrease due
to Investor Charge-Offs or the
occurrence of a Pay Out Event and the
commencement of the Rapid Amortization
Period, as specified in the related
Prospectus Supplement.
During the Funding Period, funds on deposit
in the Pre-Funding Account for a Series
of Certificates will be withdrawn and
paid to the Seller to the extent of any
increases in the Investor Interest. In
the event that the Investor Interest
does not for any reason equal the Full
Investor Interest by the end of the
Funding Period, any amount remaining in
the Pre-Funding Account and any
additional amounts specified in the
related Prospectus Supplement will be
payable to the Certificateholders of
such Series in a manner and at such time
as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus
Supplement, monies in the Pre-Funding
Account with respect to any Series will
be invested by the Trustee in Permitted
Investments or will be subject to a
guaranteed rate or investment agreement
or other similar arrangement, and
investment earnings and any applicable
payment under any such investment
arrangement will be applied to pay
interest on the Certificates of such
Series.
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 Advances
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--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
16
<PAGE> 18
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 (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 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 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 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
17
<PAGE> 19
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-- 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.
18
<PAGE> 20
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 ADVANCES. The collectibility of the
Covered Advances 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, the ability to
sell a subparticipation or other interest in the Covered Advances will depend
upon the availability of buyers therefor. If, subject to the priority of
distributions described in "Description of the Certificates--Investor Percentage
and Seller Percentage" and "--Pay Out Events", the collections on the Covered
Advances 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 Advances arising under the Covered Loan
Agreements. Neither the Covered Loan Agreements nor the Covered Advances will
be assigned directly to the Seller or any Trust. As a result, neither the
Seller nor any Trust has any legal or beneficial ownership interest (whether by
way of security or otherwise) in the Covered Loan Agreements or legal ownership
interest in the Covered Advances which can be legally asserted vis-a-vis 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 Advances may be loans acquired by the Branch
through participations. In purchasing each participation, the Branch will
usually have a contractual relationship only with the selling institution, 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 will have no right directly to enforce compliance by the Borrower with
the terms of the Covered Loan Agreement, nor any right of set-off against the
Borrower, nor have the right to object to certain changes to the Covered Loan
Agreement agreed to by the selling institution with the Borrower. The Branch may
not directly benefit from any collateral supporting a related loan and may be
subject to any right of set-off the Borrower has against the selling
institution. In the event of the insolvency of the selling institution, under
the laws of the United States of America and the States thereof, the Branch may
be treated as a general creditor of such selling institution, and may not have
any exclusive or senior claim with respect to the selling institution's interest
in, or the collateral with respect to, the Covered Loan Agreement. Consequently,
the Branch may be subject to the credit risk of the selling institution as well
as of the Borrower.
The majority of the Covered Advances will be syndicated loans 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. In addition, in such situations the Branch may be subject to
any right of set-off the Borrower has against the lenders.
As described under "Description of Certificates--Collection and Other
Servicing Procedures", in servicing the Covered Advances 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
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Covered Advances. Except as specified above 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 Advances. As a result, except as set
forth above, each Trust is relying on the ordinary business practices of the
Branch with respect to the administration of the Covered Advances. 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 Advances. Further, in situations where the interest of a 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.
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 Advances to such Borrower should be equitably subordinated, because
of action by the Branch or the originator of such Covered Advance in connection
with the administration of such Covered Advances (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.
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 of services 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 Advances are repaid may be increased. The
Trust will be dependent upon the Branch's continued ability to generate new
Advances. If the rate at which new Advances 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 Receivables 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 Receivables 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 Advances
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due to the appointment of a conservator or receiver for the Branch, or 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 Advances at a variable rate above a designated
rate, such as such designated rate 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 LIBOR or such other designated
index, the amount of collections of Covered Interest Receivables 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 Receivables 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, therefore, 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, 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. 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 the Certificates--Exchanges".
ADDITION OF TRUST ASSETS. The Branch expects, and in some cases will be
obligated, to designate Additional Loan Agreements, the Covered Advances 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 the 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
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risks associated with their undivided interest in the Trust. See "Credit
Enhancement".
RISKS RELATING TO CERTIFICATES
PAYMENTS AND MATURITY. Advances may be paid at any time and there is no
assurance that there will be additional Advances created in the Advances or
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 Advances to be conveyed
to a Trust. A significant decline in the amount of Advances 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 Seller's
ability to continue to compete in the current industry environment will affect
the Seller's ability to generate new Advances to be conveyed to the Trust and
may also affect payment patterns. See "Maturity Assumptions".
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 Advances 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-U.S.
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. Each
Trust will not have substantial assets other than its Subparticipation in the
Covered Advances and its interest in other Collateral 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 the 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 Advances 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'S U.S. COMMERCIAL AND INDUSTRIAL LENDING ACTIVITIES
GENERAL
With respect to each Series of Certificates, the Advances 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 presently includes and in
the future will include broadly syndicated loans and direct (bilateral) loans
with corporate and industrial customers. The Covered Loan Agreements will
include fully funded term loans and revolving credit facilities.
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 U.S. 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 U.S. 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 U.S. 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. 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 U.S.
Lending Office. Following approval at the U.S. 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
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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, 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.
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 syndicated loan transaction,
the loan is serviced by an agent bank (which may be the Branch or a third-party
bank). The approval process for an 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 Advances in accordance with the Servicer's customary and usual policies and
procedures for servicing commercial and industrial loans comparable to the
Advances, 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 U.S. 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 U.S. 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 Advances conveyed to each Trust ("Covered Advances") 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 Advances, 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
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a Subparticipation in all Advances under Additional Loan Agreements, whether
such Advances 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
with respect to all Advances under such Removed Loan Agreements, upon payment by
the Branch to the Seller of the amount of such Covered Advances and a reduction
of the Seller Interest in a corresponding amount, whether such Advances are then
existing or thereafter created. Throughout the term of each Trust, the related
Loan Agreements from which the Advances 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
Advances 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 Principal Advances 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 Advances
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 Advances may vary from month to
month due to seasonal variations, general economic conditions and payment habits
of certain borrowers. There can be no assurance that collections of Covered
Principal Advances 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.
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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 Advances 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.
LTCB AND LTCB TRUST COMPANY
The Long-Term Credit Bank of Japan, Limited 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 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"), and the
deposits of the New York Branch are not insured by the FDIC. The principal
offices of the New York 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.
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 and a Series
Supplement to the Agreement, a copy of the form 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
Agreement relating to such Series which may differ materially from the Agreement
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 Agreement and
Series Supplement.
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 borrower payments on the Loan Agreements in such
Trust. For each Series of Certificates, unless otherwise specified in the
related Prospectus
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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 Advances 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 Advances; Investor Charge-Offs". The
amount of Covered Principal Advances in each Trust, however, will vary each day
as new Covered Principal Advances 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 Advances in the Trust. When a Series is
amortizing, the Investor Interest of such Series will decline as payments of
Covered Principal Advances 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 Advances 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, as the registered
holder of the
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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").
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 Depositary; 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 Depositary 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
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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.
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.
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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 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.
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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 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 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
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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 Advances 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.
TRANSFER AND ASSIGNMENT OF COVERED ADVANCES
With respect to each Trust, the Branch will grant, pursuant to a First
Tier Participation Agreement, a Participation in all of its right, title and
interest in and to the Covered Advances under the related Covered Loan
Agreements and all Covered Advances 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 Subparticipation in
all of its right, title and interest in and to the Covered Advances under the
related Covered Loan Agreements and all Covered Advances thereafter created
under such Covered Loan Agreements.
In connection with each transfer of Covered Advances to a Trust, the
Seller will indicate, in its computer files that the related Covered Advances
have been conveyed to such Trust. In addition, the Seller will provide to the
Trustee with respect to each Trust, computer files or microfiche lists,
containing a true and complete list showing each related Covered Loan Agreement,
identified by account number and by total outstanding balance on the date of
transfer. The Seller will not deliver to the related Trustee any other records
or agreements relating to the Covered Loan Agreements or the Covered Advances,
except in connection with additions or removals of Covered Loan Agreements.
Except as stated above, the records and agreements relating to the Covered Loan
Agreements and the Covered Advances maintained by the Servicer or its affiliates
are not and will not be segregated by the Servicer or its affiliates from other
documents and agreements relating to other loans and advances and are not and
will not be stamped or marked to reflect the transfer of the Covered Advances to
a Trust, but the computer records of the Servicer or its affiliates are and will
be required to be marked to evidence such transfer. The Seller will file, with
respect to each Trust, Uniform Commercial Code financing statements with respect
to the Covered Advances meeting the requirements of Delaware state law. See
"Risk Factors --Transfer of Covered Advances".
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
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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. The
Seller may offer any Series under a Disclosure Document in offerings 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 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
the 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 transactions contemplated by the First Tier Participation
Agreement, (b) as of the Closing Date of the initial Series of Certificates
issued
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by such Trust, (i) the related Agreements 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
Advances pursuant to the 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 Advances, and (iii) if and to the extent the conveyance
of a 100% Participation in the Covered Advances 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 Advances (other than Covered Advances
created after the Cut-Off Date) and will create a valid security interest in the
Covered Advances 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 Advances 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 Advances under Additional Loan Agreements), (i) each
Covered Advance outstanding on such date was an Eligible Advance and (ii) a 100%
Participation in each Covered Advance 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
Advance of any representations and warranties set forth in clause (c)(ii) of the
preceding paragraph, or in the event that a Covered Advance is not an Eligible
Advance as a result of the failure to create such Advance 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 LTCB or receipt by
LTCB 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 Advance
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 Advances or their proceeds are
impaired or the proceeds of such Covered Advances 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 Advances 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 Advance shall then be true and correct in all material
respects as if such Covered Advance had been created on such day.
When the provisions of the First Tier Participation Agreement require
the termination and extinguishment of the Participation in the Covered Advances
arising under any Covered Loan Agreement and the repurchase by the Branch of
such Covered Advances 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 Advances 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
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Advances 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 Advances 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 Advances
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
Advances as the Branch may reasonably request.
SECOND TIER PARTICIPATION AGREEMENT. Unless otherwise specified in the
Prospectus Supplement relating to a Series of Certificates, the Seller will make
in the Second Tier Participation Agreement, certain representations and
warranties to the Trust to the effect that, among other things, (a) as of the
Closing Date, 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 the initial 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 Advances 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 Advances and the
First Tier Participation Agreement, and (iii) if and to the extent the
conveyance of a 100% Subparticipation interest in the Covered Advances 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 Advances (other than Covered Advances created after
the Cut-Off Date) and creates a valid security interest in the Covered Advances
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 the initial 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 LTCB 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 Advances under Additional Loan Agreements), a 100%
Subparticipation in each Covered Advance 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.
In the event the Participation of the Seller in any Covered Advance is
terminated, repurchased and extinguished pursuant to the First Tier
Participation Agreement, the 100% Subparticipation of the Trust in such Covered
Advance 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 Advances or their proceeds are impaired or the
proceeds of such Covered Advances 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 Advances 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
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representations and warranties with respect to such Covered Advance shall then
be true and correct in all material respects as if such Covered Advance 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
Advances arising under any Covered Loan Agreement and the repurchase by the
Seller of such Subparticipation in such Covered Advances then outstanding (such
Covered Advances, together with the related Covered Loan Agreements, "Ineligible
Advances" and such termination, extinguishment and repurchase, a "Removal" with
respect to the Subparticipation in the affected Ineligible Advances), then such
Removal shall be effected by the Servicer deducting the principal balance of
each such Ineligible Advance from the Principal Advances included in the Covered
Advances in the Trust and decreasing the Seller Interest by such amount. On and
after the date of such Removal, each Ineligible Advance shall be deducted from
the aggregate amount of Principal Advances used in the calculation of any
Investor Percentage, the Seller Percentage or the Seller Interest. In the event
that the exclusion of Ineligible Advances from the calculation of the Seller
Interest would cause the Seller Interest to be reduced below zero or would
otherwise not be permitted by law, the Seller shall concurrently make a deposit
in the Collection Account (for allocation as a Principal Advance) 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 zero. 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 Advance, 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 Advance (whether through the
subparticipation interest granted, sold and purchased or otherwise), all monies
due or to become due with respect to such Ineligible Advance. The Trust shall
deliver to the Seller such confirmation of termination and extinguishment of the
Subparticipation in such Ineligible Advance 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 Advance 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 Advance available to Certificateholders or the
Trust on behalf of Certificateholders.
In the event of a breach of any of the representations and warranties
of LTCB 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 Advances
arising under 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 Advances 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
Advances as the Seller may reasonably request.
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
Receivables arising under such Loan Agreement are calculated only
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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 Advances of the Branch will be remitted to
the Collection Account; (e) as of the date such Loan Agreement became a Covered
Loan Agreement, (w) the Advances arising under such Loan Agreement are
classified by the Branch as "corporate risk" (and not as 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 Advance arising thereunder is classified as
a non-accruing asset in accordance with the Branch's customary standards,
policies and procedures and (z) the Advances arising thereunder and do not arise
under Defaulted Loan Agreements; and (f) such Loan Agreement does not preclude
the grant by the Branch hereunder of a participation interest in advances
arising under such Loan Agreement. 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 under the related Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Advance" will be defined to
mean each Advance that (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 Advance arises does not afford any obligor(s) the right to calculate the
amount due with respect to such Advance in any currency other than dollars or
(ii) extended and payable under a multi-currency facility; provided, that
any advances payable in a currency other than dollars shall be allocated to the
Seller Interest unless (a) the Trust has the benefit of a swap agreement which
will swap payments with respect to such Advance 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 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 Advances 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 LTCB or any of LTCB's affiliates, and (ii) in the case
of Advances 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 Advances were created LTCB 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 LTCB
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" or "chattel paper" 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
Advance 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 Advances or any
records relating to the Covered Advances 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
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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 Advances and certain other components of the Trust.
ADDITION OF TRUST ASSETS
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 Advances of 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 Loan Agreements. Additional Loan
Agreements may have been originated by the Seller using credit criteria
different from those which were applied by the Seller to the Initial Loan
Agreements or may have been acquired by the Seller from an institution which may
have had different credit criteria.
A grant by the Seller to a Trust of a Subparticipation in Covered
Advances 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 such Additional Loan Agreements will be included,
which notice shall specify the approximate aggregate amount of such Advances 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 Advance in such
Additional Loan Agreement is, as of the Addition Date, an Eligible Advance, (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 from 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 Participant 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 Advances 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 Advances 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), (x) the Advances under such Covered Loan Agreement shall be
Covered Advances only if and to the extent they are outstanding as of the
Initial Termination Date as in effect on the date such Loan Agreement became a
Covered Loan Agreement and (y) the Advances arising thereafter shall be Covered
Advances only if 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
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pursuant to the Exchange Act, the Servicer intends to file, on behalf of each
Trust, a report on Form 8-K with respect to any grant to a Trust of a
Subparticipation in Covered Advances 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
Advances thereunder as a Covered Loan Agreement and related Covered Advances and
cause the Branch to repurchase such Covered Advances 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 Advance, the Seller shall designate the Covered Loan Agreement under
which such Ineligible Advance was made as a Removed Loan Agreement. The Seller
will be permitted to designate and require termination of a Subparticipation in
the Covered Advances from Removed Loan Agreements only upon satisfaction of the
following conditions: (i) the removal of any Covered Advances 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 Advances 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 Advances shall equal or exceed the sum of
the initialInvestor Interests for all outstanding Series on such date (the
"Minimum Aggregate Covered Principal Advances"); (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 (vii) 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 and administering the Advances in accordance with the Servicer's
customary and usual policies and procedures for servicing commercial and
industrial loans comparable to the Advances. 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 Advances
covering such actions and in such amounts as the Servicer believes to be
reasonable from time to time.
The Servicer will agree in each Agreement to service and administer the
Covered Loan Agreements and the Covered Advances arising thereunder and to
collect payments due under the Covered Advances in accordance with its
customary and usual servicing policies and procedures for its own portfolio of
commercial and industrial loans (the "Servicing Standard"); provided, however,
that the Servicer, in connection with its servicing and administration of the
Covered Loan Agreements and the Covered Advances arising thereunder shall act
without regard to any credit or other relationships apart from the Covered
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Loan Agreements that the Servicer or any of its Affiliates may have with any
obligor; provided, further, that the actions and obligations of the Servicer
only apply to the extent of the Trust's interest in the Covered Advances and
related Covered Loan Agreements (it being understood that 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 multi-bank facility with other lenders and the Branch, as
Servicer, may not have the controlling vote with respect to actions taken by
lenders under the Covered Loan Agreements and 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).
In connection with its servicing and administration of the Covered Loan
Agreements and Covered Advances 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 deem necessary or desirable and consistent with the
Servicing Standard; provided, however, that:
(i) the Servicer will not consent or agree to the extension or
deferral of any date on which a Covered Advance is to be paid, any
waiver of any covenant in any Covered Loan Agreement or any amendment
or modification to any Covered Loan Agreement unless (x) such
extension, deferral, waiver, amendment or modification (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 maximizing the
amount ultimately to be received by the Trust with respect to the
affected Covered Advances and Covered Loan Agreements, and (y)
contemporaneous with or prior to agreeing or consenting thereto, the
Servicer delivers to the Trustee an Officer's Certificate to the
effect set forth in the preceding clause (x);
(ii) in connection with any proposed extension or deferral of
any date on which a Covered Advance is to be paid, the aggregate of all
extensions or deferrals with respect to such payment date shall not
exceed six months;
(iii) in the case of any proposed amendment or modification to
a Loan Agreement that involves the release of collateral securing the
payment of Covered Advances, collateral of equal or greater value shall
be substituted for the collateral released contemporaneously or prior
to the release of any such collateral;
(iv) if, due to one or more credit related developments, the
Servicer would sell the Covered Loan Agreement in accordance with its
customary policies and procedures and the Servicer reasonably believes
such a sale would maximize the amount ultimately to be received by the
Trust, then the Servicer may sell Covered the Loan Agreement if such
sale would not cause a Pay-Out Event;
(v) 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 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 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 Advance or Covered
Loan Agreement (which determination shall be made without regard to whether
funds
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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 Advances
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 First Tier Participation Agreement
and the 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 Advances and the Servicer paying for the same by
depositing an amount equal to the amount of such Covered Advances 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 Advances 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 Advances, and all amounts which would have constituted
collections with respect to Covered Principal Advances but for the Seller's
inability to transfer such Advances (up to an aggregate amount equal to the
aggregate amount of Covered Principal Advances 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 Advances and all amounts which
would have constituted Covered Principal Advances but for the Seller's inability
to transfer Covered Advances to the Trust that are written off as uncollectable
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 Advances but for the Seller's inability to transfer Covered
Advances to the Trust shall be deemed to be Covered Principal Advances 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 Advances thereunder first to the oldest
Covered Principal Advances 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 Advances are
removed from the pool of Covered Advances, then, in any such event, the Servicer
shall account for payments received with respect to such Ineligible Advances
separately from its accounting for collections on Covered Principal Advances
retained by the Trust. If payments received from or on behalf of an obligor are
not specifically applicable either to an Ineligible Advance of such obligor
reassigned to the Seller or to Covered Advances of such obligor retained in the
Trust, then the Servicer agrees to allocate payments proportionately based on
the total amount of Covered Principal Advances of such obligor retained in the
Trust and the total amount owing by such obligor on any Ineligible Advances
purchased by the Seller, and the portion allocable to any Covered Principal
Advances 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.
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
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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.
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. 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 paid to the
Seller. Funds in any other series account established by a Series
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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.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer of additional Advances to the Trust or
pending the reduction of the Investor Interests of other Series issued by the
related Trust. The related Prospectus Supplement will specify the initial
Investor Interest with respect to such Series, the Full Investor Interest and
the date by which the Investor Interest is expected to equal the Full Investor
Interest. The Investor Interest will increase as Advances are delivered to the
related Trust or as the Investor Interests of other Series of the related Trust
are reduced. The Investor Interest may also decrease due to Investor Charge-Offs
or the occurrence of a Pay Out Event with respect to such Series as provided in
the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account
for a Series of Certificates will be withdrawn and paid to the Seller to the
extent of any increases in the Investor Interest. In the event that the Investor
Interest does not for any reason equal the Full Investor Interest by the end of
the Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the
Pre-Funding Account will be invested by the Trustee in Permitted Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Interest Account for
distribution in respect of interest on the Certificates of the related Series in
the manner specified in the related Prospectus Supplement.
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 Receivables, all amounts collected on Covered Principal
Advances and all Covered Advances 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 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 Advances, Interest Receivables and Advances 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.
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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 by not later than 11:00 A.M. on
the business day after the same is received by the Branch all amounts paid or
payable with respect to Covered Advances 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 Advances 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 Advances and Covered
Interest Receivables, 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
Receivables 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 Advances will be paid or held for payment to the holder
of the Seller Certificate, provided that if after giving effect to the
inclusion in the related Trust of all Covered Advances 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 Accumulation Period, as applicable, an amount equal to
the applicable Investor Percentage of such deposits in respect of Covered
Principal Advances 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 Advances 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
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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 Advances 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 Advances 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 Advances; Investor Charge-Offs".
SHARED PRINCIPAL COLLECTIONS
If so specified in the related Prospectus Supplement, to the extent that
collections of Covered Principal Advances 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 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, the Seller Interest is less than or equal to the Minimum
Seller Interest or the amount of Covered Principal Advances is less than or
equal to the Minimum Aggregate Principal Advances (as defined below), 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 "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 and the amount of Covered Principal Advances
exceeds the Minimum Aggregate Principal Advances; 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 Principal Account and treated as Shared
Principal Collections to the extent needed to cover principal
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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 Interest Receivables with respect to such Monthly Period.
"Minimum Aggregate Principal Advances" 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 ADVANCES; 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, which will be equal to the
aggregate amount of Covered Principal Advances under Loan Agreements
("Defaulted Loan Agreements") where (a) the payment of any Covered Principal
Advance is 180 days or more past due, (b) the obligor has declared bankruptcy
or is the subject of a foreclosure, receivership or insolvency proceeding, (c)
the Branch has accelerated any Covered Principal Advance under such Loan
Agreement, or (d) the Servicer has determined in accordance with its standard
policies that more than 50% of the Covered Principal Advances under such Loan
Agreement are uncollectible. The Default Amount for a Monthly Period will be
allocated among each Series of Certificates and the Seller Certificate as
described in the Prospectus Supplement; the portion allocated to a Series is
referred to as the "Investor Default Amount" for that Series. 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 Advance 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 Advance described above will be deducted from Principal Advances 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 Advances, money or Permitted Investments
sufficient to make all remaining scheduled interest and principal payments on
such Series or all outstanding
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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 Advances, 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 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 Advances 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 Advances, 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) June 30, 2018, or (c) if the Covered Advances 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
Advances 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 occurs with respect to all Series issued by a Trust upon
the occurrence of either of the following events:
(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 Advances 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 Advances arising after the date hereof under the Second Tier
Participation Agreement;
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(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 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 pursuant to certain
provisions of federal law, the Branch or the Seller voluntarily enters
liquidation or a receiver or conservator is appointed for the Branch or the
Seller, on the day of such event the Branch or the Seller, as applicable, will
immediately cease to transfer Principal Advances 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 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 Advances and the early retirement of the Certificates.
See "Risk Factors--Certain Matters Relating to Receivership".
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 Advances 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
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against any loss, liability, expense, damage or injury suffered or sustained by
reason of any acts 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 Advances
or Advances 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 Advances 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. 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 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
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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 Advances on terms equivalent to the best
purchase offer as determined by the Trustee.
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.
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 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
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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 Advances
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 Advances, the Investor Interest and the Investor Interest as a
percentage of the aggregate amount of the Covered Principal Advances 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 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
Receivables 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 Certificate holders to
prepare their United States tax returns.
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 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,
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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 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 Advances from the Trust will not be considered an
amendment requiring Certificateholder consent under the provisions of the
related Agreement and any Series Supplement.
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
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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 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 Advances 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
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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 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 Advances 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 Advances allocable to the Collateral Interest to decrease the
Collateral Interest, (ii) to the extent collections of Principal Advances
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 specified in the related
Prospectus Supplement. The total amount of the Credit Enhancement available
pursuant to the Collateral Interest and, if applicable, the Cash
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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.
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
"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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CERTAIN 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. 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
consequences 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 "U.S. Certificateholder" means any beneficial owner of an
Offered Certificate of that is either a U.S. Person or any other person to the
extent that the income attributable to an Offered 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-U.S. Certificateholder"
mean any beneficial owner of an Offered Certificate that is not a U.S.
Certificateholder and the term "Offered Certificates" shall mean each Class
of Certificates offered under a Prospectus Supplement.
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 Advances. 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 Advances is sometimes 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 Advances 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
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 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
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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, Simpson Thacher & Bartlett ("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 Advances 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. Certificateholder (including a cash basis U.S. Certificate holder)
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 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 U.S. 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.
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Such gain or loss generally will be capital gain or loss and will be long-term
capital gain or loss if the U.S. Certificateholder held the Offered
Certificates for more than one year. Capital losses generally may be used only
to offset capital gains.
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 Unites 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 Advances 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
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-U.S. 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-U.S.
Certificateholder, provided (i) that the non-U.S. 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
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of section 871(h)(3) of the Code and the regulations thereunder, (ii) the
non-U.S. 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-U.S. 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-U.S. 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-U.S.
Certificateholder or a financial institution holding the Offered Certificate on
behalf of such non-U.S. Certificateholder, must provide, in accordance with
specified procedures, LTCB Asset Funding or its Paying Agent with a statement
to the effect that the non-U.S. Certificateholder is not a U.S. Person.
Pursuant to current temporary Treasury regulations, these requirements will be
met if (1) the non-U.S. 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-U.S.
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.
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-U.S. 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.
Certificateholders' 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 U.S. 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 percent 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-U.S. 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 income allocable or distributions made to a foreign partner. That
withholding may be at a rate as high as 39.6 percent 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. Certificate Owner generally would be subject to withholding tax at the
rate of 30 percent, unless that rate were reduced under an applicable tax
treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent 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,
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unless the U.S. Certificateholder is an exempt recipient 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 percent 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-U.S. 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
percent 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 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 administrative exemption is available. Plans that are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined
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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 Certificates will be eligible for purchase by Plan investors.
A violation of the prohibited transaction rules could occur if any Series
of 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
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 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 Certificates will represent
beneficial interests in a Trust, and despite the agreement of the Seller and the
Certificate Owners to treat each Series of Certificates as debt instruments, the
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 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 Certificates will
meet the foregoing criteria for treatment as "publicly-offered securities". No
restrictions will be imposed on the transfer of the Certificates. 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 is met. Each Class of 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
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participation in a Trust is not significant on any date on which any Series of
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 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 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 Certificates on behalf of Plan Assets should consult their own
counsel regarding whether the Trust assets represented by the 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 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
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 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 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
Certificates offered hereby and by the related Prospectus Supplement if any of
such 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 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 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
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 Certificates; and short positions created
by the underwriters involve the sale of the underwriters of a greater number of
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 Certificates are repurchased by the
underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the 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 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
Seller and for the underwriters by Sullivan & Cromwell, New York, New York.
Certain legal matters relating to the issuance of the Certificates under the
laws of the State of Delaware will be passed upon for the Seller by Richards,
Layton & Finger, Wilmington, Delaware. 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 BASE PROSPECTUS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accumulation Period............................................ 6
Additional Date................................................ 37
Additional Interest............................................ 15
Additional Loan Agreements..................................... 6
Adverse Effect................................................. 42
Agreement...................................................... 5
Agreements..................................................... 25
Amortization Period............................................ 6
Borrowers...................................................... 19
Branch......................................................... 1, 5
Calculation of Registration Fee................................ II-2
Cash Collateral Account........................................ 56
Cash Collateral Guaranty....................................... 55
CEDEL.......................................................... 29
CEDEL Participants............................................. 29
Certificateholders............................................. 3
Certificate Owners............................................. 3
Certificate Rate............................................... 6
Certificates................................................... 1, 5
Class.......................................................... 2, 5
Closing Date................................................... 11
Code........................................................... 17, 59
Collateral Interest............................................ 56
Collection Account............................................. 10
Commission..................................................... 3
Controlled Accumulation Amount................................. 12
Controlled Accumulation Period................................. 12
Controlled Amortization Amount................................. 11
Controlled Amortization Period................................. 11
Controlled Deposit Amount...................................... 12
Controlled Distribution Amount................................. 11
Cooperative.................................................... 30
Covered Advances............................................... 1, 5, 24
Covered Interest Receivables................................... 8
Covered Loan Agreements........................................ 1, 5, 23, 24
Covered Principal Advance...................................... 7
Credit Enhancement............................................. 5
Credit Enhancement Percentage.................................. 44
Credit Enhancement Provider.................................... 52
Cut-Off Date................................................... 7
Defaulted Loan Agreement....................................... 45
Definitive Certificates........................................ 9
Depositories................................................... 28
Depository..................................................... 27
Determination Date............................................. 47
Disclosure Document............................................ 8
Distribution Account........................................... 43
Distribution Date.............................................. 10
DOL............................................................ 64
DTC............................................................ 3, A-1
</TABLE>
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<TABLE>
<S> <C>
Eligible Advance................................................... 38
Eligible Loan Agreement............................................ 37
Enhancement........................................................ 5
Enhancement Invested Amount........................................ 55
ERISA.............................................................. 17
Euroclear.......................................................... 30
Euroclear Operator................................................. 30
Euroclear Participants............................................. 30
Excess Funding Account............................................. 47
Excess Interest Collections........................................ 14
Exchange........................................................... 8
Exchange Act....................................................... 3
FASIA.............................................................. 63
FASIT Provisions................................................... 63
FDIC............................................................... 7, 26
First Tier Participation Agreement................................. 6
Full Investor Interest............................................. 16
Funding Period..................................................... 15
Global Securities.................................................. A-1
Group.............................................................. 14
Holders............................................................ 31
Independent Investors.............................................. 16, 65
Indirect Participants.............................................. 28
Ineligible Advances................................................ 36
Initial Loan Agreements............................................ 6
Initial Termination Date........................................... 39
Interest Account................................................... 43
Interest Funding Account........................................... 31
Interest Participants.............................................. 28
Interest Period.................................................... 10
Investment Company Act............................................. 44
Investor Charge-Off................................................ 15
Investor Default Amount............................................ 15
Investor Interest.................................................. 7
Investor Percentage................................................ 7
Investor Servicing Fee............................................. 15
IRS................................................................ 59
L/C Bank........................................................... 55
Loans.............................................................. 1, 5
LTCB............................................................... 5
LTCB Asset Funding................................................. 1, 5
LTCB Loan Activities............................................... 37
LTCB Portfolio..................................................... 5
Maximum Addition Amount............................................ 39
Minimum Aggregate Covered Principal Advances....................... 38
Minimum Aggregate Principal Advances............................... 47
Minimum Seller Interest............................................ 8
Monthly Interest................................................... 15
Monthly Period..................................................... 10
Moody's............................................................ 43
Non-U.S. Certificateholder......................................... 59
OID................................................................ 60
Participants....................................................... 28
Participation...................................................... 6
Pay Out Event...................................................... 13
</TABLE>
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<TABLE>
<S> <C>
Permitted Investments............................................... 44
Plans............................................................... 64
Plan Assets......................................................... 64
Plan Asset Regulation............................................... 64
Pre-Funding Account................................................. 15
Pre-Funding Amount.................................................. 15
Principal Account................................................... 43
Principal Amortization Period....................................... 12
Principal Commencement Date......................................... 11
Principal Funding Account........................................... 12
Principal Terms..................................................... 8
Prospectus Supplement............................................... 1
Qualified Institution............................................... 43
Rapid Accumulation Period........................................... 13
Rapid Amortization Period........................................... 14
Rating Agency....................................................... 18
Removal............................................................. 36
Removal Date........................................................ 40
Removed Loan Agreements............................................. 6
Reserve Account..................................................... 56
Revolving Period.................................................... 11
Scheduled Payment Date.............................................. 11
Second Tier Participation Agreement................................. 6
Securities Act...................................................... 8
Seller.............................................................. 6
Seller Certificate.................................................. 7
Seller Interest..................................................... 8
Seller Percentage................................................... 27
Senior Certificates................................................. 6
Series.............................................................. 1, 5, A-1
Series Supplement................................................... 5
Series Termination Date............................................. 48
Servicer............................................................ 10
Servicer Default.................................................... 51
Servicer Transfer................................................... 51
Servicing Fee....................................................... 10
Servicing Standard.................................................. 41
Shared Principal Collections........................................ 15
Spread Account...................................................... 56
Standard & Poor's................................................... 43
Subordinated Certificates........................................... 6
Subparticipation.................................................... 6
Tax Counsel......................................................... 60
Tax Opinion......................................................... 9
Terms and Conditions................................................ 30
Transfer Date....................................................... 12
Trust............................................................... 1, 5
Trustee............................................................. 5
Trust Portfolio..................................................... 6, 25
Trust Termination Date.............................................. 48
Unallocated Principal Collections................................... 46
Underwriting Agreement.............................................. 67
U.S. Certificateholder.............................................. 59
U.S. Lending Office................................................. 23
U.S. Person......................................................... 59, A-3
</TABLE>
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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.
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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 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
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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 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), or (iii) an estate or trust the income of
which is includible in
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gross income for United States tax purposes regardless of its source. 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.
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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>
- --------------
* 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) Pooling and Servicing Agreement*
4(b) First Tier Participation Agreement*
4(c) Second Tier Participation Agreement*
4(d) Form of Series Supplement for Pooling and Servicing Agreement*
5 Opinion of special Delaware counsel as to legality of the Asset
Backed Certificates
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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 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.
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(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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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 23RD DAY
OF JULY, 1997.
By: LTCB ASSET FUNDING COMPANY,
as Depositor
By: /s/ Tsuyoshi Monri
----------------------------------
Tsuyoshi Monri
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