<PAGE> 1
EXHIBIT 2
BEAR STEARNS
BEAR, STEARNS INTERNATIONAL LIMITED
ONE CANADA SQUARE
LONDON E14 5AD, ENGLAND
TEL: 0207-516-6390
FAX: 0207-516-6805
REGULATED BY FSA
DATE: [December 29, 2000]
TO: Westgate Enterprise III, LLC
ATTENTION: [Contact Name]
TELEPHONE: [Telephone Number]
FACSIMILE: [Fax Number]
FROM: Derivatives Documentation
TELEPHONE: 212-272-2711
FACSIMILE: 212-272-9857
SUBJECT: Equity Derivatives DRAFT Confirmation
REFERENCE NUMBER(S): [Reference Number(s)]
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into on the Trade Date specified below (the
"Transaction") between Bear, Stearns International Limited ("Bear Stearns") and
Westgate Enterprise III, LLC ("Counterparty"). This letter agreement constitutes
the sole and complete "Confirmation," as referred to in the "Master Agreement"
(as defined below), with respect to the Transaction.
1. This Confirmation is subject to and incorporates the 1991 ISDA Definitions
(the "1991 Definitions"), as supplemented by the 1998 Supplement to the
1991 ISDA Definitions (the "Supplement"), as amended and supplemented by
the 1998 ISDA Euro Definitions (the "Euro Definitions") (collectively the
"Definitions") and the 1996 ISDA Equity Derivatives Definitions (the "1996
Definitions"), each as published by the International Swaps and Derivatives
Association, Inc. ("ISDA"). The parties agree to negotiate, execute and
deliver an agreement in the form of the ISDA Master Agreement
(Multicurrency--Cross Border) (the "Form Master Agreement"), together with
the schedule thereto and any other related documents, each in form and
substance as the parties shall in good faith agree (collectively, the
"Executed Master Agreement"). In addition, the parties agree that until
execution and delivery of the Executed Master Agreement, a Form Master
Agreement, shall be deemed to have been executed and delivered by the
parties on the Trade Date of the first transaction that by its terms is
intended to be governed by a Master Agreement. All provisions contained in,
or incorporated by reference to, the Form Master Agreement or the Executed
Master Agreement (as applicable, the "Master Agreement") shall govern the
Transaction referenced in this Confirmation, except as expressly modified
below. This Confirmation, together with all of the other documents
confirming any and all Transactions entered into between us (regardless of
which branch, if any, either of us has acted through) that by their terms
are intended to be governed by a Master Agreement, shall supplement, form a
part of and be subject to the Master Agreement. In the event of any
inconsistency between the provisions of the Definitions and the 1996
Definitions, the 1996 Definitions shall prevail for the purpose of this
Transaction. In the event of any inconsistency between the provisions of
this Confirmation and the Definitions, 1996 Definitions or Master
Agreement, this Confirmation shall prevail for the purpose of this
Transaction.
REGISTERED IN ENGLAND NO. 1592029
<PAGE> 2
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 2 of 13
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
GENERAL TERMS:
Trade Date: [Trade Date]
Effective Date: [Effective Date]
Termination Date: The Equity Payment Date immediately
following the final Valuation Date.
Shares: The common shares of Kmart Stores
Inc, currently trading under the
ticker symbol KM.
Exchange(s): New York Stock Exchange
Related Exchange(s): The exchanges or quotation systems,
if any, on which options or futures
contracts on the Shares are traded
or quoted, and as may be selected
from time to time by the Calculation
Agent.
Calculation Agent: Bear Stearns
EQUITY AMOUNTS PAYABLE BY EQUITY AMOUNTS PAYER:
Equity Amount Payer: Bear Stearns
Number of Shares: [TBD]
Equity Notional Amount: [TBD], being on the Trade Date the
Number of Shares multiplied by the
Initial Price.
Equity Notional Reset: Applicable
Equity Payment Dates: Three Exchange Business Days
following each Valuation Date (or,
if such day is not a Currency
Business Day, the next succeeding
Currency Business Day).
Type of Return: Total Return
Initial Price: [TBD]
Final Price: With respect to each Valuation Date
prior to the final Valuation Date,
the closing price per Share quoted
by the Exchange at the Valuation
Time on the related Valuation Date;
and with respect to the final
Valuation Date, the amount
determined in accordance with
Section 4.4(c) of the 1996
Definitions minus USD 0.06
<PAGE> 3
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 3 of 13
Relevant Price: The average price per Share at which
Bear Stearns unwinds any hedge it
may have to this Transaction on the
related Averaging Date, in whole or
in part, as determined by the
Calculation Agent or, in the event
Bear Stearns does not unwind any
such hedge to this Transaction on
the related Averaging Date, in whole
or in part, the closing price per
Share quoted by the Exchange at the
Valuation Time on the related
Averaging Date.
Valuation Time: At the close of trading on the
Exchange
Valuation Dates: [monthly dates]
Averaging Dates: The final Valuation Date and each of
the 14 Exchange Business Days
preceding the final Valuation Date.
Averaging Date
Market Disruption: Modified Postponement
Dividend Period
End Dates: Each Currency Business Day on which
any per Share ordinary cash dividend
is paid for which the ex-dividend
date occurs during the period from
and excluding the Trade Date to but
including the Valuation Date.
Dividend Period: Notwithstanding Section 7.12(c) of
the 1996 Definitions, Dividend
Period shall mean each period from,
and excluding one Dividend Period
End Date to, but including, the next
following Dividend Period End Date,
except that (i) the initial Dividend
Period will commence on, but
exclude, the Trade Date and (ii) the
final Dividend Period will end on,
and include, the Valuation Date.
Dividend Amount: 100% of all cash dividends, whether
ordinary or extraordinary, net of
any withholding taxes, where: (i)
the ex-dividend date occurs during
the period from and excluding the
Trade Date to but including the
final Valuation Date and (ii) the
date on which the related ordinary
or extraordinary cash dividend would
have been received by persons who
held the Shares during such period
is during the relevant Dividend
Period multiplied by the Relevant
Number of Shares (defined below) on
the related ex-dividend date. An
"Additional Dividend Amount" as
described below may also be payable
by the Equity Amount Payer.
Relevant Number of Shares: On any ex-dividend date which occurs
on or prior to the initial Averaging
Date, the Number of Shares; and
thereafter the product of (i) the
Number of Shares multiplied by (ii)
a fraction, of which the numerator
is (x) the total number of Averaging
Dates minus the number of Averaging
Dates which have occurred prior to
the related ex-dividend date and of
which the denominator is the total
number of Averaging Dates.
<PAGE> 4
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 4 of 13
Dividend Payment Dates: The fifth Currency Business Day
following the related Dividend
Period End Date.
Reinvestment of Dividends: Inapplicable
ADDITIONAL DIVIDEND AMOUNT PAYABLE BY THE EQUITY AMOUNT PAYER:
Additional Dividend
Amount Payer: The Equity Amount Payer
Additional Dividend Amount: 100% of all cash dividends,
whether ordinary or extraordinary,
net of any withholding taxes, where:
(i) the ex-dividend date occurs
during the period from and excluding
the Trade Date to but including the
final Valuation Date and (ii) the
date on which the related ordinary
or extraordinary cash dividend would
have been received by persons who
held the Shares on the relevant
ex-dividend date is on or after the
final Valuation Date, multiplied by
the Relevant Number of Shares on the
related ex-dividend date.
Additional Dividend Amount
Payment Dates: With respect to any Additional
Dividend Amount, the fifth Currency
Business Day following the date on
which the related ordinary or
extraordinary cash dividend would
have been received by persons who
held the Shares on the relevant
ex-dividend date.
FLOATING AMOUNTS PAYABLE BY FLOATING AMOUNT PAYER:
Floating Amount Payer: Counterparty
Notional Amount: The Equity Notional Amount. This
Notional Amount will be adjusted in
accordance with Section 7.11(c) of
the 1996 Definitions.
Payment Dates: Each Equity Payment Date
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One month
Spread: Plus [75] basis points
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of each Calculation
Period.
Business Days: Not applicable; payments will be
made on the dates determined in
accordance with "Payment Dates"
above, without regard to whether
such date constitutes a Business Day
under the Definitions.
<PAGE> 5
Reference Number: [Number] -- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 5 of 13
Business Day Convention: Not applicable; payments will be
made on the dates determined in
accordance with "Payment Dates"
above, without regard to any
Business Day Convention set forth in
the Definitions.
ADJUSTMENTS:
Method of Adjustment: Calculation Agent Adjustment
EXTRAORDINARY EVENTS:
Consequence of Merger Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or Insolvency: Cancellation and Payment
OPTIONAL TERMINATION: Each party has granted the other the
right, but not the obligation, to
terminate the Transaction in whole,
or in part, in each case prior to
the Termination Date by designating
an earlier Exchange Business Day as
the "Optional Termination Valuation
Date" and the number of Shares to be
terminated in connection therewith
(the "Terminated Number of Shares").
In no event may the Optional
Termination Valuation Date (i) fall
after a date which, but for the
designation of the Optional
Termination Valuation Date, would
have been the final Valuation Date
or (ii) fall prior to the date which
is 90 calendar days after the
Effective Date.
If either party wishes to exercise
its right to designate an Optional
Termination Valuation Date, such
party shall do so by delivering an
irrevocable notice (by telephone, if
practicable, and otherwise in
writing) to the other party between
9:00 a.m. and 5:00 p.m. (New York
City time) on an Exchange Business
Day which is no less that 30
calendar days prior to the date
being designated as an Optional
Termination Valuation Date. If such
notice is received by a party after
5:00 p.m. (New York City time) on
any Exchange Business Day or on any
day which is not an Exchange
Business Day, then the notice will
be deemed effective on the next
following Exchange Business Day. The
party which has exercised its right
to designate an Optional Termination
Valuation Date will execute and
deliver a written notice confirming
the substance of any telephonic
notice of exercise within one
Exchange Business Day of that
notice. Failure to provide that
written notice will not affect the
validity of the telephonic notice.
For the avoidance of doubt, if
either party designates an Optional
Termination Valuation Date pursuant
to the terms hereof, the
<PAGE> 6
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 6 of 13
Optional Termination Valuation Date
shall be deemed the final Valuation
Date with respect to the Terminated
Number of Shares, the third Exchange
Business Day following the Optional
Termination Valuation Date shall be
deemed to be the Optional
Termination Date with respect to the
Terminated Number of Shares, and the
Calculation Agent will determine the
amounts that would be payable
pursuant to the terms of this
Transaction accordingly; provided
that, in addition to any other
amounts due hereunder, the
Calculation Agent shall calculate
the Breakage Amount (defined below).
BREAKAGE AMOUNT:
On the Optional Termination Date, if
the Breakage Amount is positive,
Counterparty shall pay such amount
to Bear Stearns and if the Breakage
Amount is negative, Bear Stearns
shall pay the absolute value of such
amount to Counterparty. The Breakage
Amount shall be calculated in
accordance with the following
formula:
Period Days
NA x ----------- x (Old Libor - New Libor)**
360
------------------------------------
Period Days
1 + ----------- x New Libor
360
"NA" shall mean the product of the
Terminated Number of Shares and the
Initial Price.
"Period Days" means the number of
days from and including the Optional
Termination Date to, but excluding,
the Scheduled Period End Date
"Scheduled Period End Date" means
the date which is, or in the case of
a full termination, but for the
designation of an Optional
Termination Date, would have been,
the Floating Amount Payer Payment
Date immediately following the
Optional Termination Date.
"Old LIBOR" means the Floating Rate
in effect immediately prior to the
Optional Termination Date.
"New LIBOR" means USD-LIBOR-BBA
determined as if (i) the Optional
Termination Date were a Reset Date
for a Calculation Period which
begins on the Optional Termination
Date and having a Period End Date on
the Scheduled Period End Date and
(ii) Linear Interpolation were
applicable.
<PAGE> 7
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 7 of 13
COLLATERAL PROVISIONS: (a) On any Local Business Day
designated by Bear Stearns (any such
date referred to as a "Credit
Support Valuation Date"), Bear
Stearns shall determine the
following: (i) the Exposure (as
defined below), (ii) the market
value (determined in accordance with
the Eligible Collateral Annex
hereto) of all Collateral (as
defined in the Eligible Collateral
Annex), if any, pledged by
Counterparty ("Pledgor") to the Bear
Stearns ("Secured Party"), and (iii)
the Credit Support Amount (as
defined below) for such date.
"Exposure" means for any Credit
Support Valuation Date, the amount,
if any, that would be payable to the
Secured Party by the Pledgor
(expressed as a positive number) or
by the Secured Party to the Pledgor
(expressed as a negative number) to
replace all of the Transactions that
are or may be entered into and
governed by the Master Agreement so
as to preserve the economic
equivalent of the payment
obligations of the parties with
respect thereto. "Credit Support
Amount" means the Secured Party's
Exposure plus the aggregate of the
Initial Collateral Requirements (as
set forth in paragraph (b) below and
as expressed in Confirmations in
connection with other Transactions,
if any), applicable to the Pledgor,
if any; provided, that the Credit
Support Amount will not be less than
the aggregate of the Pledgor's
Initial Collateral Requirements, if
any. If the Credit Support Amount
exceeds the market value of all
Collateral held by the Secured Party
by an amount (the "Delivery Amount")
equal to or greater than USD
500,000, then the Pledgor shall
transfer to the Secured Party
Collateral with a market value equal
to or greater than the Delivery
Amount. If the market value of all
Collateral held by the Secured Party
exceeds the Credit Support Amount by
an amount (the "Return Amount")
equal to or greater than USD
100,000, then the Secured Party
shall return to the Pledgor
Collateral with a market value as
close as practicable (but not
greater than) the Return Amount.
Each delivery or return of
Collateral required under this
paragraph shall be made by the close
of business on the relevant Credit
Support Valuation Date if notice
requesting such delivery or return
is received by 11 a.m. New York City
time, or by the next Local Business
Day if notice is received after 11
a.m. New York City time. The Secured
Party herein is Bear Stearns.
(b) In addition to any Collateral
required to be delivered pursuant to
paragraph (a) above, Counterparty
shall deliver to and at all times
maintain with Bear Stearns
Collateral having a market value
equal to or greater than the Initial
Collateral Requirement (defined
herein). Counterparty shall deliver
such collateral to Bear Stearns on
or before the Local Business Day
following the Trade Date. The
"Initial Collateral Requirement"
applicable to Counterparty shall
mean as of any Credit Support
Valuation Date:
<PAGE> 8
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 8 of 13
(i) if the Spot Price (as defined
below) on the Exchange
Business Day preceding the
relevant Credit Support
Valuation Date is equal to or
less than USD 2.00, then 100%
of the Collateral Notional
Amount (as determined on the
Exchange Business Day
preceding the relevant Credit
Support Valuation Date); or
(ii) otherwise, the lesser of (x)
35% of the Collateral
Notional Amount (as
determined on the Exchange
Business Day preceding the
relevant Credit Support
Valuation Date) and (y) 35%
of the Notional Amount of
this Transaction (which, as
described above, will be
adjusted in respect of
monthly Reset Dates) on the
Exchange Business Day
preceding the relevant Credit
Support Valuation Date.
For purposes of the foregoing,
the "Spot Price" means the
closing price per Share as quoted
on the Exchange at the Valuation
Time on the relevant Exchange
Business Day, provided, however,
that if there is a Market
Disruption Event on such date,
the Calculation Agent shall
determine a good faith estimate
of the price per Share that would
have prevailed but for the
occurrence of such Market
Disruption Event and the
"Collateral Notional Amount"
means the product of the Number
of Shares and the Spot Price on
the relevant Exchange Business
Day.
(c) These Collateral Provisions
shall be deemed a security
agreement, and notwithstanding
anything to the contrary contained
in the Executed Agreement or this
Confirmation, these provisions shall
be governed by the laws of the State
of New York, without giving effect
to the conflicts or choice of law
provisions thereof. Notwithstanding
anything to the contrary set forth
in this Confirmation or the Master
Agreement, in the event of any
inconsistency between the Master
Agreement and these Collateral
Provisions, the Master Agreement
shall prevail, except as set forth
in the preceding sentence. The
Pledgor hereby grants a first
priority continuing security
interest in all Collateral provided
hereunder and in any and all
substitutions therefor, proceeds
thereof and distributions thereon.
Interest on any cash Collateral held
hereunder shall be credited at a
rate equal to the "Federal Funds
(Effective)" rate as such rate is
displayed on Telerate page 118 for
such day under the caption
"Effective" for USD or the "EONIA"
as such rate is displayed on
Telerate Page 247 for such day for
Euro, as applicable. The amount of
interest calculated for each day of
the interest period shall be
compounded monthly. These Collateral
Provisions constitute a Credit
Support Document and the failure by
the Pledgor to deliver Collateral in
accordance with these Collateral
Provisions (if such failure is not
remedied on or before the Local
Business Day after notice of
<PAGE> 9
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 9 of 13
such failure is given to such party)
shall constitute an Event of Default
with respect to the Pledgor for
purposes of Section 5(a)(iii) of the
Master Agreement. For purposes of
these Collateral Provisions, the
term "Local Business Day" shall have
the meaning given such term in the
Master Agreement, except that
references to a payment in clause
(b) thereof will be deemed to
include a delivery or return of
Collateral hereunder.
3. ACCOUNT DETAILS AND
SETTLEMENT INFORMATION: PAYMENTS TO BEAR STEARNS:
[payment instructions for the
relevant currency.]
PAYMENTS TO COUNTERPARTY:
Please provide to expedite payment:
------------------------------------
------------------------------------
------------------------------------
ADDITIONAL PROVISIONS:
Agency. Counterparty acknowledges that Bear, Stearns & Co. Inc. ("BS&C") has
acted as agent for Counterparty solely for the purposes of arranging this
Transaction with its Affiliate, Bear Stearns. This Confirmation is being
provided by BS&C in such capacity. Upon your written request, BS&C will furnish
you with the time at which this Transaction was entered into.
Incorporation of Terms. For the avoidance of doubt, the parties agree that
Sections 5 and 6 of the Form Master Agreement are incorporated herein, and the
parties expressly specify that Market Quotation and Second Method shall apply
unless otherwise specified herein.
Non-Reliance. Each party represents to the other party that (a) it has not
received and is not relying upon any legal, tax, regulatory, accounting or other
advice (whether written or oral) of the other party regarding this Transaction,
other than representations expressly made by that other party in this
Confirmation and in the Master Agreement and (b) in respect of this Transaction,
(i) it has the capacity to evaluate (internally or through independent
professional advice) this Transaction and has made its own decision to enter
into this Transaction and (ii) it understands the terms, conditions and risks of
this Transaction and is willing to assume (financially and otherwise) those
risks. Counterparty acknowledges that Bear Stearns has advised Counterparty to
consult its own tax, accounting and legal advisors in connection with this
Transaction evidenced by this Confirmation and that the Counterparty has done
so.
Payment Date Netting. The parties agree that subparagraph (ii) of Section 2(c)
of the Master Agreement will not apply to any Transactions that are or will be
governed by the Master Agreement. Thus all amounts payable on the same date in
the same currency in respect of all Transactions shall be netted.
Governing Law: Unless otherwise specified in the Executed Master Agreement, the
laws of the State of New York, without reference to the choice or conflicts of
law principles thereof.
<PAGE> 10
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 10 of 13
Guaranty. The Guaranty of The Bear Stearns Companies Inc. ("TBSCI"), which will
be a Credit Support Document and which Bear Stearns will provide upon execution
of the Executed Master Agreement.
Termination Currency. Unless otherwise specified in the Executed Master
Agreement or agreed by the parties, USD shall be the Termination Currency.
Transfer. Unless otherwise specified in the Executed Master Agreement, either
party may transfer its rights and obligations under this Transaction in
accordance with Section 7 of the Master Agreement. However, (a) unless otherwise
specified in the Executed Master Agreement, Bear Stearns may also transfer its
rights and obligations under this Transaction, in whole or in part, to TBSCI or
any of its Affiliates, provided such Affiliate's obligations under this
Transaction shall be guaranteed by TBSCI to the same extent as the obligations
of Bear Stearns hereunder are so guaranteed and (b) unless otherwise specified
in the Executed Master Agreement, Counterparty may also transfer its rights and
obligations under this Transaction, in whole or in part, to a third party with
Bear Stearns's consent (such consent not to be unreasonably withheld).
Notwithstanding anything to the contrary, Bear Stearns may withhold such consent
solely upon any of the following bases: (i) such transferee's creditworthiness
would be weaker than that of Counterparty, (ii) Bear Stearns's failure to
negotiate acceptable credit terms (including terms relating to collateral) from
such transferee, (iii) the transfer would result in withholding tax from any
payments to be made by such transferee, (iv) an Event of Default has occurred
with respect to Counterparty or such a transfer will cause an Event of Default
to occur with respect to either party, (v) such transferee is in a jurisdiction
in which netting under the Master Agreement is not enforceable, and (vi) it
becomes unlawful for either party to perform any obligation under the Master
Agreement.
This Confirmation may be executed in several counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
Counterparty hereby agrees to check this Confirmation and to confirm that the
foregoing correctly sets forth the terms of the Transaction by signing in the
space provided below and returning to Bear Stearns a facsimile of the
fully-executed Confirmation to 212-272-9857. For inquiries regarding U.S.
Transactions, please contact SONYA NUGENT by telephone at 212-272-8273. For all
other inquiries please contact NIAMH ANSLEY by telephone at 353-1-402-6225.
Originals will be provided for your execution upon your request.
<PAGE> 11
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 11 of 13
We are very pleased to have executed this Transaction with you and we look
forward to completing other transactions with you in the near future.
Very truly yours,
BEAR, STEARNS INTERNATIONAL LIMITED
By:
-------------------------------
Name:
Title:
Counterparty, acting through its duly authorized signatory, hereby agrees to,
accepts and confirms the terms of the foregoing as of the Trade Date.
WESTGATE ENTERPRISE III, LLC
By:
-------------------------------
Name:
Title:
(Authorized Signatory)
<PAGE> 12
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 12 of 13
ELIGIBLE COLLATERAL ANNEX TO COLLATERAL PROVISIONS
<TABLE>
<CAPTION>
VALUATION
ELIGIBLE COLLATERAL PERCENTAGE
------------------- ----------
<S> <C>
Cash 100%
U.S. Treasuries (as defined below) having a remaining term to maturity of not
more than one year 100%
Direct Obligations of US-Government Sponsored Entities (as defined below) having
a remaining term to maturity of not more than one year 99%
U.S. Treasuries having a remaining term to maturity of more than one year but
not more than five years 99%
Direct Obligations of US-Government Sponsored Entities having a remaining term
to maturity of more than one year but not more than five years 98%
U.S. Treasuries having a remaining term to maturity of more than five years but
not more than ten years 99%
Direct Obligations of US-Government Sponsored Entities having a remaining term
to maturity of more than five years but not more than ten years 98%
U.S. Treasuries having a remaining term to maturity of more than ten years but
not more than twenty years 98%
Direct Obligations of US-Government Sponsored Entities having a remaining term
to maturity of more than ten years but not more than twenty years 97%
U.S. Treasuries having a remaining term to maturity of more than twenty years
but not more than thirty years 98%
Direct Obligations of US-Government Sponsored Entities having a remaining term
to maturity of more than twenty years but not more than thirty years 98%
</TABLE>
<PAGE> 13
Reference Number: [Number]- DRAFT
Westgate Enterprise III, LLC
[December 29, 2000]
Page 13 of 13
<TABLE>
<S> <C>
Mortgage participation certificates in book-entry form, the timely payment of
interest at the applicable certificate rate and the ultimate collection of
principal of which are guaranteed by the Federal Home Loan Mortgage Corporation
(excluding multi-class REMIC pass-through certificates and pass-through
certificates backed by adjustable rate mortgages and excluding securities paying
interest or principal only) 97%
Mortgage pass-through certificates in book-entry form, the full and timely
payment of interest at the applicable certificate rate and the ultimate
collection of principal of which are guaranteed by the Federal National Mortgage
Association (excluding multi-class REMIC pass-through certificates and
pass-through certificates backed by adjustable rate mortgages and excluding
securities paying interest or principal only) 97%
Fully modified pass-through certificates in book-entry form, the full and timely
payment of principal and interest of which are guaranteed by the Government
National Mortgage Association (excluding multi-class REMIC pass-through
certificates and pass-through certificates backed by adjustable rate mortgages
and excluding securities paying interest or principal only) 97%
</TABLE>
For the purposes of the Eligible Collateral Annex set forth above, the words
indicated below shall have the following definitions:
"US Treasuries" shall mean negotiable debt obligations issued by the United
States Treasury Department.
"Direct Obligations of US-Government Sponsored Entities" shall mean non-callable
negotiable debt obligations of the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association and Government National Mortgage
Association.
