Filed Pursuant to Rule 424(b)(5)
Registration No. 333-133852
This pricing supplement, which is not complete and may be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement is not an offer to sell these notes in any country or jurisdiction where such an offer would not be permitted.
Pricing Supplement No. Preliminary Pricing Supplement - Subject to Completion |
||
(To Prospectus dated May 5, 2006 and Series L Prospectus Supplement dated April 10, 2008) May 30, 2008 |
$
Minimum Return Equity Appreciation Growth LinkEd Securities Index EAGLES®,
due June 28, 2013, Linked to a Basket of Five Indices
| The notes are our unsecured senior notes. |
| We will not pay interest on the notes. |
| At maturity, you will receive the principal amount of the notes plus a Supplemental Redemption Amount (as defined below), which will be at least 5.00% of the principal amount of the notes, or $50 per $1,000 principal amount, for a total payment at maturity of at least $1,050. |
|
The Supplemental Redemption Amount will be based primarily upon the performance of a group, or Basket, of five selected stock indices over the term of the notes. The five stock indices are the Dow Jones Industrial AverageSM, the S&P MidCap 400 Index, the S&P SmallCap 600 Index, the Dow Jones EURO STOXX 50® Index, and the Nikkei 225 Index. We describe how to determine this amount beginning on page PS-4. |
| The notes will mature on June 28, 2013. |
| The notes are issued in minimum denominations of $1,000 and whole multiples of $1,000. |
| The notes will not be listed on any securities exchange. |
Per Note | Total | |||
Public offering price |
100.00% | $ | ||
Selling Agents commissions |
3.00% | |||
Proceeds (before expenses) |
97.00% | $ |
Our notes are unsecured and are not savings accounts, deposits, or other obligations of a bank. Our notes are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and involve investment risks. Potential purchasers of the notes should consider the information in Risk Factors beginning on page PS-19.
None of the Securities and Exchange Commission (the SEC), any state securities commission, or any other regulatory body has approved or disapproved of these notes or passed upon the adequacy or accuracy of this pricing supplement, the accompanying prospectus supplement, or the accompanying prospectus. Any representation to the contrary is a criminal offense.
We will deliver the notes in book-entry form only through The Depository Trust Company on or about June , 2008 against payment in immediately available funds.
Banc of America Securities LLC | Banc of America Investment Services, Inc. |
Selling Agents
Page | ||
PS-3 | ||
PS-19 | ||
PS-25 | ||
PS-26 | ||
PS-31 | ||
PS-56 | ||
PS-56 | ||
PS-62 |
Index EAGLES® is our federal service mark registration.
Dow Jones, Dow Jones Industrial AverageSM, and DJIASM are service marks of Dow Jones & Company, Inc. (Dow Jones) and have been licensed for use for certain purposes by us. Our notes based on the Dow Jones Industrial AverageSM are not sponsored, endorsed, sold, or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in the notes.
Standard & Poors®, S&P®, S&P MidCap 400 Index, Standard & Poors MidCap 400 Index, S&P SmallCap 600 Index, and Standard & Poors SmallCap 600 Index are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by us. The notes are not sponsored, endorsed, sold, or promoted by Standard & Poors® and Standard & Poors® makes no representation regarding the advisability of investing in the notes.
The Dow Jones EURO STOXX 50® Index is proprietary and copyrighted material. The Dow Jones EURO STOXX 50® Index and the related trademarks have been licensed for certain purposes by us. Neither STOXX Limited (STOXX) nor Dow Jones & Company, Inc. (Dow Jones) sponsors, endorses, or promotes notes based on the Dow Jones EURO STOXX 50® Index.
Nikkei 225 Index is a trade or service mark of Nikkei Inc. (formerly known as Nihon Keizai Shimbun, Inc.) and is licensed for use by us. The notes have not been passed on by Nikkei Inc. as to their legality or suitability. The notes are not issued, endorsed, sold, or promoted by Nikkei Inc. NIKKEI INC. MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE NOTES.
PS-2
This pricing supplement relates only to our notes and does not relate to the securities of any of the companies comprising the Basket described in this pricing supplement. This summary includes questions and answers that highlight selected information from the accompanying prospectus, prospectus supplement, and this pricing supplement to help you understand these notes. You should read carefully the entire prospectus, prospectus supplement, and pricing supplement to understand fully the terms of the notes, as well as the tax and other considerations important to you in making a decision about whether to invest in the notes. In particular, you should review carefully the section in this pricing supplement entitled Risk Factors, which highlights a number of risks, to determine whether an investment in the notes is appropriate for you. If information in this pricing supplement is inconsistent with the prospectus or prospectus supplement, this pricing supplement will supersede those documents.
Certain capitalized terms used and not defined in this pricing supplement have the meanings ascribed to them in the prospectus supplement and prospectus.
In light of the complexity of the transaction described in this pricing supplement, you are urged to consult with your own attorneys and business and tax advisors before making a decision to purchase any of the notes.
The information in this Summary section is qualified in its entirety by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying prospectus supplement and prospectus. You should rely only on the information contained in this pricing supplement, the accompanying prospectus supplement, and the prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor either of the selling agents is making an offer to sell these notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this pricing supplement, the accompanying prospectus supplement, and prospectus is accurate only as of the date on their respective front covers.
What are the notes?
The notes are senior debt securities issued by Bank of America Corporation, and are not secured by collateral. The notes rank equally with all of our other unsecured senior indebtedness from time to time outstanding. The notes will mature on June 28, 2013. We cannot redeem the notes at any earlier date. We will not make any payments on the notes until maturity.
Are the notes equity or debt securities?
The notes are our senior debt securities. However, these notes differ from traditional debt securities in that you will not receive interest payments and they contain a derivative component. Instead, at maturity you will receive (a) your principal amount, plus (b) an additional amount called the Supplemental Redemption Amount, as described below. The notes have been designed for investors who are willing to forgo market rates of interest on their investment, such as fixed interest rates paid on conventional non-callable debt securities.
PS-3
Will you receive your principal at maturity?
Yes. If you hold the notes until maturity, then you will receive your principal amount and a Supplemental Redemption Amount. However, if you sell the notes prior to maturity, you may find that the market value of the notes is less than the principal amount of the notes.
How much will you receive at maturity?
At maturity, you will receive the principal amount of the notes. You also will receive the Supplemental Redemption Amount, which will not be less than 5.00% of the principal amount of the notes at maturity. We call this minimum amount the Minimum Supplemental Redemption Amount. The Supplemental Redemption Amount will be based primarily upon the performance of the Basket during the term of the notes and will be determined by the calculation agent in the manner described below.
The Basket Indices are the five selected stock indices that make up the Basket that will be used to determine the Supplemental Redemption Amount. The Basket Indices are the Dow Jones Industrial AverageSM, the S&P MidCap 400 Index, the S&P SmallCap 600 Index, the Dow Jones EURO STOXX 50® Index, and the Nikkei 225 Index.
The calculation agent will determine the Supplemental Redemption Amount payable to you at maturity by reference to the periodic returns of the Basket during the following 20 Reference Periods:
2008/09 |
2009/10 |
2010/11 | ||
6/25/2008-9/25/2008 |
6/25/2009-9/25/2009 | 6/25/2010-9/25/2010 | ||
9/25/2008-12/25/2008 |
9/25/2009-12/25/2009 | 9/25/2010-12/25/2010 | ||
12/25/2008-3/25/2009 |
12/25/2009-3/25/2010 | 12/25/2010-3/25/2011 | ||
3/25/2009-6/25/2009 |
3/25/2010-6/25/2010 | 3/25/2011-6/25/2011 |
2011/12 |
2012/13 | |
6/25/2011-9/25/2011 |
6/25/2012-9/25/2012 | |
9/25/2011-12/25/2011 |
9/25/2012-12/25/2012 | |
12/25/2011-3/25/2012 |
12/25/2012-3/25/2013 | |
3/25/2012-6/25/2012 |
3/25/2013-6/25/2013 |
We expect to price the notes on June 25, 2008, or the pricing date. The pricing date is the first day of the first Reference Period. If we price the notes on a day other than June 25, 2008, the scheduled Reference Periods above will be adjusted accordingly, and you will be notified of the changes in the final pricing supplement.
The Basket Level is the hypothetical value of the Basket that is determined at the close of any business day (as defined below). The Basket Level equals the sum of the products of the closing level and the Index Ratio for each Basket Index. The Basket Level will be rounded to the nearest one-hundredth. Each Basket Index will represent a percentage of the Starting Level (as defined below) on the pricing date. For each Basket Index, we will set the
PS-4
Index Ratio on the pricing date by (a) multiplying 1,000 by the Index Weight for that Basket Index that is set forth in the table on page PS-27 and (b) dividing that product by the closing level of that Basket Index on the pricing date. The result will be rounded to the nearest one hundred-thousandth. The Index Ratio for each Basket Index is fixed as of the pricing date and is subject to change only if certain events or adjustments affect the relevant Basket Index, as described in this pricing supplement. See the section entitled Description of the NotesDiscontinuance of the Basket Indices; Alteration of Method of Calculation.
We refer to the last day of each Reference Period as a Reset Date. On each Reset Date, the calculation agent will determine the Periodic Return of the Basket Indices for the Reference Period then ended by applying the following formula:
(Ending Level - Starting Level)
Starting Level
The result will be rounded to the nearest ten-thousandth of a decimal place and then expressed as a percentage.
The Starting Level for the initial Reference Period will be 1,000, and the Starting Level for each subsequent Reference Period is the Ending Level for the immediately preceding Reference Period. The Ending Level for each Reference Period is the Basket Level on the applicable Reset Date, or if that day is not a business day (as defined below), the Basket Level on the next following business day.
Except for the payment of the principal amount and the Minimum Supplemental Redemption Amount at maturity, you will be exposed to unlimited declines in the Periodic Return for any Reference Period. On the pricing date, we will set a cap, or the Return Cap, which will limit any increases in the Periodic Return of the Basket to that rate. We currently expect that we will set the Return Cap between 6.00% and 8.00%, inclusive. For any Reference Period in which the Periodic Return is greater than the Return Cap, the Periodic Return for that Reference Period will be deemed to be the Return Cap, and for that Reference Period you will receive only the benefit of the increase in value up to the Return Cap.
The Basket Return
After the close of the Japanese, European, and U.S. markets on the last Reset Date, the calculation agent will determine the Supplemental Redemption Amount, which will not be less than the Minimum Supplemental Redemption Amount, based on the following formula:
Principal Amount x Basket Return
The Basket Return is the compounded value of the 20 Periodic Returns computed in the following manner:
[The product of (1.00 + the Periodic Return) for each Reference Period] - 1.00
The Basket Return will be rounded to the nearest ten-thousandth and then expressed as a percentage.
The period of time between the last Reset Date and the maturity date is not part of a Reference Period, and, therefore, changes in the Basket Level during that period will not affect the Supplemental Redemption Amount payable to you at maturity. If the calculation of the Supplemental Redemption Amount results in an amount that is less than the Minimum
PS-5
Supplemental Redemption Amount, then we will pay you a Supplemental Redemption Amount equal to the Minimum Supplemental Redemption Amount.
The notes provide less opportunity for appreciation than an investment tied directly to the performance of the Basket because the Return Cap limits the appreciation in the Basket Level used to calculate the Periodic Return. Because of the Return Cap, the Basket Return cannot be more than a range of approximately 286.97% to 460.44% (a maximum value that represents an increase of the Basket Level up to the Return Cap for each Reference Period).
You should consider the possibility that an investment in the notes will not result in a gain above the Minimum Supplemental Redemption Amount even if the Basket Level increases during one or more Reference Periods, or even if the Basket Level as of the final scheduled Reset Date is greater than the Basket Level on the pricing date.
PS-6
Examples
The Basket Return depends on the Basket Level as of each Reset Date. Because the Basket Level may be subject to significant variations over the term of the notes, it is not possible to present a chart or table illustrating a complete range of possible payments on the maturity date. The examples of hypothetical payment calculations that follow are intended to illustrate the effect of general trends in the Basket Level on the Supplemental Redemption Amount payable at maturity for each $1,000 principal amount of the notes. Because these examples are based on hypothetical terms and assumptions, such as the hypothetical specific Basket Levels as of the indicated Reset Dates and a hypothetical Return Cap, which may not reflect the actual terms of the notes or the performance of the Basket during the term of the notes, the returns set forth in the tables may not reflect the actual returns. Each of the hypothetical examples is based upon:
| the Starting Level of 1,000; |
| a hypothetical Return Cap of 8.00%; |
| the Minimum Supplemental Redemption Amount of 5.00% of the principal amount of notes; and |
| Reference Periods ending on the 25th day of the months indicated. |
In each example set forth below, for any Reference Period where the indicated Periodic Return is in excess of 8.00%, the Periodic Return for that Reference Period used in the calculation of the Basket Return shall be the hypothetical Return Cap of 8.00%. The Basket Levels illustrated in each example have been rounded to the nearest whole number. The pretax annualized rates of return in each example assume that the notes were purchased in the original public offering and are calculated on the basis of a 360-day year of twelve 30-day months, with annual compounding.
PS-7
Example 1: The Basket Level as of the final scheduled Reset Date is greater than the Starting Level, and the appreciation of the Basket Level, or the Periodic Return, is 2.00% (an amount less than the hypothetical Return Cap) during each Reference Period throughout the term of the notes:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,020 | 2.00% | 8.00% | 1,104 | 2.00% | 8.00% | 1,195 | 2.00% | 8.00% | |||||||||
December |
1,040 | 2.00% | 8.00% | 1,126 | 2.00% | 8.00% | 1,219 | 2.00% | 8.00% | |||||||||
March |
1,061 | 2.00% | 8.00% | 1,149 | 2.00% | 8.00% | 1,243 | 2.00% | 8.00% | |||||||||
June |
1,082 | 2.00% | 8.00% | 1,172 | 2.00% | 8.00% | 1,268 | 2.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
1,294 | 2.00% | 8.00% | 1,400 | 2.00% | 8.00% | ||||||||||||
December
|
1,319 | 2.00% | 8.00% | 1,428 | 2.00% | 8.00% | ||||||||||||
March |
1,346 | 2.00% | 8.00% | 1,457 | 2.00% | 8.00% | ||||||||||||
June |
1,373 | 2.00% | 8.00% | 1,486 | 2.00% | 8.00% |
Basket Return = [(1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x
(1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x
(1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02) x (1.00+0.02)] minus
1.00 = 0.4859 or 48.59%
Supplemental Redemption Amount = $1,000.00 x 0.4859 = $485.90
Total payment at maturity = $1,000.00 + $485.90 = $1,485.90 per note
Pretax annualized rate of return: 8.24%
PS-8
Example 2: The Basket Level as of the final scheduled Reset Date is greater than the Starting Level, and the appreciation of the Basket Level, or the Periodic Return, is 8.00% (an amount equal to the hypothetical Return Cap) during each Reference Period throughout the term of the notes:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,080 | 8.00% | 8.00% | 1,469 | 8.00% | 8.00% | 1,999 | 8.00% | 8.00% | |||||||||
December |
1,166 | 8.00% | 8.00% | 1,587 | 8.00% | 8.00% | 2,159 | 8.00% | 8.00% | |||||||||
March |
1,260 | 8.00% | 8.00% | 1,714 | 8.00% | 8.00% | 2,332 | 8.00% | 8.00% | |||||||||
June |
1,360 | 8.00% | 8.00% | 1,851 | 8.00% | 8.00% | 2,518 | 8.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
2,720 | 8.00% | 8.00% | 3,700 | 8.00% | 8.00% | ||||||||||||
December
|
2,937 | 8.00% | 8.00% | 3,996 | 8.00% | 8.00% | ||||||||||||
March |
3,172 | 8.00% | 8.00% | 4,316 | 8.00% | 8.00% | ||||||||||||
June |
3,426 | 8.00% | 8.00% | 4,661 | 8.00% | 8.00% |
Basket Return = [(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08)] minus 1.00 = 3.6610 or 336.10%
Supplemental Redemption Amount = $1,000.00 x 3.6610% = $3,661.00
Total payment at maturity = $1,000.00 + $3,661.00 = $4,661.00 per note
Pretax annualized rate of return: 36.03%
PS-9
Example 3: In this example, for the Reference Periods where the Periodic Returns are in excess of 8.00%, the Periodic Returns for those Reference Periods used in the calculation of the Basket Return shall be the hypothetical Return Cap of 8.00%. The Basket Level as of the final scheduled Reset Date is greater than the Starting Level, and the appreciation of the Basket Level, or the Periodic Return, is 10.00% (an amount greater than the hypothetical Return Cap) during each Reference Period throughout the term of the notes:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,100 | 10.00% | 8.00% | 1,611 | 10.00% | 8.00% | 2,358 | 10.00% | 8.00% | |||||||||
December |
1,210 | 10.00% | 8.00% | 1,772 | 10.00% | 8.00% | 2.594 | 10.00% | 8.00% | |||||||||
March |
1,331 | 10.00% | 8.00% | 1,949 | 10.00% | 8.00% | 2,853 | 10.00% | 8.00% | |||||||||
June |
1,464 | 10.00% | 8.00% | 2,144 | 10.00% | 8.00% | 3,138 | 10.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
3,452 | 10.00% | 8.00% | 5,054 | 10.00% | 8.00% | ||||||||||||
December
|
3,797 | 10.00% | 8.00% | 5,560 | 10.00% | 8.00% | ||||||||||||
March |
4,177 | 10.00% | 8.00% | 6,116 | 10.00% | 8.00% | ||||||||||||
June |
4,595 | 10.00% | 8.00% | 6,727 | 10.00% | 8.00% |
Basket Return = [(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08)] minus 1.00 = 3.6610 or 336.10%
Supplemental Redemption Amount = $1,000.00 x 3.6610 = $3,661.00
Total payment at maturity = $1,000.00 + $3,661.00 = $4,661.00 per note
Pretax annualized rate of return: 36.03%
PS-10
Example 4: The Basket Level as of the final scheduled Reset Date is less than the Starting Level, and the Periodic Return declined throughout the term of the notes:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
980 | -2.00% | 8.00% | 904 | -2.00% | 8.00% | 834 | -2.00% | 8.00% | |||||||||
December |
960 | -2.00% | 8.00% | 886 | -2.00% | 8.00% | 817 | -2.00% | 8.00% | |||||||||
March |
941 | -2.00% | 8.00% | 868 | -2.00% | 8.00% | 801 | -2.00% | 8.00% | |||||||||
June |
922 | -2.00% | 8.00% | 851 | -2.00% | 8.00% | 785 | -2.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
769 | -2.00% | 8.00% | 709 | -2.00% | 8.00% | ||||||||||||
December
|
754 | -2.00% | 8.00% | 695 | -2.00% | 8.00% | ||||||||||||
March |
739 | -2.00% | 8.00% | 681 | -2.00% | 8.00% | ||||||||||||
June |
724 | -2.00% | 8.00% | 668 | -2.00% | 8.00% |
Basket Return = [(1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x
(1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x
(1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x (1.00+ -0.02) x
(1.00+ -0.02) x (1.00+ - -0.02) x (1.00+ -0.02)] minus 1.00 = -0.3324 or -33.24%
Supplemental Redemption Amount = $50.00, the Minimum Supplemental Redemption Amount
Total payment at maturity = $1,000.00 + $50.00 = $1,050.00 per note
Pretax annualized rate of return: 0.98%
PS-11
Example 5: The Basket Level as of the final scheduled Reset Date is less than the Starting Level, and the Periodic Return increased in half of the Reference Periods and decreased in the other half of the Reference Periods, with the magnitude of each decrease being greater than the magnitude of each increase:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,080 | 8.00% | 8.00% | 1,469 | 8.00% | 8.00% | 1,999 | 8.00% | 8.00% | |||||||||
December |
1,166 | 8.00% | 8.00% | 1,587 | 8.00% | 8.00% | 2,159 | 8.00% | 8.00% | |||||||||
March |
1,260 | 8.00% | 8.00% | 1,714 | 8.00% | 8.00% | 1,943 | -10.00% | 8.00% | |||||||||
June |
1,360 | 8.00% | 8.00% | 1,851 | 8.00% | 8.00% | 1,749 | -10.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
1,574 | -10.00% | 8.00% | 1,033 | -10.00% | 8.00% | ||||||||||||
December
|
1,416 | -10.00% | 8.00% | 929 | -10.00% | 8.00% | ||||||||||||
March |
1,275 | -10.00% | 8.00% | 836 | -10.00% | 8.00% | ||||||||||||
June |
1,147 | -10.00% | 8.00% | 753 | -10.00% | 8.00% |
Basket Return = [(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x
(1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+0.08) x (1.00+ -0.10) x
(1.00+ -0.10) x (1.00+ -0.10) x (1.00+ -0.10) x (1.00+ -0.10) x (1.00+ -0.10) x (1.00+ -0.10) x
(1.00+ -0.10) x (1.00+ -0.10) x (1.00+ -0.10)] minus 1.00 = -0.2472 or -24.72%
Supplemental Redemption Amount = $50.00, the Minimum Supplemental Redemption Amount
Total payment at maturity = $1,000.00 + $50.00 = $1,050.00 per note
Pretax annualized rate of return: 0.98%
PS-12
Example 6: The Basket Level as of the final scheduled Reset Date is greater than the Starting Level, and the Periodic Return fluctuated during the term of the notes, increasing in one-half of the Reference Periods and decreasing in the other one-half of the Reference Periods, with the magnitude of each increase being greater than the magnitude of each decrease:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,080 | 8.00% | 8.00% | 1,137 | 8.00% | 8.00% | 1,197 | 8.00% | 8.00% | |||||||||
December |
1,166 | 8.00% | 8.00% | 1,228 | 8.00% | 8.00% | 1,293 | 8.00% | 8.00% | |||||||||
March |
1,108 | -5.00% | 8.00% | 1,166 | -5.00% | 8.00% | 1,228 | -5.00% | 8.00% | |||||||||
June |
1,053 | -5.00% | 8.00% | 1,108 | -5.00% | 8.00% | 1,166 | -5.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
1,260 | 8.00% | 8.00% | 1,326 | 8.00% | 8.00% | ||||||||||||
December
|
1,361
|
8.00%
|
8.00%
|
1,432
|
8.00%
|
8.00%
|
||||||||||||
March |
1,293 | -5.00% | 8.00% | 1,361 | -5.00% | 8.00% | ||||||||||||
June |
1,228 | -5.00% | 8.00% | 1,293 | -5.00% | 8.00% |
Basket Return = [(1.00+0.08) x (1.00+0.08) x (1.00+ -0.05) x (1.00+ -0.05) x (1.00+0.08) x
(1.00+0.08) x (1.00+ -0.05) x (1.00+ -0.05) x (1.00+0.08) x (1.00+0.08) x (1.00+ -0.05) x
(1.00+ -0.05) x (1.00+0.08) x (1.00+0.08) x (1.00+ -0.05) x (1.00+ -0.05) x (1.00+0.08) x
(1.00+0.08) x (1.00+ -0.05) x (1.00+ -0.05)] minus 1.00 = 0.2926 or 29.26%
Supplemental Redemption Amount = $1,000.00 x 0.2926 = $292.60
Total payment at maturity = $1,000.00 + $292.60 = $1,292.60 per note
Pretax annualized rate of return: 5.26%
PS-13
Example 7: In this example, for the Reference Periods where the Periodic Returns are in excess of 8.00%, the Periodic Returns for those Reference Periods used in the calculation of the Basket Return shall be the hypothetical Return Cap of 8.00%. The Basket Level as of the final scheduled Reset Date is greater than the Starting Level, and the Periodic Return fluctuated during the term of the notes, increasing in three-fourths of the Reference Periods and decreasing in the other one-fourth, with a wide variance in the magnitude of the increases:
2008/09 | 2009/10 | 2010/11 | ||||||||||||||||
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap |
Basket Level |
Periodic Return |
Return Cap | ||||||||||
September |
1,030 | 3.00% | 8.00% | 1,049 | 3.00% | 8.00% | 1,068 | 3.00% | 8.00% | |||||||||
December |
1,061 | 3.00% | 8.00% | 1,080 | 3.00% | 8.00% | 1,100 | 3.00% | 8.00% | |||||||||
March |
849 | -20.00% | 8.00% | 864 | -20.00% | 8.00% | 880 | -20.00% | 8.00% | |||||||||
June |
1,018 | 20.00% | 8.00% | 1,037 | 20.00% | 8.00% | 1,056 | 20.00% | 8.00% | |||||||||
2011/12 | 2012/13 | |||||||||||||||||
Basket Level
|
Periodic Return
|
Return Cap
|
Basket Level
|
Periodic Return
|
Return Cap
|
|||||||||||||
September |
1,088 | 3.00% | 8.00% | 1,108 | 3.00% | 8.00% | ||||||||||||
December
|
1,121 | 3.00% | 8.00% | 1,141 | 3.00% | 8.00% | ||||||||||||
March |
897 | -20.00% | 8.00% | 913 | -20.00% | 8.00% | ||||||||||||
June |
1,076 | 20.00% | 8.00% | 1,096 | 20.00% | 8.00% |
Basket Return = [(1.00+0.03) x (1.00+0.03) x (1.00+ -0.20) x (1.00+0.08) x (1.00+0.03) x
(1.00+0.03) x (1.00+ -0.20) x (1.00+0.08) x (1.00+0.03) x (1.00+0.03) x (1.00+ -0.20) x
(1.00+0.08) x (1.00+0.03) x (1.00+0.03) x (1.00+ -0.20) x (1.00+0.08) x (1.00+0.03) x
(1.00+0.03) x (1.00+ -0.20) x (1.00+0.08)] minus 1.00 = -0.3824 or -38.24%
Supplemental Redemption Amount = $50.00, the Minimum Supplemental Redemption Amount
Total payment at maturity = $1,000.00 + $50.00 = $1,050.00 per note
Pretax annualized rate of return: 0.98%
PS-14
Who will determine the Supplemental Redemption Amount and the amounts due at maturity?
A calculation agent will make all the calculations associated with determining the Supplemental Redemption Amount and the amounts due at maturity. We have appointed our subsidiary, Banc of America Securities LLC, or BAS, to act as calculation agent. See the section entitled Description of the NotesRole of the Calculation Agent.
Who publishes the Basket Indices and what do the Basket Indices measure?
The DJIASM is published by Dow Jones, and is maintained and reviewed by the editors of The Wall Street Journal. The DJIASM is a widely followed indicator of the pattern of price movements in U.S. equities. The value of the DJIASM is based on the stock prices of 30 blue-chip companies.
Standard & Poors®, a division of The McGraw-Hill Companies, Inc., or S&P®, publishes the S&P MidCap 400 Index. The S&P MidCap 400 Index is intended to provide a benchmark for performance measurement of the medium capitalization segment of the U.S. equity markets. It tracks the stock price movement of 400 companies with mid-sized market capitalizations, primarily ranging from $1.5 billion to $5.5 billion.
Standard & Poors®, a division of The McGraw-Hill Companies, Inc., or S&P®, publishes the S&P SmallCap 600 Index. The S&P SmallCap 600 Index is intended to provide a benchmark for performance measurement of the small capitalization segment of the U.S. equity markets. It tracks the stock price movement of 600 companies with small market capitalizations, primarily ranging from $300 million to $2.0 billion.
The Dow Jones EURO STOXX 50® Index is published by STOXX and is a capitalization-weighted index of the stocks of 50 highly-capitalized European companies.
The Nikkei 225 Index is a stock index published by Nikkei Inc. that measures the composite price performance of selected Japanese stocks.
How have the Basket Indices performed historically?
There has been significant volatility in the levels of the Basket Indices. The applicable tables in the section The Basket Indices show the quarterly performance of the Basket Indices since the first calendar quarter of 2004. We have provided this historical information to help you evaluate the behavior of the Basket Indices in recent periods. However, it is not possible to accurately predict how the Basket Indices or the notes will perform in the future. Past performance of the Basket Indices is not necessarily indicative of future results for any other period.
How will you be able to find the level of each of the Basket Indices?
You can obtain the DJIASM level from the Bloomberg® service under the symbol ^DJI, from the Dow Jones website, at www.djindexes.com, as well as from The New York Times, The Wall Street Journal, and the Financial Times.
You can obtain the S&P MidCap 400 Index level from the Bloomberg® service under the symbol MID, the S&P® website, www.standardandpoors.com, as well as from The New York Times and The Wall Street Journal.
PS-15
You can obtain the S&P SmallCap 600 Index level from the Bloomberg® service under the symbol SML, the S&P® website, www.standardandpoors.com, as well as from The New York Times and The Wall Street Journal.
You can obtain the Dow Jones EURO STOXX 50® Index level from the Bloomberg® service under the symbol SX5E, the STOXX website, www.stoxx.com/index.html, from the Dow Jones website, www.djindexes.com, as well as from The Wall Street Journal and the Financial Times.
You can obtain the Nikkei 225 Index level from the Bloomberg® service under the symbol NKY, from the NKS website, www.nni.nikkei.co.jp, as well as from The Wall Street Journal and the Financial Times.
Will you have an ownership interest in the stocks that are included in the Basket Indices?
No. An investment in the notes does not entitle you to any ownership interest, including any voting rights, dividends paid, or other distributions, in the stocks of any of the companies included in any Basket Index.
Who are the selling agents for the notes?
Our subsidiaries, BAS and Banc of America Investment Services, Inc., or BAI, are acting as our selling agents in connection with this offering and will receive a commission based on the total principal amount of notes sold. In this capacity, neither of the selling agents is your fiduciary or advisor, and you should not rely upon any communication from either selling agent in connection with the notes as investment advice or a recommendation to purchase the notes. You should make your own investment decision regarding the notes after consulting with your legal, tax, and other advisors.
How are the notes being offered?
BAS and BAI are offering the notes, as selling agents, to selected investors on a best efforts basis. We have registered the notes with the SEC in the U.S. However, we are not registering the notes for public distribution in any jurisdiction other than the U.S. The selling agents may solicit offers to purchase the notes from non-U.S. investors in reliance on available private placement exemptions. See the section Supplemental Plan of DistributionSelling Restrictions in the attached prospectus supplement.
Are the notes exchange-traded funds?
No. The notes are not part of an exchange-traded fund. The value of the notes will not rise or fall at the same rate, or in the same manner, as the Basket Indices. We do not expect the notes to trade with the same volume or liquidity as certain exchange-traded funds.
How are the notes treated for U.S. federal income tax purposes?
Although the matter is not free from doubt, for U.S. federal income tax purposes, the notes should be treated as debt instruments that provide for contingent interest. As a result, the notes are considered to be issued with original issue discount, or OID. See U.S. Federal Income Tax SummaryTax Characterization of the Notes.
PS-16
You will be required to pay taxes on the notes over their term based upon a comparable yield for the notes, even though you will not receive any payments until maturity. We have determined this comparable yield in accordance with regulations issued by the U.S. Treasury Department, solely in order for you to determine the amount of taxes that you will owe each year as a result of your ownership of the notes. This comparable yield is neither a prediction nor a guarantee of what the actual Supplemental Redemption Amount will be, or whether the actual Supplemental Redemption Amount will exceed the Minimum Supplemental Redemption Amount. Based on current market conditions, we have determined that the current estimated comparable yield will equal 5.00% per annum, compounded annually. However, the estimated comparable yield may change between the date of this preliminary pricing supplement and the pricing date. The comparable yield determined on the pricing date will be set forth in the final pricing supplement.
Additionally, you generally will be required to recognize ordinary income on any gain realized on a sale, upon maturity, or upon another disposition of the notes. See the section entitled U.S. Federal Income Tax Summary.
If you are a Non-U.S. Holder, payments on the notes generally will not be subject to U.S. federal income or withholding tax, as long as you provide us with the required completed tax forms.
Will the notes be listed on an exchange?
No. The notes will not be listed on any securities exchange, and a market for them may never develop.
Can the Reset Dates and the stated maturity date be postponed if a Market Disruption Event occurs?
Yes. If the calculation agent determines that, on any Reset Date, a Market Disruption Event (as defined below) has occurred or is continuing as to one or more Basket Indices, the determination of the closing level of the applicable Basket Index or Indices will be postponed until the first trading day (as defined below) on which no Market Disruption Event occurs or is continuing, but the delay will never be more than five business days. If any determination as to a Basket Index is postponed to the last possible day, but a Market Disruption Event occurs or is continuing on that day, the determination of its closing level will nevertheless be made on that date. If the closing level of that Basket Index is not available on that last possible day, either because of a Market Disruption Event or for any other reason, the calculation agent will make a good faith estimate of the closing level of the applicable Basket Index based on its assessment, made in its sole discretion, of the level of that Basket Index at that time. If the determination of the closing level of one or more Basket Indices is postponed due to a Market Disruption Event on the last scheduled Reset Date, the maturity date for the notes also will be postponed by the same number of business days. See the section entitled Description of the NotesMarket Disruption.
Does ERISA impose any limitations on purchases of the notes?
Yes. An employee benefit plan subject to the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974 (commonly referred to as ERISA) or a plan that is subject to Section 4975 of the Internal Revenue Code, or the Code, including individual retirement accounts, individual retirement annuities or Keogh plans, or any entity the assets of which are deemed to be plan assets under the ERISA regulations, should not purchase, hold, or dispose of the notes unless that plan or entity has determined that its purchase, holding, or disposition of the notes will not constitute a prohibited transaction under ERISA or Section 4975 of the Code.
PS-17
Any plan or entity purchasing the notes will be deemed to be representing that it has made that determination, or that a prohibited transaction class exemption (PTCE) or other statutory or administrative exemption exists and can be relied upon by that plan or entity. See the section entitled ERISA Considerations.
Are there any risks associated with my investment?
Yes. An investment in the notes is subject to risk. Please refer to the section entitled Risk Factors in this pricing supplement and page S-4 of the attached prospectus supplement.
PS-18
Your investment in the notes entails significant risks. Your decision to purchase the notes should be made only after carefully considering the risks of an investment in the notes, including those discussed below, with your advisors in light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the notes or financial matters in general.
Your yield may be less than the yield on a conventional debt security of comparable maturity. There will be no periodic payments of interest on the notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. Instead, the rate of return primarily is based on the future performance of the Basket Indices. We cannot assure you that the Basket Return will be positive. If the Basket Return is 5.00% or less, the Supplemental Redemption Amount to be paid at maturity will be the Minimum Supplemental Redemption Amount. Under such circumstances, you will receive only the principal amount and the Minimum Supplemental Redemption Amount at maturity. Any yield on your investment above the principal amount of your note may be less than the overall return you would earn if you had purchased a conventional debt security with the same maturity date. Your investment return may not reflect the full opportunity cost to you when you consider factors that affect the time value of money.
Your investment return is limited and may be less than a comparable investment directly in the Basket Indices or the stocks included in the Basket Indices. If the Basket Level declines during any Reference Period during the term of the notes, the Periodic Return for that Reference Period will be less than zero. The Basket Return is based on the compounded value of the Periodic Returns during the 20 Reference Periods. This has a cumulative negative effect as the number of negative Periodic Return values increases prior to the maturity date of the notes. The likelihood that you will receive only the principal amount and the Minimum Supplemental Redemption Amount increases as the number of negative Periodic Return values increases and as the decline of the Basket Level in any Reference Period increases. You may receive only the principal amount and the Minimum Supplemental Redemption Amount even if the Basket Level increases during one or more Reference Periods during the term of the notes or if the Basket Level as of the final scheduled Reset Date exceeds its level on the pricing date. In fact, if the Basket Level declines in any single Reference Period by a range of approximately 70.97% to 79.58% or more, you will receive only the Minimum Supplemental Redemption Amount, regardless of the amount of the increases in the Basket Level in other Reference Periods. In that case, at maturity, you would receive only the principal amount of the notes and the Minimum Supplemental Redemption Amount. See the section entitled Description of the NotesPayment at Maturity; Supplemental Redemption Amount. In addition, due to the Return Cap, the return on your investment in the notes may not fully reflect any increase in the market values of the stocks included in the Basket Indices. Finally, a direct investment in the stocks included in the Basket Indices would allow you to receive the full benefit of any appreciation in the price of those shares, as well as in any dividends paid by or distributions made on those shares.
We cannot assure you that a trading market for the notes will ever develop or be maintained. We will not list the notes on any securities exchange. We cannot predict how the notes will trade in the secondary market, or whether that market will be liquid or illiquid. The number of potential buyers of the notes in any secondary market may be limited. BAS currently intends to act as a market-maker for the notes, but it is not required to do so. BAS may discontinue its market-making activities at any time.
To the extent that BAS engages in any market-making activities, it may bid for or offer the notes. Any price at which BAS may bid for, offer, purchase, or sell any notes may differ from the values determined by pricing models that may be used by BAS, whether as a result of
PS-19
dealer discounts, mark-ups, or other transaction costs. These bids, offers, or completed transactions may affect the prices, if any, at which the notes might otherwise trade in the market.
In addition, if at any time BAS were to cease acting as a market-maker, it is likely that there would be significantly less liquidity in the secondary market, in which case the price at which the notes could be sold likely would be lower than if an active market existed.
If you attempt to sell the notes prior to maturity, the market value of the notes, if any, may be less than the principal amount of the notes. Unlike savings accounts, certificates of deposit, and other similar investment products, you have no right to redeem the notes prior to maturity. If you wish to liquidate your investment in the notes prior to maturity, your only option would be to sell the notes. At that time, there may be a very illiquid market for the notes or no market at all. Even if you were able to sell your notes, there are many factors outside of our control that may affect the market value of the notes, some of which, but not all, are stated below. Some of these factors are interrelated in complex ways. As a result, the effect of any one factor may be offset or magnified by the effect of another factor. The following paragraphs describe the expected impact on the market value of the notes given a change in a specific factor, assuming all other conditions remain constant.
|
The Basket Indices. Because the total amount payable at maturity is tied to the Basket Level on the pricing date and on each of the Reset Dates, the market value of the notes at any time will depend on the closing levels of the Basket Indices. The Basket Level is primarily influenced by the operational results, creditworthiness, and dividend rates, if any, of the companies represented by the component stocks of the Basket Indices, and by complex and interrelated political, economic, financial, and other factors that affect the capital markets generally, the markets on which these stocks are traded, and the market segments of which these companies are a part. The policies of Dow Jones, S&P®, STOXX, and Nikkei Inc. (collectively, the Index Sponsors) concerning additions, deletions, and substitutions of the stocks underlying the Basket Indices and the manner in which the Index Sponsors take account of certain changes affecting these stocks may affect the Basket Level. The policies of the Index Sponsors with respect to the calculation of the Basket Indices also could affect the Basket Level. One or more of the Index Sponsors may discontinue or suspend the calculation or dissemination of the applicable Basket Index or Basket Indices. Any of these actions could affect the value of the notes. See the section entitled The Basket Indices. It is impossible to predict whether the Basket Level will rise or fall. |
| Impact of the Basket Indices on the Value of the Notes. We anticipate that the market value of the notes, if any, will depend substantially on the Basket Level as of each Reset Date. Even if the Basket Level increases after the pricing date, if you are able to sell your notes before the maturity date, you may receive substantially less than the amount that would be payable at maturity based on that value because of the anticipation that the Basket Level will continue to fluctuate until the Basket Return is determined. If you sell your notes when the Basket Level is less than, or not sufficiently above, the Starting Level, you may receive less than the principal amount of your notes. In general, the market value of the notes will decrease as the Basket Level decreases, and increase as the Basket Level increases. It is impossible to predict whether the Basket Level will rise or fall. However, as the Basket Level increases or decreases, the market value of the notes is not expected to increase or decrease at the same rate as that change in the Basket Level. Because your return is calculated based upon the Periodic Returns for each Reference Period, an increase in the Basket Level in one or more Reference Periods may be offset by a decrease in its level in one or more other Reference Periods. |
PS-20
| Volatility of the Basket Indices. Volatility is the term used to describe the size and frequency of market fluctuations. Volatility of the Basket Indices may affect the market value of the notes. The volatility of the Basket Indices during the term of the notes may vary. The generally unsettled international environment and related uncertainties may result in greater market volatility. This volatility may increase the risk that the Basket Level will decline, which would negatively affect the market value of the notes and your yield. |
| Economic and Other Conditions Generally. The general economic conditions of the capital markets in the U.S., Europe, and Japan, as well as geopolitical conditions and other financial, political, regulatory, and judicial events that affect the international stock markets generally, may affect the Basket Level and the value of the notes. |
| Interest Rates. We expect that changes in interest rates will affect the market value of the notes. In general, if U.S. interest rates increase, we expect that the market value of the notes will decrease and, conversely, if U.S. interest rates decrease, we expect that the market value of the notes will increase. The level of prevailing interest rates also may affect the U.S. economy, and, in turn, the Basket Level. |
| Dividend Yields. In general, if dividend yields on the stocks included in the Basket Indices increase, we anticipate that the market value of the notes will decrease and, conversely, if dividend yields on these stocks decrease, we anticipate that the market value of the notes will increase. |
| Volatility of Exchange Rates. The U.S. dollar/euro and U.S. dollar/Japanese yen exchange rates are the spot foreign currency exchange rates that reflect the relative value of the U.S. dollar and these other currencies. These rates represent the amount of U.S. dollars that can be exchanged, on a spot basis, for one unit of each of these other currencies. These exchange rates increase when the U.S. dollar decreases in value relative to the applicable currency and decrease when the U.S. dollar increases in value relative to that currency. Changes in the volatility of these exchange rates could have a negative impact on the market value of the notes. |
|
Relationship Between Exchange Rates and the Basket Indices. The correlation between the U.S. dollar/euro exchange rate and the Dow Jones EURO STOXX 50® Index reflects the extent to which a percentage change in the U.S. dollar/euro exchange rate corresponds to a percentage change in the Dow Jones EURO STOXX 50® Index. The correlation between the U.S. dollar/Japanese yen exchange rate and the Nikkei 225 Index reflects the extent to which a percentage change in the U.S. dollar/Japanese yen exchange rate corresponds to a percentage change in the Nikkei 225 Index. Changes in these correlations may have a negative impact on the value of the notes. |
| Time to Maturity. As the time remaining to maturity of the notes decreases, the time premium associated with the notes may decrease. We anticipate that before their maturity, the notes may have a market value above that which would be expected based on the levels of market interest rates and the Basket Indices. This difference will reflect a time premium due to expectations concerning the Basket Level during the period before the maturity date of the notes. However, as the time remaining to the maturity of the notes decreases, we expect that this time premium may decrease, lowering the market value of the notes. |
In general, assuming all relevant factors are held constant, we anticipate that the effect on the market value of the notes of a given change in most of the factors listed above will be less if it occurs later in the term of the notes than if it occurs earlier in their term.
PS-21
Changes in the level of one or more of the Basket Indices may be offset by changes in the level of the other Basket Indices. A change in the level of one Basket Index may not correlate with changes in the other Basket Indices. The level of one or more of the Basket Indices may increase, while the level of one or more of the other Basket Indices may not increase as much, or may even decline in value. Therefore, in calculating the Basket Level as of any time, particularly as of any Reset Date, increases in the level of one or more Basket Indices may be moderated, or wholly offset, by lesser increases or declines in the level of one or more of the other Basket Indices. In particular, declines in the level of the DJIASM could be particularly adverse to the value of the notes, due to the relatively high Index Weight of this Basket Index.
Your investment in the notes is subject to risks resulting from investing in foreign markets. Your return on the notes depends to a significant extent upon the performance of the Dow Jones EURO STOXX 50® Index, which is an index based on the stocks of European issuers, and the performance of the Nikkei 225 Index, which is an index based on the stocks of Japanese issuers. As a result, an investment in the notes involves considerations that may not be associated with a security linked to indices based solely on the stocks of U.S. issuers. The considerations relate to European and Japanese market factors generally, and may include, for example, different accounting requirements and regulations, different securities trading rules and conventions, and different and, in some cases, more adverse, economic environments.
Your return will not be adjusted for changes in currency exchange rates. Although the stocks included in the Dow Jones EURO STOXX 50® Index and the Nikkei 225 Index are traded principally in foreign currencies, the notes are denominated in U.S. dollars. The amount payable on the notes at maturity will not be adjusted as a result of changes in the U.S. dollar/euro and U.S. dollar/Japanese yen exchange rates with respect to the U.S. dollar. Any amount in addition to the principal amount of each note payable to you at maturity is based solely upon the Basket Level. Changes in one or both of these exchange rates may reflect changes in the European and Japanese economies, which in turn may affect the value of the applicable Basket Index, the Basket Level, and the notes.
Changes in our credit ratings are expected to affect the value of the notes. Our credit ratings are an assessment by ratings agencies of our ability to pay our obligations. Consequently, actual or anticipated changes in our credit ratings prior to the maturity date of the notes may affect the notes value. However, because your return on the notes depends upon factors in addition to our ability to pay our obligations, such as the percentage increase in the Basket Level during each of the 20 Reference Periods, an improvement in our credit ratings will not reduce the other investment risks related to the notes.
Hedging activities may affect the Supplemental Redemption Amount and the market value of the notes. Hedging activities in which we or one or more of our affiliates, including the selling agents, may engage may affect the Basket Level. Accordingly, our hedging activities may increase or decrease the market value of the notes prior to maturity and the Supplemental Redemption Amount you would receive at maturity. In addition, we or one or more of our affiliates, including the selling agents, may purchase or otherwise acquire a long or short position in the notes. We or any of our affiliates, including the selling agents, may hold or resell the notes. Although we have no reason to believe that any of those activities will have a material impact on the Basket Level, we cannot assure you that these activities will not affect that level and the market value of the notes prior to maturity or the Supplemental Redemption Amount payable at maturity.
You have no shareholder rights, have no rights to receive any of the stocks included in any Basket Index, and are not entitled to dividends or other distributions by the issuers of these stocks. The notes are our debt securities. They are not equity
PS-22
instruments or shares of stock. Investing in the notes will not make you a holder of any of the stocks included in the Basket Indices. You will not have any voting rights, any rights to receive dividends or other distributions, or any other rights with respect to those stocks. As a result, the return on your notes may not reflect the return you would realize if you actually owned the stocks included in the Basket Indices and received the dividends paid or other distributions made in connection with them. Your notes will be paid in cash and you have no right to receive delivery of any of these stocks.
Although our common stock is a component of the DJIASM, we are not affiliated with any other Basket Index company and are not responsible for any disclosure made by any other Basket Index company. While we currently, or in the future, may engage in business with companies represented by the constituent stocks of the Basket Indices, neither we nor any of our affiliates, including the selling agents, assume any responsibility for the adequacy or accuracy of any publicly available information about any other companies represented by the constituent stocks of each of the Basket Indices or the calculation of the Basket Indices. You should make your own investigation into the Basket Indices and the companies represented by their constituent stocks. See the section entitled The Basket Indices below for additional information about the Basket Indices.
None of the Index Sponsors, their affiliates, nor any other Basket Index company other than us is involved in this offering of the notes or has any obligation of any sort with respect to the notes. As a result, none of those companies has any obligation to take your interests into consideration for any reason, including taking any corporate actions that might affect the value of the notes.
Our trading and hedging activities may create conflicts of interest with you. We or one or more of our affiliates, including the selling agents, may engage in trading activities related to the Basket Indices and the constituent stocks of the Basket Indices that are not for your account or on your behalf. We and our affiliates from time to time may buy or sell the stocks included in the Basket Indices or futures or options contracts on the Basket Indices for our own accounts, for business reasons, or in connection with hedging our obligations under the notes. We also may issue, or our affiliates may underwrite, other financial instruments with returns based upon the Basket Indices. These trading and underwriting activities could affect the level of the Basket Indices in a manner that would be adverse to your investment in the notes.
In addition, we expect to enter into an arrangement or arrangements with one or more of our affiliates to hedge the market risks associated with our obligation to pay the amounts due under the notes. Our affiliates expect to make a profit in connection with this arrangement. We do not intend to seek competitive bids for this arrangement from unaffiliated parties.
We or our affiliates may enter into these transactions on or prior to the pricing date in order to hedge some or all of our anticipated obligations under the notes. This hedging activity could increase the Starting Level. If this occurs, you would be less likely to receive a Supplemental Redemption Amount that is greater than the Minimum Supplemental Redemption Amount.
In addition, from time to time during the term of the notes and in connection with the determination of the Periodic Return, we or our affiliates may enter into additional hedging transactions or adjust or close out existing hedging transactions. We or our affiliates also may enter into hedging transactions relating to other notes or instruments that we issue, some of which may have returns calculated in a manner related to that of the notes. We or our affiliates will price these hedging transactions with the intent to realize a profit, considering the risks inherent in these hedging activities, whether the value of the notes increases or
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decreases. However, these hedging activities may result in a profit that is more or less than initially expected, or could result in a loss.
These trading activities may present a conflict of interest between your interest in your notes and the interests we and our affiliates may have in our proprietary accounts, in facilitating transactions, including block trades, for our other customers, and in accounts under our management. These trading activities, if they influence the Basket Level, could be adverse to your interests as a beneficial owner of the notes.
Our business activities relating to the companies included in the Basket Indices may create conflicts of interest with you. We and our affiliates, including the selling agents, at present or in the future, may engage in business with the companies included in the Basket Indices, including making loans to, equity investments in, or providing investment banking, asset management, or other services to those companies, their affiliates, and their competitors. In connection with these activities, we may receive information about those companies that we will not divulge to you or other third parties. One or more of our affiliates have published, and in the future may publish, research reports on one or more of these companies. This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the notes. Any of these activities may affect the market value of the notes.
Secondary market prices of the notes may be affected adversely by the inclusion in the original issue price of the notes of the selling agents commissions and costs of hedging our obligations under the notes. Assuming no change in market conditions or any other relevant factors, the market price, if any, at which a party may be willing to purchase notes in secondary market transactions likely will be lower than the original issue price. This is because the original issue price included, and secondary market prices are likely to exclude, commissions paid for the notes and the potential profit included in the cost of hedging our obligations under the notes. The price of hedging our obligations was determined by our affiliates with the intention of realizing a profit. However, because hedging our obligations entails risks and may be influenced by market forces beyond our control or our affiliates control, these hedging activities may result in a profit that is more or less than initially expected, or could result in a loss.
There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent. The determination of the Supplemental Redemption Amount is a complex process involving a large number of related calculations, some of which may require the exercise of judgment. Our subsidiary, BAS, is the calculation agent for the notes and, as such, will determine each Starting Level and Ending Level and calculate the Supplemental Redemption Amount. Under some circumstances, these duties could result in a conflict of interest between BAS status as our subsidiary and its responsibilities as calculation agent. These conflicts could occur, for instance, in connection with the calculation agents determination as to whether a Market Disruption Event has occurred, or in connection with judgments that it would be required to make if the publication of any of the Basket Indices is discontinued. See the sections entitled Description of the NotesMarket Disruption and Discontinuance of the Basket Indices; Alteration of Method of Calculation.
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We will use the net proceeds we receive from the sale of the notes for the purposes described in the accompanying prospectus under Use of Proceeds. In addition, we expect that we or our affiliates will use a portion of the net proceeds to hedge our obligations under the notes.
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General
The notes are part of a series of medium-term notes entitled Medium-Term Notes, Series L issued under the Senior Indenture, as amended and supplemented from time to time. The Senior Indenture is described more fully in the accompanying prospectus and prospectus supplement. The following description of the notes supplements the description of the general terms and provisions of the notes and debt securities set forth under the headings Description of the Notes in the prospectus supplement and Description of Debt Securities in the prospectus.
The aggregate principal amount of the notes is $ . The notes are issued in minimum denominations of $1,000 and whole multiples of $1,000. The notes will mature on June 25, 2013, but under limited circumstances, which we describe below, the maturity date may be postponed. See the section entitled Description of the NotesMarket Disruption.
We will not pay interest on the notes.
Prior to maturity, the notes are not redeemable by us or repayable at your option. The notes are not subject to any sinking fund. Upon the occurrence of an event of default (as defined in the Senior Indenture), holders of the notes may accelerate the maturity of the notes, as described under Description of Debt SecuritiesDefaults and Rights of Acceleration in the prospectus. Upon an event of default, you will be entitled to receive only your principal amount, and you will not be entitled to payment of any Supplemental Redemption Amount.
The notes will be issued in book-entry form only. The CUSIP number for the notes is 06048 UAP9.
Payment at Maturity; Supplemental Redemption Amount
At maturity, you will be paid the principal amount of the notes and the Supplemental Redemption Amount, which will not be less than the Minimum Supplemental Redemption Amount.
We expect to price the notes on June 25, 2008, or the pricing date. The pricing date is the first day of the first Reference Period. If we price the notes on a day other than June 25, 2008, the scheduled Reference Periods above will be adjusted accordingly, and you will be notified of the changes in the final pricing supplement.
The Basket Level is the hypothetical value of the Basket that is determined at the close of any business day (as defined below). The Basket Level equals the sum of the products of the closing level and the Index Ratio for each Basket Index. The Basket Level will be rounded to the nearest one-hundredth. Each Basket Index will represent a percentage of the Starting Level (as defined below) on the pricing date. For each Basket Index, we will set the Index Ratio on the pricing date by (a) multiplying 1,000 by the Index Weight for that Basket Index that is set forth in the table below and (b) dividing that product by the closing level of that Basket Index on the pricing date. The result will be rounded to the nearest one hundred-thousandth. The Index Ratio for each Basket Index is fixed as of the pricing date and is subject to change only if certain events or adjustments affect the relevant Basket Index, as described in this pricing supplement. See the section entitled Discontinuance of the Basket Indices; Alteration of Method of Calculation.
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The following table illustrates the Basket Indices and Index Ratios, as weighted below based on the closing level of each Basket Index on the pricing date, to achieve a Basket Level of 1,000 on that date.
Basket Index |
Closing Level on Pricing Date |
Index Weight |
Index Ratio | |||
DJIASM |
68.00% | |||||
S&P MidCap 400 Index |
10.00% | |||||
S&P SmallCap 600 Index |
7.00% | |||||
Dow Jones EURO STOXX 50® Index |
7.50% | |||||
Nikkei 225 Index |
7.50% |
The calculation agent will determine the Supplemental Redemption Amount by reference to the Periodic Returns of the Basket Indices during the 20 Reference Periods described in the Summary section above. On each Reset Date, the calculation agent will determine the Periodic Return of the Basket for the Reference Period then ended by applying the following formula:
(Ending Level - Starting Level) |
Starting Level |
The result will be rounded to the nearest ten-thousandth of a decimal place and then expressed as a percentage.
The calculation agent will determine the applicable Starting Level and Ending Level for each Reference Period.
Except for the payment of the principal amount and the Minimum Supplemental Redemption Amount at maturity, you will be exposed to unlimited declines in the Periodic Return for any Reference Period. However, you will benefit from increases in the Periodic Return of the Basket Indices, but only up to the Return Cap, which we will set on the pricing date. For any Reference Period in which the Periodic Return is greater than the Return Cap, the Periodic Return for that Reference Period will be deemed to be the Return Cap, and for that Reference Period you will receive only the benefit of the increase in value up to the Return Cap.
After the close of the Japanese, European, and U.S. markets on the last Reset Date, the calculation agent will determine the Supplemental Redemption Amount payable to you at maturity, which will not be less than the Minimum Supplemental Redemption Amount, based on the following formula:
Principal Amount x Basket Return
The Basket Return is the compounded value of the 20 Periodic Returns computed in the following manner:
[The product of (1.00 + the Periodic Return) for each Reference Period] - 1.00
The Basket Return will be rounded to the nearest ten-thousandth and then expressed as a percentage.
The notes are principal protected. You are entitled to receive the Minimum Supplemental Redemption Amount. As a result, if the calculation of the Supplemental
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Redemption Amount results in an amount that is less than the Minimum Supplemental Redemption Amount, or if it results in a negative number because the Basket Level declines, you will receive only your principal amount and the Minimum Supplemental Redemption Amount at maturity.
Market Disruption
Each of the following will be a Market Disruption Event if, in the sole opinion of the calculation agent, that event materially affects any of the Basket Indices:
| the suspension, material limitation, or absence of the trading of a material number of stocks included in any of the Basket Indices; |
| the suspension or material limitation of the trading of stocks on one or more stock exchanges on which stocks included in any of the Basket Indices are quoted; |
| a breakdown or failure in the price and trade reporting systems of the respective primary markets on which the stocks included in any of the Basket Indices are quoted, as a result of which the reported trading prices for the affected stocks, during the last one-half hour before the close of trading in that market, are materially inaccurate; or |
| the suspension or material limitation of the trading of (a) options or futures relating to any of the Basket Indices on any options or futures exchanges or (b) options or futures generally. |
For purposes of determining whether a Market Disruption Event has occurred:
| a limitation on the number of hours or days of trading will not be a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange; |
| a limitation on trading imposed by reason of the movements in price exceeding the levels permitted by any relevant exchange will be a Market Disruption Event; |
| a decision to permanently discontinue trading in the relevant futures or options contracts will not constitute a Market Disruption Event; and |
| an absence of trading on a securities exchange or quotation system will not include any time when that exchange or quotation system is closed for trading under ordinary circumstances. |
If the calculation agent determines that, on any Reset Date, a Market Disruption Event has occurred or is continuing as to one or more Basket Indices, the determination of the closing level of the applicable Basket Index or Indices will be postponed until the first trading day on which no Market Disruption Event occurs or is continuing, but the delay will never be more than five business days. If any determination as to a Basket Index is postponed to the last possible day, but a Market Disruption Event occurs or is continuing on that day, the determination of its closing level will nevertheless be made on that date. If the closing level of that Basket Index is not available on that last possible day, either because of a Market Disruption Event or for any other reason, the calculation agent will make a good faith estimate of the closing level of the applicable Basket Index based on its assessment, made in its sole discretion, of the level of that Basket Index at that time. If the determination of the closing level of one or more Basket Indices is postponed due to a Market Disruption Event on the last
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scheduled Reset Date, the maturity date for the notes also will be postponed by the same number of business days.
When we refer to a business day, we mean a day that is a business day of the kind described in the accompanying prospectus supplement. In this pricing supplement, as to one or more of the Basket Indices, the term trading day means any day, as determined by the calculation agent, that is not a day on which the principal securities market (or markets) on which the constituent stocks of that Basket Index are traded is closed.
Discontinuance of the Basket Indices; Alteration of Method of Calculation
If the publication of any of the Basket Indices is discontinued and a successor or substitute index is published that the calculation agent determines, in its sole discretion, is comparable to the discontinued Basket Index (the new index being referred to as a Successor Index), then the relevant closing levels of the applicable Basket Index will be determined by reference to the closing level of the Successor Index.
If the calculation agent selects a Successor Index for any Basket Index, the calculation agent immediately will notify us and the trustee of the Senior Indenture, and the trustee will provide written notice of a change to you within three business days of that selection.
If the publication of a Basket Index or a Successor Index is discontinued, and the calculation agent determines that no Successor Index is available, then the calculation agent will notify us and the trustee of the Senior Indenture and will calculate the appropriate closing levels. These calculations by the calculation agent will be in accordance with the formula for and method of calculating the level of the applicable Basket Index last in effect prior to that discontinuance. If a Successor Index is selected or the calculation agent calculates a level as a substitute for the applicable Basket Index, that Successor Index or level will be substituted for that Basket Index for all purposes, and the calculation agent will make one or more adjustments to the applicable Index Ratio as it determines to be necessary.
If at any time the method of calculating a Basket Index or a Successor Index, or the level of that index, is changed in a material respect, or if a Basket Index or a Successor Index in any other way is modified so that it does not, in the opinion of the calculation agent, fairly represent the level of that Basket Index or that Successor Index had those changes or modifications not been made, then, from and after that time, the calculation agent will notify us and the trustee of the Senior Indenture. The calculation agent will make those calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a level of a stock index comparable to the applicable Basket Index or that Successor Index, as the case may be, as if those changes or modifications had not been made, and will calculate the closing levels with reference to that Basket Index or that Successor Index, as adjusted. Accordingly, if the method of calculating a Basket Index or a Successor Index is modified so that the level of that index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the index), then the calculation agent will adjust that index in order to arrive at a level of the Basket Index or that Successor Index as if it had not been modified (e.g., as if the split had not occurred). The calculation agent also may determine that no adjustment is required by the modification of the method of calculation.
Role of the Calculation Agent
The calculation agent has the sole discretion to make all determinations regarding the notes, including determinations regarding the Basket Return, the Periodic Return, the Supplemental Redemption Amount, Market Disruption Events, Successor Indices, business days, and trading days. Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without any liability on the part of the calculation agent.
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We have initially appointed our subsidiary, BAS, as the calculation agent, but we may change the calculation agent at any time without notifying you.
Same-Day Settlement and Payment
The notes will be delivered in book-entry form only through The Depository Trust Company against payment by purchasers of the notes in immediately available funds. We will make payments of the principal amount and the Supplemental Redemption Amount in immediately available funds so long as the notes are maintained in book-entry form.
Listing
The notes will not be listed on any securities exchange.
PS-30
We have obtained all information regarding the Basket Indices contained in this pricing supplement, including their make-up, method of calculation, and changes in their components, from publicly-available information. That information reflects the policies of, and is subject to change by, the Index Sponsors. The Index Sponsors have no obligation to continue to publish, and may discontinue publication of, the Basket Indices. The consequences of the Index Sponsors discontinuing publication of the Basket Indices are described in the section entitled Description of the NotesDiscontinuance of the Basket Indices; Alteration of Method of Calculation. We do not assume any responsibility for the accuracy or completeness of any information relating to the Basket Indices.
The DJIASM
The DJIASM is widely used as an indicator of the pattern of the price movement of U.S. equities. The calculation of the level of the DJIASM, discussed below in further detail, is a price-weighted average of the stocks of 30 blue-chip companies that are generally the leaders in their industry. As of May 28, 2008, the component companies of the DJIASM were as follows:
3M Company | Hewlett-Packard Company | |
Alcoa Inc. | The Home Depot, Inc. | |
American Express Company | Intel Corporation | |
American International Group, Inc. | International Business Machines Corporation | |
AT&T Inc. | Johnson & Johnson | |
Bank of America Corporation | J.P. Morgan Chase & Co. | |
The Boeing Company | McDonalds Corporation | |
Caterpillar Inc. | Merck & Co., Inc. | |
Chevron Corporation | Microsoft Corporation | |
Citigroup Inc. | Pfizer Inc. | |
The Coca-Cola Company | The Procter & Gamble Company | |
E.I. du Pont de Nemours and Company | United Technologies Corporation | |
Exxon Mobil Corporation | Verizon Communications Inc. | |
General Electric Company | Wal-Mart Stores, Inc. | |
General Motors Corporation | The Walt Disney Company |
As of May 28, 2008, 28 of the DJIA SM component companies were traded on the New York Stock Exchange, and the other two companies were traded on The Nasdaq Stock Market. The composition of the DJIASM is not limited to traditionally defined industrial stocks. Instead,
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the companies are chosen from sectors of the economy most representative of the countrys economic health. The index serves as a measure of the entire U.S. market, covering such diverse industries as financial services, technology, retail, entertainment, and consumer goods. The editors of The Wall Street Journal maintain and review the index and from time to time, in their sole discretion, may add companies to, or delete companies from, the DJIASM to achieve the objectives stated above. Composition changes are rare, however, and generally occur only after events such as corporate acquisitions or other dramatic shifts in a components core business. When such an event causes one component to be replaced, the entire index is reviewed, and therefore, multiple component changes are often implemented simultaneously. A stock typically is added if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the sector(s) covered by the index.
The DJIASM is price-weighted rather than market capitalization-weighted, which means that weightings are based only on changes in the stocks prices, rather than by both price changes and changes in the number of shares outstanding. The divisor used to calculate the price-weighted average of the DJIASM is not simply the number of component stocks; rather, the divisor is adjusted to smooth out the effects of stock splits and other corporate actions. While this methodology reflects current practice in calculating the DJIASM, no assurance can be given that Dow Jones will not modify or change this methodology in a manner that may affect the amounts payable on the notes at maturity.
Neither we nor any of our affiliates, including the selling agents, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the DJIASM or any successor to the DJIASM. Dow Jones does not guarantee the accuracy or the completeness of the DJIASM or any data included in the DJIASM. Dow Jones assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the DJIASM. Dow Jones disclaims all responsibility for any errors or omissions in the calculation and dissemination of the DJIASM or the manner in which the DJIASM is applied in determining the amount payable at maturity.
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Historical Closing Levels of the DJIASM
Since its inception, the DJIASM has experienced significant fluctuations. Any historical upward or downward trend in the level of the DJIASM during any period shown below is not an indication that the level of the DJIASM is more or less likely to increase or decrease at any time during the term of the notes. The historical DJIASM levels do not give an indication of future performance of the DJIASM. We cannot assure you that the future performance of the DJIASM or the constituent stocks of the DJIASM will result in you receiving an amount greater than the outstanding face amount of the notes on the maturity date plus the Minimum Supplemental Redemption Amount.
The table below sets forth the high, the low, and the last closing levels at the end of each calendar quarter of the DJIASM since the first quarter of 2004. The closing levels listed in the table below were obtained from the Bloomberg® service, without independent verification.
DJIASM Quarterly Levels
HIGH | LOW | CLOSE | ||||
2004 |
||||||
First Quarter |
10,737.70 | 10,048.23 | 10,357.70 | |||
Second Quarter |
10,570.81 | 9,906.91 | 10,435.48 | |||
Third Quarter |
10,342.79 | 9,814.59 | 10,080.27 | |||
Fourth Quarter |
10,854.54 | 9,749.99 | 10,783.01 | |||
2005 |
||||||
First Quarter |
10,940.55 | 10,368.61 | 10,503.76 | |||
Second Quarter |
10,623.07 | 10,012.36 | 10,274.97 | |||
Third Quarter |
10,705.55 | 10,270.68 | 10,568.70 | |||
Fourth Quarter |
10,931.62 | 10,215.22 | 10,717.50 | |||
2006 |
||||||
First Quarter |
11,317.43 | 10,667.39 | 11,109.32 | |||
Second Quarter |
11,642.65 | 10,706.14 | 11,150.22 | |||
Third Quarter |
11,718.45 | 10,739.35 | 11,679.07 | |||
Fourth Quarter |
12,510.57 | 11,670.35 | 12,463.15 | |||
2007 |
||||||
First Quarter |
12,786.64 | 12,050.41 | 12,354.35 | |||
Second Quarter |
13,676.32 | 12,382.30 | 13,408.62 | |||
Third Quarter |
14,000.41 | 12,845.78 | 13,895.63 | |||
Fourth Quarter |
14,164.53 | 12,743.44 | 13,264.82 | |||
2008 |
||||||
First Quarter |
13,056.72 | 11,740.15 | 12,262.90 | |||
Second Quarter (through May 28th) |
13,058.20 | 12,302.06 | 12,594.03 |
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the DJIASM. The generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the DJIASM exhibiting greater volatility than in earlier periods.
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License Agreement
We have entered into a non-exclusive license agreement with Dow Jones providing for the license to us and certain of our affiliated or subsidiary companies, in exchange for a fee, of the right to use indices owned and published by Dow Jones (including the DJIASM) in connection with certain securities, including the notes.
The license agreement between us and Dow Jones requires that the following language be stated in this pricing supplement:
The notes are not sponsored, endorsed, sold, or promoted by Dow Jones. Dow Jones makes no representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly. Dow Jones only relationship to us is in the licensing of certain trademarks, trade names, and service marks of Dow Jones and of the DJIASM, which is determined, composed, and calculated by Dow Jones without regard to us or the notes. Dow Jones has no obligation to take our needs or the needs of holders of the notes into consideration in determining, composing, or calculating the DJIASM. Dow Jones is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the notes to be issued or in the determination of the amount to be paid on the notes. Dow Jones has no obligation or liability in connection with the administration, marketing, or trading of the notes.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DJIASM OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIASM OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DJIASM OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OR ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND US.
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S&P MidCap 400 Index
S&P® publishes the S&P MidCap 400 Index. The S&P MidCap 400 Index is intended to provide a benchmark for performance measurement of the medium capitalization segment of the U.S. equity markets. It tracks the stock price movement of 400 companies with mid-sized market capitalizations, primarily ranging from $1.5 billion to $5.5 billion. The calculation of the value of the S&P MidCap 400 Index (discussed below in further detail) is based on the relative market value of the common stocks of 400 companies (the Component Stocks) as of a particular time as compared to the market value of the common stocks of 400 similar companies on the base date of June 28, 1991. S&P® chooses companies for inclusion in the S&P MidCap 400 Index with an aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the medium capitalization segment of the U.S. equity market. S&P® may from time to time, in its sole discretion, add companies to, or delete companies from, the S&P MidCap 400 Index to achieve the objectives stated above. Relevant criteria employed by S&P® include U.S. company status, a market cap range between $1.5 billion and $5.5 billion, financial viability, adequate liquidity and reasonable price, a public float of at least 50%, sector representation, and status as an operating company.
As of April 30, 2008, the Component Stocks had an aggregate market capitalization of approximately $1,093 billion. As of April 30, 2008, 291 companies or 75.4% of the capitalization of the S&P MidCap 400 Index companies traded on the New York Stock Exchange, 108 companies or 24.2% of the capitalization of the S&P MidCap 400 Index companies traded on The Nasdaq Stock Market, and one company or 0.4% of the capitalization of the S&P MidCap 400 Index companies traded on the American Stock Exchange LLC. As of April 30, 2008, ten main groups of companies comprise the S&P MidCap 400 Index with the number of companies currently included in each group indicated in parentheses: Consumer Discretionary (75), Consumer Staples (15), Energy (20), Financials (67), Health Care (42), Industrials (62), Information Technology (63), Materials (28), Telecommunications Services (2), and Utilities (26).
Computation of the S&P MidCap 400 Index
The S&P MidCap 400 Index is calculated using a base-weighted aggregate methodology: the level of the index reflects the total market value of all 400 Component Stocks relative to the base date of June 28, 1991. An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time.
The actual total market value of the Component Stocks on the base date of June 28, 1991 has been set equal to an indexed value of 100. This is often indicated by the notation June 28, 1991=100. In practice, the daily calculation of the S&P MidCap 400 Index is computed by dividing the total market value of the Component Stocks by the index divisor. By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the S&P MidCap 400 Index, it serves as a link to the original base period value of the index. The index divisor keeps the index comparable over time and is the manipulation point for all adjustments to the S&P MidCap 400 Index, which is index maintenance. Index maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructurings or spinoffs.
In March 2005, S&P® began shifting the S&P MidCap 400 Index half way from a market capitalization weighted formula to a float-adjusted formula, before moving the S&P MidCap 400 Index to full float adjustment on September 16, 2005. S&P®s criteria for selecting stocks for the S&P MidCap 400 Index did not change by the shift to float adjustment. However, the adjustment affects each companys weight in the S&P MidCap 400 Index.
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Under float adjustment, the share counts used in calculating the S&P MidCap 400 Index will reflect only those shares that are available to investors, not all of a companys outstanding shares. S&P® defines three groups of shareholders whose holdings are subject to float adjustment:
| holdings by other publicly traded corporations, venture capital firms, private equity firms, strategic partners, or leveraged buyout groups; |
| holdings by government entities, including all levels of government in the U.S. or foreign countries; and |
| holdings by current or former officers and directors of the company, founders of the company, or family trusts of officers, directors, or founders, as well as holdings of trusts, foundations, pension funds, employee stock ownership plans, or other investment vehicles associated with and controlled by the company. |
However, treasury stock, stock options, restricted shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. In cases where holdings in a group exceed 10% of the outstanding shares of a company, the holdings of that group are excluded from the float-adjusted count of shares to be used in the index calculation. Mutual funds, investment advisory firms, pension funds, or foundations not associated with the company and investment funds in insurance companies, shares of a U.S. company traded in Canada as exchangeable shares, shares that trust beneficiaries may buy or sell without difficulty or significant additional expense beyond typical brokerage fees, and, if a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class if such shares are convertible by shareholders without undue delay and cost, are also part of the float.
For each stock, an investable weight factor (IWF) is calculated by dividing the available float shares, defined as the total shares outstanding less shares held in one or more of the three groups listed above where the group holdings exceed 10% of the outstanding shares, by the total shares outstanding. The float-adjusted index is then calculated by dividing the sum of the IWF multiplied by both the price and the total shares outstanding for each stock by the index divisor. For companies with multiple classes of stock, S&P® calculates the weighted average IWF for each stock using the proportion of the total company market capitalization of each share class as weights.
Index Maintenance
S&P MidCap 400 Index maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares outstanding and the stock prices of the companies in the S&P MidCap 400 Index, and do not require index divisor adjustments.
To prevent the level of the S&P MidCap 400 Index from changing due to corporate actions, corporate actions which affect the total market value of the S&P MidCap 400 Index require an index divisor adjustment. By adjusting the index divisor for the change in market value, the level of the S&P MidCap 400 Index remains constant and does not reflect the corporate actions of individual companies in the S&P MidCap 400 Index. Index divisor adjustments are made after the close of trading and after the calculation of the S&P MidCap 400 Index closing level.
PS-36
Changes in a companys shares outstanding of 5.00% or more due to mergers, acquisitions, public offerings, private placements, tender offers, Dutch auctions, or exchange offers are made as soon as reasonably possible. All other changes of 5.00% or more (due to, for example, company stock repurchases, redemptions, exercise of options, warrants, subscription rights, conversion of preferred stock, notes, debt, equity participation units, or other recapitalizations) are made weekly and are announced on Tuesdays for implementation after the close of trading on Wednesday. Changes of less than 5.00% are accumulated and made quarterly on the third Friday of March, June, September, and December, and are usually announced two days prior.
Changes in IWFs of more than ten percentage points caused by corporate actions (such as merger and acquisition activity, restructurings, or spinoffs) will be made as soon as reasonably possible. Other changes in IWFs will be made annually, in September, when IWFs are reviewed.
Historical Closing Levels of the S&P MidCap 400 Index
Since its inception, the S&P MidCap 400 Index has experienced significant fluctuations. Any historical upward or downward trend in the level of the S&P MidCap 400 Index during any period shown below is not an indication that the level of the S&P MidCap 400 Index is more or less likely to increase or decrease at any time during the term of the notes. The historical S&P MidCap 400 Index levels do not give an indication of future performance of the S&P MidCap 400 Index. We cannot assure you that the future performance of the S&P MidCap 400 Index or the constituent stocks of the S&P MidCap 400 Index will result in the holders of the notes receiving an amount greater than the outstanding face amount of the notes on the maturity date plus the Minimum Supplemental Redemption Amount.
The table below sets forth the high, the low, and the last closing levels at the end of each calendar quarter of the S&P MidCap 400 Index since the first calendar quarter of 2004. The closing levels listed in the table below were obtained from the Bloomberg® service under the symbol MID, without independent verification.
PS-37
S&P MidCap 400 Index Quarterly Levels
HIGH | LOW | CLOSE | ||||
2004 |
||||||
First Quarter |
615.92 | 575.91 | 603.56 | |||
Second Quarter |
616.70 | 561.57 | 607.69 | |||
Third Quarter |
600.09 | 549.51 | 593.20 | |||
Fourth Quarter |
664.50 | 583.00 | 663.31 | |||
2005 |
||||||
First Quarter |
682.42 | 629.91 | 658.87 | |||
Second Quarter |
693.28 | 627.38 | 684.94 | |||
Third Quarter |
725.02 | 689.88 | 716.33 | |||
Fourth Quarter |
749.61 | 672.12 | 738.05 | |||
2006 |
||||||
First Quarter |
792.11 | 749.02 | 792.11 | |||
Second Quarter |
817.95 | 716.62 | 764.87 | |||
Third Quarter |
770.44 | 712.86 | 754.25 | |||
Fourth Quarter |
820.37 | 748.13 | 804.37 | |||
2007 |
||||||
First Quarter |
867.61 | 800.40 | 848.47 | |||
Second Quarter |
925.90 | 852.41 | 895.51 | |||
Third Quarter |
926.23 | 819.18 | 885.06 | |||
Fourth Quarter |
917.18 | 821.32 | 858.20 | |||
2008 |
||||||
First Quarter |
847.56 | 744.89 | 779.51 | |||
Second Quarter (through May 28th) |
883.65 | 797.80 | 873.05 |
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the S&P MidCap 400 Index. The generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the S&P MidCap 400 Index exhibiting greater volatility than in earlier periods.
License Agreement
We have entered into a non-exclusive license agreement with S&P® providing for the license to us and certain of our affiliated or subsidiary companies, in exchange for a fee, of the right to use indices owned and published by S&P® (including the S&P MidCap 400 Index) in connection with certain securities, including the notes.
The license agreement between us and S&P® requires that the following language be stated in this pricing supplement:
The notes are not sponsored, endorsed, sold, or promoted by S&P®. S&P® makes no representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly or the ability of the S&P MidCap 400 Index to track general stock market performance. S&P®s only relationship to us is the licensing of certain trademarks and trade names of S&P® and of the S&P MidCap 400 Index, which is determined, composed, and calculated by S&P® without regard to us or the notes. S&P®
PS-38
has no obligation to take our needs or the needs of the owners of the notes into consideration in determining, composing, or calculating the S&P MidCap 400 Index. S&P® is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the notes to be issued, or in the determination or calculation of the Supplemental Redemption Amount. S&P® has no obligation or liability in connection with the administration, marketing, or trading of the notes.
S&P® DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P® SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P® MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. S&P® MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P® HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
PS-39
S&P SmallCap 600 Index
S&P® publishes the S&P SmallCap 600 Index. The S&P SmallCap 600 Index is intended to provide a benchmark for performance measurement of the small capitalization segment of the U.S. equity markets. It tracks the stock price movement of 600 companies with small market capitalizations, primarily ranging from $300 million to $2.0 billion. The calculation of the value of the S&P SmallCap 600 Index (discussed below in further detail) is based on the relative market value of the common stocks of 600 companies (the Component Stocks) as of a particular time as compared to the market value of the common stocks of 600 similar companies on the base date of December 31, 1993. S&P® chooses companies for inclusion in the S&P SmallCap 600 Index with an aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the small capitalization segment of the U.S. equity market. S&P® may from time to time, in its sole discretion, add companies to, or delete companies from, the S&P SmallCap 600 Index to achieve the objectives stated above. Relevant criteria employed by S&P® include U.S. company status, a market cap range between $300 million and $2.0 billion, financial viability, a public float of at least 50%, adequate liquidity and reasonable price, sector representation, and status as an operating company.
As of April 30, 2008, the Component Stocks had an aggregate market capitalization of approximately $501 billion. As of April 30, 2008, 286 companies or 55.2% of the capitalization of the S&P SmallCap 600 Index companies traded on the New York Stock Exchange, 310 companies or 44.4% of the capitalization of the S&P SmallCap 600 Index companies traded on The Nasdaq Stock Market, and four companies or 0.4% of the capitalization of the S&P SmallCap 600 Index companies traded on the American Stock Exchange LLC. As of April 30, 2008, ten main groups of companies comprise the S&P SmallCap 600 Index with the number of companies currently included in each group indicated in parentheses: Consumer Discretionary (116), Consumer Staples (23), Energy (29), Financials (101), Health Care (75), Industrials (86), Information Technology (122), Materials (28), Telecommunications Services (2), and Utilities (18).
Computation of the S&P SmallCap 600 Index
The S&P SmallCap 600 Index is calculated using a base-weighted aggregate methodology: the level of the index reflects the total market value of all 600 Component Stocks relative to the base date of December 31, 1993. An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time.
The actual total market value of the Component Stocks on the base date of December 31, 1993 has been set equal to an indexed value of 100. This is often indicated by the notation December 31, 1993=100. In practice, the daily calculation of the S&P SmallCap 600 Index is computed by dividing the total market value of the Component Stocks by the index divisor. By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the S&P SmallCap 600 Index, it serves as a link to the original base period value of the index. The index divisor keeps the index comparable over time and is the manipulation point for all adjustments to the S&P SmallCap 600 Index, which is index maintenance. Index maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructurings or spinoffs. See the section entitled The Basket IndicesS&P MidCap 400 Index Maintenance for a discussion that also is applicable to the S&P SmallCap 600 Index.
In March 2005, S&P® began shifting the S&P SmallCap 600 Index half way from a market capitalization weighted formula to a float-adjusted formula, before moving the S&P SmallCap 600 Index to full float adjustment on September 16, 2005. S&P®s criteria for selecting stocks for the S&P SmallCap 600 Index did not change by the shift to float
PS-40
adjustment. However, the adjustment affects each companys weight in the S&P SmallCap 600 Index.
Under float adjustment, the share counts used in calculating the S&P SmallCap 600 Index will reflect only those shares that are available to investors, not all of a companys outstanding shares. For additional information regarding float adjustment, see the section entitled The Basket IndicesS&P MidCap 400 IndexComputation of the S&P MidCap 400 Index, which contains a discussion of float adjustment which is also applicable to the S&P SmallCap 600 Index.
Historical Closing Levels of the S&P SmallCap 600 Index
Since its inception, the S&P SmallCap 600 Index has experienced significant fluctuations. Any historical upward or downward trend in the level of the S&P SmallCap 600 Index during any period shown below is not an indication that the level of the S&P SmallCap 600 Index is more or less likely to increase or decrease at any time during the term of the notes. The historical S&P SmallCap 600 Index levels do not give an indication of future performance of the S&P SmallCap 600 Index. We cannot assure you that the future performance of the S&P SmallCap 600 Index or the constituent stocks of the S&P® Index will result in you receiving an amount greater than the outstanding face amount of the notes on the maturity date plus the Minimum Supplemental Redemption Amount.
The table below sets forth the high, the low, and the last closing levels at the end of each calendar quarter of the S&P SmallCap 600 Index since the first calendar quarter of 2004. The closing levels listed in the table below were obtained from the Bloomberg® service under the symbol SML, without independent verification.
PS-41
S&P SmallCap 600 Index Quarterly Levels
HIGH | LOW | CLOSE | ||||
2004 |
||||||
First Quarter |
290.05 | 270.86 | 286.66 | |||
Second Quarter |
296.35 | 265.10 | 296.35 | |||
Third Quarter |
293.22 | 263.47 | 291.60 | |||
Fourth Quarter |
329.58 | 286.80 | 328.80 | |||
2005 |
||||||
First Quarter |
336.51 | 309.74 | 321.26 | |||
Second Quarter |
336.31 | 301.06 | 333.10 | |||
Third Quarter |
357.86 | 334.97 | 350.20 | |||
Fourth Quarter |
361.46 | 326.84 | 350.67 | |||
2006 |
||||||
First Quarter |
394.83 | 356.02 | 394.83 | |||
Second Quarter |
404.89 | 352.77 | 375.97 | |||
Third Quarter |
378.83 | 348.69 | 371.78 | |||
Fourth Quarter |
406.47 | 367.99 | 400.02 | |||
2007 |
||||||
First Quarter |
422.69 | 389.75 | 411.92 | |||
Second Quarter |
444.30 | 413.76 | 432.31 | |||
Third Quarter |
445.19 | 396.35 | 423.43 | |||
Fourth Quarter |
442.34 | 382.60 | 395.14 | |||
2008 |
||||||
First Quarter |
390.41 | 344.69 | 364.59 | |||
Second Quarter (through May 28th) |
392.63 | 362.67 | 390.01 |
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the S&P SmallCap 600 Index. The generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the S&P SmallCap 600 Index exhibiting greater volatility than in earlier periods.
License Agreement
We have entered into a non-exclusive license agreement with S&P® providing for the license to us and certain of our affiliated or subsidiary companies, in exchange for a fee, of the right to use indices owned and published by S&P® (including the S&P SmallCap 600 Index) in connection with certain securities, including the notes.
The license agreement between us and S&P® requires that the following language be stated in this pricing supplement:
The notes are not sponsored, endorsed, sold or promoted by S&P®. S&P® makes no representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly or the ability of the S&P SmallCap 600 Index to track general stock market performance. S&P®s only relationship to us is the licensing of certain trademarks and trade names of S&P® and of the S&P SmallCap 600 Index, which is determined, composed, and calculated by S&P® without regard to us or the notes. S&P®
PS-42
has no obligation to take our needs or the needs of the owners of the notes into consideration in determining, composing, or calculating the S&P SmallCap 600 Index. S&P® is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the notes to be issued, or in the determination or calculation of the Supplemental Redemption Amount. S&P® has no obligation or liability in connection with the administration, marketing, or trading of the notes.
S&P® DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN AND S&P® SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P® MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. S&P® MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P® HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
PS-43
Dow Jones EURO STOXX 50® Index
The Dow Jones EURO STOXX 50® Index was created by STOXX, a joint venture between Deutsche Börse AG, Dow Jones, and SWX Swiss Exchange. Publication of the Dow Jones EURO STOXX 50® Index began in February 1998, based on an initial Dow Jones EURO STOXX 50® Index level of 1,000 at December 31, 1991. The Dow Jones EURO STOXX 50® Index is published in The Wall Street Journal and the Financial Times and disseminated on the STOXX website, http://www.stoxx.com/index.html, and the Dow Jones website, www.djindexes.com.
Dow Jones EURO STOXX 50® Index Composition and Maintenance
The Dow Jones EURO STOXX 50® Index is composed of 50 component stocks of market sector leaders from within the Dow Jones EURO STOXX Total Market Index, which includes stocks selected from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all of the market sectors defined by the Dow Jones Global Classification Standard. Set forth below are the country weightings and market sector weightings of the securities included in the Dow Jones EURO STOXX 50® Index as of March 31, 2008:
Country Weightings | Industrial Sector Weightings | |||||
France | 32.2% | Banks | 21.3% | |||
Germany | 27.5% | Utilities | 11.8% | |||
Spain | 13.7% | Insurance | 11.5% | |||
Italy | 11.8% | Oil & Gas | 8.9% | |||
Netherlands | 8.4% | Telecommunications | 8.5% | |||
Finland | 4.2% | Technology | 6.0% | |||
Luxembourg | 2.2% | Chemicals | 5.4% | |||
Automobiles & Parts | 4.8% | |||||
Industrial Goods & Services | 4.2% | |||||
Personal & Household Goods | 3.4% | |||||
Food & Beverage | 3.3% | |||||
Health Care | 2.7% | |||||
Basic Resources | 2.2% | |||||
Construction & Materials | 2.0% | |||||
Media | 1.5% | |||||
Retail | 1.4% | |||||
Financial Services | 1.1% |
PS-44
A list of the issuers of the component stocks in the Dow Jones EURO STOXX 50® Index, as of March 31, 2008, is set forth below:
Issuer of Component Stock |
Adjusted Weight in Index |
Industry Sector | ||
Total S.A. | 5.23 | Oil & Gas | ||
Banco Santander Central Hispano SA | 4.15 | Banks | ||
Nokia Corporation | 4.15 | Technology | ||
Telefónica, S.A. | 4.00 | Telecommunications | ||
E.ON AG | 3.90 | Utilities | ||
Siemens AG | 3.12 | Industrial Goods & Services | ||
Allianz AG | 2.99 | Insurance | ||
UniCredito Italiano S.p.A. | 2.98 | Banks | ||
BNP Paribas | 2.87 | Banks | ||
Eni S.p.A | 2.77 | Oil & Gas | ||
Sanofi-Aventis | 2.68 | Health Care | ||
DaimlerChrysler AG | 2.68 | Automobiles & Parts | ||
ING Groep N.V. | 2.61 | Insurance | ||
Banco Bilbao Vizcaya Argentaria, S.A. | 2.61 | Banks | ||
SUEZ | 2.59 | Utilities | ||
ArcelorMittal | 2.25 | Basic Resources | ||
BASF AG | 2.20 | Chemicals | ||
AXA SA | 2.13 | Insurance | ||
France Telecom | 2.13 | Telecommunications | ||
Sanpaolo IMI S.p.A. | 2.10 | Banks | ||
Bayer AG | 2.04 | Chemicals | ||
Iberdrola, S.A. | 2.02 | Utilities | ||
Fortis | 1.98 | Banks | ||
Société Générale Group | 1.90 | Banks | ||
Deutsche Bank AG | 1.89 | Banks | ||
RWE AG | 1.80 | Utilities |
PS-45
Issuer of Component Stock |
Adjusted Weight in Index |
Industry Sector | ||
Unilever N.V. | 1.77 | Food & Beverage | ||
Assicurazioni Generali S.p.A. | 1.75 | Insurance | ||
Deutsche Telekom AG | 1.65 | Telecommunications | ||
Groupe Danone | 1.53 | Food & Beverage | ||
Vivendi Universal | 1.52 | Media | ||
Enel S.p.A. | 1.48 | Utilities | ||
SAP AG | 1.47 | Technology | ||
Carrefour SA | 1.41 | Retail | ||
Volkswagen AG | 1.37 | Automobile & Parts | ||
Royal Philips Electronics | 1.36 | Personal & Household Goods | ||
Munich Re Group | 1.33 | Insurance | ||
Air Liquide | 1.20 | Chemicals | ||
VINCI | 1.17 | Construction & Materials | ||
Deutsche Börse AG | 1.07 | Financial Services | ||
Schneider Electric SA | 1.06 | Industrial Goods & Services | ||
LOreal S.A. | 1.04 | Personal & Household Goods | ||
LVMH Moet Hennessy Louis Vuitton S.A. | 0.96 | Personal & Household Goods | ||
Repsol YPF, S.A. | 0.91 | Oil & Gas | ||
Compagnie de Saint-Gobain | 0.85 | Construction & Materials | ||
Crédit Agricole S.A. | 0.79 | Banks | ||
Renault | 0.74 | Automobiles & Parts | ||
Telecom Italia S.p.A. | 0.71 | Telecommunications | ||
Aegon N.V. | 0.66 | Insurance | ||
Alcatel |
0.44 | Technology |
The composition of the Dow Jones EURO STOXX 50® Index is reviewed annually, based on the closing stock data on the last trading day in August. The component stocks are announced the first trading day in September. Changes to the component stocks are implemented on the third Friday in September and are effective the following trading day.
PS-46
Changes in the composition of the Dow Jones EURO STOXX 50® Index are made to ensure that the Dow Jones EURO STOXX 50® Index includes the 50 market sector leaders from within the Dow Jones EURO STOXX Total Market Index.
The free float factors for each component stock used to calculate the Dow Jones EURO STOXX 50® Index, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the next quarterly review.
The Dow Jones EURO STOXX 50® Index is also reviewed on an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the Dow Jones EURO STOXX 50® Index composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type of corporate action and the magnitude of the effect.
Dow Jones EURO STOXX 50® Index Calculation
The Dow Jones EURO STOXX 50® Index is calculated with the Laspeyres formula, which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the Dow Jones EURO STOXX 50® Index value can be expressed as follows:
Index |
= | free float market capitalization of the index | x | 1,000 | ||||
adjusted base date market capitalization of the index |
The free float market capitalization of the index is equal to the sum of the products of the closing price, market capitalization, and free float factor for each component stock as of the time the Dow Jones EURO STOXX 50® Index is being calculated.
The Dow Jones EURO STOXX 50® Index is also subject to a divisor, which is adjusted to maintain the continuity of the Dow Jones EURO STOXX 50® Index values across changes due to corporate actions. The following is a summary of the adjustments to any component stock made for corporate actions and the effect of the adjustment on the divisor, where shareholders of the component stock will receive B number of shares for every A share held (where applicable).
(1) | Split and reverse split: |
Adjusted price = closing price * A / B
New number of shares = old number of shares * B / A
Divisor: no change
(2) | Rights offering: |
Adjusted price = (closing price * A + subscription price * B) / (A + B)
New number of shares = old number of shares * (A + B) / A
Divisor: increases
(3) | Stock dividend: |
Adjusted price = closing price * A / (A + B)
PS-47
New number of shares = old number of shares * (A + B) / A
Divisor: no change
(4) | Stock dividend of another company: |
Adjusted price = (closing price * A - price of other company * B) / A
Divisor: decreases
(5) | Return of capital and share consolidation: |
Adjusted price = (closing price - dividend announced by company * (1-withholding tax)) * A / B
New number of shares = old number of shares * B / A
Divisor: decreases
(6) | Repurchase shares / self tender: |
Adjusted price = | ((price before tender * old number of shares ) - (tender price * | |
number of tendered shares)) / (old number of shares - | ||
number of tendered shares) |
New number of shares = old number of shares - number of tendered shares
Divisor: decreases
(7) | Spin-off: |
Adjusted price = (closing price * A - price of spun-off shares * B) / A
Divisor: decreases
(8) | Combination stock distribution (dividend or split) and rights offering: |
For this corporate action, the following additional assumptions apply:
| Shareholders receive B new shares from the distribution and C new shares from the rights offering for every A shares held. |
| If A is not equal to one share, then all of the following new number of shares formulae need to be divided by A: |
- If rights are applicable after stock distribution (one action applicable to other):
Adjusted price = (closing price * A + subscription price * C * (1 + B / A)) / ((A + B) * (1 + C / A))
New number of shares = old number of shares * ((A + B) * (1 + C / A)) / A
Divisor: increases
PS-48
- If stock distribution is applicable after rights (one action applicable to other):
Adjusted price = (closing price * A + subscription price * C) / ((A + C) * (1 + B / A))
New number of shares = old number of shares * ((A + C) * (1 + B / A))
Divisor: increases
- Stock distribution and rights (neither action is applicable to the other):
Adjusted price = (closing price * A + subscription price * C) / (A + B + C)
New number of shares = old number of shares * (A + B +C) / A
Divisor: increases
Neither we nor any of our affiliates, including BAS, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the Dow Jones EURO STOXX 50® Index or any successor to the Dow Jones EURO STOXX 50® Index. STOXX does not guarantee the accuracy or the completeness of the Dow Jones EURO STOXX 50® Index or any data included in the Dow Jones EURO STOXX 50® Index. STOXX assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the Dow Jones EURO STOXX 50® Index. STOXX disclaims all responsibility for any errors or omissions in the calculation and dissemination of the Dow Jones EURO STOXX 50® Index or the manner in which the Dow Jones EURO STOXX 50® Index is applied in determining the amount payable at maturity.
Historical Closing Levels of the Dow Jones EURO STOXX 50® Index
Since its inception, the Dow Jones EURO STOXX 50® Index has experienced significant fluctuations. Any historical upward or downward trend in the level of the Dow Jones EURO STOXX 50® Index during any period shown below is not an indication that the level of the Dow Jones EURO STOXX 50® Index is more or less likely to increase or decrease at any time during the term of the notes. The historical Dow Jones EURO STOXX 50® Index levels do not give an indication of future performance of the Dow Jones EURO STOXX 50® Index. We cannot assure you that the future performance of the Dow Jones EURO STOXX 50® Index or the constituent stocks of the Dow Jones EURO STOXX 50® Index will result in you receiving an amount greater than the outstanding face amount of the notes on the maturity date plus the Minimum Supplemental Redemption Amount.
The table below sets forth the high, the low, and the last closing levels at the end of each calendar quarter of the Dow Jones EURO STOXX 50® Index since the first calendar quarter of 2004. The closing levels listed in the table below were obtained from the Bloomberg® service under the symbol SX5E, without independent verification.
PS-49
Dow Jones EURO STOXX 50® Index Quarterly Levels
HIGH | LOW | CLOSE | ||||
2004 |
||||||
First Quarter |
2,959.71 | 2,702.05 | 2,787.49 | |||
Second Quarter |
2,905.88 | 2,659.85 | 2,811.08 | |||
Third Quarter |
2,806.62 | 2,580.04 | 2,726.30 | |||
Fourth Quarter |
2,955.11 | 2,734.37 | 2,951.01 | |||
2005 |
||||||
First Quarter |
3,114.54 | 2,924.01 | 3,055.73 | |||
Second Quarter |
3,190.80 | 2,930.10 | 3,181.54 | |||
Third Quarter |
3,429.42 | 3,170.06 | 3,428.51 | |||
Fourth Quarter |
3,616.33 | 3,241.14 | 3,578.93 | |||
2006 |
||||||
First Quarter |
3,874.61 | 3,532.68 | 3,853.74 | |||
Second Quarter |
3,890.94 | 3,408.02 | 3,648.92 | |||
Third Quarter |
3,899.41 | 3,492.11 | 3,899.41 | |||
Fourth Quarter |
4,140.66 | 3,880.14 | 4,119.94 | |||
2007 |
||||||
First Quarter |
4,272.32 | 3,906.15 | 4,181.03 | |||
Second Quarter |
4,556.97 | 4,189.55 | 4,489.77 | |||
Third Quarter |
4,557.57 | 4,062.33 | 4,381.71 | |||
Fourth Quarter |
4,489.79 | 4,195.58 | 4,399.72 | |||
2008 |
||||||
First Quarter |
4,339.23 | 3,431.82 | 3,628.06 | |||
Second Quarter (through May 28th) |
3,882.28 | 3,671.28 | 3,743.18 |
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the Dow Jones EURO STOXX 50® Index. The generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the Dow Jones EURO STOXX 50® Index exhibiting greater volatility than in earlier periods.
License Agreement
We have entered into a non-exclusive license agreement with STOXX providing for the license to us and certain of our affiliated or subsidiary companies, in exchange for a fee, of the right to use indices owned and published by STOXX (including the Dow Jones EURO STOXX 50® Index) in connection with certain securities, including the notes.
The license agreement between us and STOXX requires that the following language be stated in this pricing supplement:
STOXX and Dow Jones have no relationship to us, other than the licensing of the Dow Jones EURO STOXX 50® Index and the related trademarks for use in connection with the notes. STOXX and Dow Jones do not:
| sponsor, endorse, sell, or promote the notes; |
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| recommend that any person invest in the notes or any other securities; |
| have any responsibility or liability for or make any decisions about the timing, amount, or pricing of the notes; |
| have any responsibility or liability for the administration, management, or marketing of the notes; or |
|
consider the needs of the notes or the holders of the notes in determining, composing, or calculating the Dow Jones EURO STOXX 50® Index, or have any obligation to do so. |
STOXX and Dow Jones will not have any liability in connection with the notes. Specifically:
| STOXX and Dow Jones do not make any warranty, express or implied, and disclaim any and all warranty concerning: |
¡ |
the results to be obtained by the notes, the holders of the notes or any other person in connection with the use of the Dow Jones EURO STOXX 50® Index and the data included in the Dow Jones EURO STOXX 50® Index; |
¡ |
the accuracy or completeness of the Dow Jones EURO STOXX 50® Index and its data; |
¡ |
the merchantability and the fitness for a particular purpose or use of the Dow Jones EURO STOXX 50® Index and its data; |
|
STOXX and Dow Jones will have no liability for any errors, omissions, or interruptions in the Dow Jones EURO STOXX 50® Index or its data; and |
| Under no circumstances will STOXX or Dow Jones be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if STOXX or Dow Jones knows that they might occur. |
The licensing agreement between us and STOXX is solely for their benefit and our benefit, and not for the benefit of the holders of the notes or any other third parties.
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Nikkei 225 Index
The Nikkei 225 Index is a stock index calculated, published, and disseminated by Nikkei Inc. that measures the composite price performance of selected Japanese stocks. The Nikkei 225 Index is currently based on 225 stocks (each, an Index Stock) trading on the Tokyo Stock Exchange (TSE) and represents a broad cross-section of Japanese industry. All 225 of the Index Stocks that are components of the Nikkei 225 Index are stocks listed in the First Section of the TSE. Index Stocks listed in the First Section are among the most actively traded stocks on the TSE. Futures and options contracts on the Nikkei 225 Index are traded on the Singapore International Monetary Exchange, the Osaka Securities Exchange, and the Chicago Mercantile Exchange.
The Nikkei 225 Index is a modified, price-weighted index. Each Index Stocks weight in the Nikkei 225 Index is based on its price per share rather than the total market capitalization of the issuer. Nikkei Inc. calculates the Nikkei 225 Index by multiplying the per share price of each Index Stock by the corresponding weighting factor for that Index Stock (a Weight Factor), calculating the sum of all these products and dividing that sum by a divisor. The divisor, initially set on May 16, 1949 at 225, was set at 24.394 on April 2, 2008, and is subject to periodic adjustments as set forth below. Each Weight Factor is computed by dividing ¥50 by the par value of the relevant Index Stock, so that the share price of each Index Stock when multiplied by its Weight Factor corresponds to a share price based on a uniform par value of ¥50. Each Weight Factor represents the number of shares of the related Index Stock which are included in one trading unit of the Nikkei 225 Index. The stock prices used in the calculation of the Nikkei 225 Index are those reported by a primary market for the Index Stocks, which is currently the TSE. The level of the Nikkei 225 Index is calculated once per minute during TSE trading hours.
In order to maintain continuity in the level of the Nikkei 225 Index in the event of certain changes due to non-market factors affecting the Index Stocks, such as the addition or deletion of stocks, substitution of stocks, stock dividends, stock splits, or distributions of assets to stockholders, the divisor used in calculating the Nikkei 225 Index is adjusted in a manner designed to prevent any instantaneous change or discontinuity in the level of the Nikkei 225 Index. The divisor remains at the new value until a further adjustment is necessary as the result of another change. As a result of each change affecting any Index Stock, the divisor is adjusted in such a way that the sum of all share prices immediately after the change multiplied by the applicable Weight Factor and divided by the new divisor, i.e., the level of the Nikkei 225 Index immediately after the change, will equal the level of the Nikkei 225 Index immediately prior to the change.
Stocks may be deleted from or added to the Nikkei 225 Index by Nikkei Inc. However, to maintain continuity in the Nikkei 225 Index, the policy of Nikkei Inc. generally is not to alter the composition of the Index Stocks except when an Index Stock is deleted in accordance with the following criteria. Any stock becoming ineligible for listing in the First Section of the TSE due to any of the following reasons will be deleted from the Index Stocks: bankruptcy of the issuer; merger of the issuer into, or acquisition of the issuer by, another company; delisting of the stock or transfer of the stock to the Seiri Post because of excess debt of the issuer or because of any other reason; or transfer of the stock to the Second Section of the TSE. Upon deletion of a stock from the Nikkei 225 Index, Nikkei Inc. will select, in accordance with certain criteria established by it, a replacement for the deleted Index Stock. In an exceptional case, a newly listed stock in the First Section of the TSE that is recognized by Nikkei Inc. to be representative of a market may be added to the Index Stocks. As a result, an existing Index Stock with low trading volume and not representative of a market will be deleted.
Nikkei Inc. is under no obligation to continue the calculation and dissemination of the Nikkei 225 Index. The notes are not sponsored, endorsed, sold, or promoted by Nikkei Inc. No
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inference should be drawn from the information contained in this pricing supplement that Nikkei Inc. makes any representation or warranty, implied or express, to us, any holder of the notes, or any member of the public regarding the advisability of investing in securities generally or in the notes in particular or the ability of the Nikkei 225 Index to track general stock market performance. Nikkei Inc. has no obligation to take our needs or the needs of any holder of the notes into consideration in determining, composing, or calculating the Nikkei 225 Index. Nikkei Inc. is not responsible for, and has not participated in the determination of the timing of, prices for, or quantities of, the notes to be issued, or in the determination or calculation of the equation by which the notes are to be settled in cash. Nikkei Inc. has no obligation or liability in connection with the administration or marketing of the notes.
Neither we nor any of our affiliates, including the calculation agent, accept any responsibility for the calculation, maintenance, or publication of the Nikkei 225 Index or any Successor Index. Nikkei Inc. disclaims all responsibility for any errors or omissions in the calculation and dissemination of the Nikkei 225 Index or the manner in which the Nikkei 225 Index is applied in determining the Basket Level or the amount payable on the notes at maturity.
The Tokyo Stock Exchange
The TSE is one of the worlds largest securities exchanges in terms of market capitalization. Trading hours for most products listed on the TSE are currently from 9:00 A.M. to 11:00 A.M. and from 12:30 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE will close prior to the opening of business in New York City on the same calendar day. Therefore, the closing level of the Nikkei 225 Index on a trading day will generally be available in the U.S. by the opening of business on the same calendar day.
The TSE has adopted certain measures, including daily price floors and ceilings on individual stocks, intended to prevent any extreme short-term price fluctuations resulting from order imbalances. In general, any stock listed on the TSE cannot be traded at a price lower than the applicable price floor or higher than the applicable price ceiling. These price floors and ceilings are expressed in absolute Japanese yen, rather than percentage limits based on the closing price of the stock on the previous trading day. In addition, when there is a major order imbalance in a listed stock, the TSE posts a special bid quote or a special asked quote for that stock at a specified higher or lower price level than the stocks last sale price in order to solicit counter-orders and balance supply and demand for the stock. Prospective investors should also be aware that the TSE may suspend the trading of individual stocks in certain limited and extraordinary circumstances, including, for example, unusual trading activity in that stock. As a result, changes in the Nikkei 225 Index may be limited by price limitations or special quotes, or by suspension of trading, on individual stocks that make up the Nikkei 225 Index, and these limitations, in turn, may adversely affect the value of the notes.
Historical Closing Levels of the Nikkei 225 Index
Since its inception, the Nikkei 225 Index has experienced significant fluctuations. Any historical upward or downward trend in the level of the Nikkei 225 Index during any period shown below is not an indication that the level of the Nikkei 225 Index is more or less likely to increase or decrease at any time during the term of the notes. The historical Nikkei 225 Index levels do not give an indication of future performance of the Nikkei 225 Index. We cannot assure you that the future performance of the Nikkei 225 Index or the constituent stocks of the Nikkei 225 Index will result in you receiving an amount greater than the outstanding face amount of the notes on the maturity date plus the Minimum Supplemental Redemption Amount.
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The table below sets forth the high, the low, and the last closing levels at the end of each calendar quarter of the Nikkei 225 Index since the first calendar quarter of 2004. The closing levels listed in the table below were obtained from the Bloomberg® service under the symbol NKY, without independent verification.
Nikkei 225 Index Quarterly Levels
HIGH | LOW | CLOSE | ||||
2004 |
||||||
First Quarter |
11,770.65 | 10,365.40 | 11,715.39 | |||
Second Quarter |
12,163.89 | 10,505.05 | 11,858.87 | |||
Third Quarter |
11,896.01 | 10,687.81 | 10,823.57 | |||
Fourth Quarter |
11,488.76 | 10,659.15 | 11,488.76 | |||
2005 |
||||||
First Quarter |
11,966.69 | 11,238.37 | 11,668.95 | |||
Second Quarter |
11,874.75 | 10,825.39 | 11,584.01 | |||
Third Quarter |
13,617.24 | 11,565.99 | 13,574.30 | |||
Fourth Quarter |
16,344.20 | 13,106.18 | 16,111.43 | |||
2006 |
||||||
First Quarter |
17,059.66 | 15,341.18 | 17,059.66 | |||
Second Quarter |
17,563.37 | 14,218.60 | 15,505.18 | |||
Third Quarter |
16,385.96 | 14,437.24 | 16,127.58 | |||
Fourth Quarter |
17,225.83 | 15,725.94 | 17,225.83 | |||
2007 |
||||||
First Quarter |
18,215.35 | 16,642.25 | 17,287.65 | |||
Second Quarter |
18,240.30 | 17,028.41 | 18,138.36 | |||
Third Quarter |
18,261.98 | 15,273.68 | 16,785.69 | |||
Fourth Quarter |
17,458.98 | 14,837.66 | 15,307.78 | |||
2008 |
||||||
First Quarter |
14,691.41 | 11,787.51 | 12,525.54 | |||
Second Quarter (through May 28th) |
14,269.61 | 12,656.42 | 13,709.44 |
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the Nikkei 225 Index. The generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the Nikkei 225 Index exhibiting greater volatility than in earlier periods.
License Agreement
We have entered into an agreement with Nikkei Inc. providing us and any of our affiliated or subsidiary companies identified in that agreement with a non-exclusive license and, in exchange for a fee, with the right to use the Nikkei 225 Index, which is owned by Nikkei Inc. Nikkei Digital Media, Inc., a wholly owned subsidiary of Nikkei Inc., calculates and disseminates the Nikkei 225 Index under an exclusive agreement with Nikkei Inc. Nikkei Inc. and Nikkei Digital Media, Inc. are collectively referred to as the Nikkei Index Sponsor.
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The license agreement requires that the following language be stated in this pricing supplement:
The notes are not in any way sponsored, endorsed, or promoted by the Nikkei Index Sponsor. The Nikkei Index Sponsor does not make any warranty or representation whatsoever, express or implied, either as to the results to be obtained as to the use of the Nikkei 225 Index or the figure as to which the Nikkei 225 Index stands on any particular day or otherwise. The Nikkei 225 Index is compiled and calculated solely by the Nikkei Index Sponsor. However, the Nikkei Index Sponsor shall not be liable to any person for any error in the Nikkei 225 Index and the Nikkei Index Sponsor shall not be under any obligation to advise any person, including you or us, of any error therein.
In addition, the Nikkei Index Sponsor gives no assurance regarding any modification or change in any methodology used in calculating the Nikkei 225 Index and is under no obligation to continue the calculation, publication, and dissemination of the Nikkei 225 Index.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
Our subsidiaries, BAS and BAI, have been appointed as our selling agents to solicit offers on a best efforts basis to purchase the notes. The selling agents are parties to the Distribution Agreement described in the Supplemental Plan of Distribution on page S-13 of the accompanying prospectus supplement. Each selling agent will receive a commission of 3.00% of the principal amount of each note sold through its efforts. You must have an account with one of the selling agents in order to purchase the notes.
No selling agent is acting as your fiduciary or advisor, and you should not rely upon any communication from any selling agent in connection with the notes as investment advice or a recommendation to purchase notes. You should make your own investment decision regarding the notes after consulting with your legal, tax, and other advisors.
BAS and any of our other affiliates and subsidiaries may use this pricing supplement, the accompanying prospectus supplement, and the prospectus in a market-making transaction for any notes after their initial sale.
U.S. FEDERAL INCOME TAX SUMMARY
The following summary of certain U.S. federal income tax consequences of the purchase, ownership, and disposition of the notes is based upon laws, regulations, rulings, and decisions now in effect, all of which are subject to change (including changes in effective dates) or possible differing interpretations. It deals only with initial purchasers of the notes who hold notes as capital assets and does not deal with persons in special tax situations, such as partnerships, subchapter S corporations, or other pass-through entities, financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, tax-exempt entities, persons holding notes in a tax-deferred or tax-advantaged account, persons holding notes as a hedge, a position in a straddle or as part of a conversion transaction for tax purposes, or persons who are required to mark-to-market for tax purposes. You must consult your own tax advisors concerning the application of U.S. federal income tax laws to your particular situation as well as any consequences of the purchase, ownership, and disposition of the notes arising under the laws of any other jurisdiction.
As used in this pricing supplement, the term U.S. Holder means a beneficial owner of a note that is for U.S. federal income tax purposes (1) a citizen or resident of the U. S., (2) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S. or of any state of the U.S. or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (4) any trust if a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury regulations, some trusts in existence on August 20, 1996, and treated as U.S. persons prior to that date, that elect to continue to be treated as U.S. persons also will be U.S. Holders. As used in this pricing supplement, the term Non-U.S. Holder is a holder that is not a U.S. Holder.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds a note, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership and accordingly, this summary does not apply to partnerships. A partner of a partnership holding a note should consult its own tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership, and disposition by the partnership of a note.
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Tax Characterization of the Notes
There are no statutory provisions, regulations, published rulings, or judicial decisions addressing the characterization, for U.S. federal income tax purposes, of the notes or other instruments with terms substantially the same as the notes. However, although the matter is not free from doubt, under current law, each note should be treated as a debt instrument for U.S. federal income tax purposes. We currently intend to treat the notes as debt instruments for U.S. federal income tax purposes and, where required, intend to file information returns with the Internal Revenue Service (IRS) in accordance with such treatment, in the absence of any change or clarification in the law, by regulation or otherwise, requiring a different characterization of the notes. You should be aware, however, that the IRS is not bound by our characterization of the notes as indebtedness and the IRS could possibly take a different position as to the proper characterization of the notes for U.S. federal income tax purposes. If the notes are not in fact treated as debt instruments for U.S. federal income tax purposes, then the U.S. federal income tax treatment of the purchase, ownership, and disposition of the notes could differ materially from the treatment discussed below with the result that the timing and character of income, gain, or loss recognized in respect of a note could differ materially from the timing and character of income, gain, or loss recognized in respect of a note had the notes in fact been treated as debt instruments for U.S. federal income tax purposes.
U.S. Holders Income Tax Considerations
Interest and Original Issue Discount
The amount payable on the notes at maturity will depend on the performance of the Basket Indices. Accordingly, the notes will be treated as contingent payment debt instruments for U.S. federal income tax purposes subject to taxation under the noncontingent bond method. As a result, the notes generally will be subject to the OID provisions of the Code and the Treasury regulations issued under the Code. Under applicable Treasury regulations, a U.S. Holder will be required to report OID or interest income based on a comparable yield and a projected payment schedule, as described below, established by us for determining interest accruals and adjustments with respect to a note. A U.S. Holder which does not use the comparable yield and follow the projected payment schedule to calculate its OID and interest income on a note must timely disclose and justify the use of other estimates to the IRS.
A comparable yield with respect to a contingent payment debt instrument generally is the yield at which we could issue a fixed-rate debt instrument with terms similar to those of the contingent payment debt instrument (taking into account for this purpose the level of subordination, term, timing of payments, and general market conditions, but ignoring any adjustments for liquidity or the riskiness of the contingencies with respect to the debt instrument). Notwithstanding the foregoing, a comparable yield must not be less than the applicable U.S. federal rate based on the overall maturity of the debt instrument.
A projected payment schedule with respect to a contingent payment debt instrument generally is a series of expected payments, the amount and timing of which would produce a yield to maturity on that debt instrument equal to the comparable yield. In the case of the notes, based upon market conditions as of the date of this pricing supplement, as determined by us for purposes of illustrating the application of the Code and the Treasury regulations to the notes as if the notes had been issued on June 27, 2008 and were scheduled to mature on June 28, 2013, the projected payment schedule per $1,000 principal amount of the notes would consist of a single payment of $1,276.45 at maturity. This consists of the principal amount and a projection for tax purposes of the estimated Supplemental Redemption Amount. The actual projected payment schedule will be completed on the pricing date, and included in the final pricing supplement. See Hypothetical Tax Accrual Table. You should be aware
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that this amount is not calculated or provided for any purposes other than the determination of a U.S. Holders interest accruals and adjustments with respect to the notes for U.S. federal income tax purposes. We make no representations regarding the actual amounts of payments on the notes, except with respect to the principal amount and the Minimum Supplemental Redemption Amount.
Based on the comparable yield and the projected payment schedule of the notes, a U.S. Holder of a note (regardless of accounting method) generally will be required to accrue as OID the sum of the daily portions of interest on the note for each day in the taxable year on which the holder held the note, adjusted upward or downward to reflect the difference, if any, between the actual and projected amount of any contingent payments on the note, as set forth below. The daily portions of interest for a note are determined by allocating to each day in an accrual period the ratable portion of interest on the note that accrues in the accrual period. The amount of interest on a note that accrues in an accrual period is the product of the comparable yield on the note (adjusted to reflect the length of the accrual period) and the adjusted issue price of the note at the beginning of the accrual period. The adjusted issue price of a note at the beginning of the first accrual period will equal its issue price and for any subsequent accrual period will be (1) the sum of the issue price of the note and any interest previously accrued on the note by a holder (disregarding any positive or negative adjustments) minus (2) the amount of any projected payments on the note for previous accrual periods. The issue price of each note in an issue of notes is the first price at which a substantial amount of those notes has been sold (including any premium paid for those notes and ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Because of the application of the OID rules, a U.S. Holder of a note will be required to include in income OID in excess of actual cash payments received for certain taxable years.
A U.S. Holder will be required to recognize interest income equal to the amount of any positive adjustment (i.e., the excess of actual payments over the projected contingent payments) for a note for the taxable year in which a contingent payment is paid. A negative adjustment (i.e., the excess of projected contingent payments over actual payments) for a note for the taxable year in which a contingent payment is paid (1) will first reduce the amount of interest for the note that a U.S. Holder would otherwise be required to include in income in the taxable year and (2) to the extent of any excess, will give rise to an ordinary loss equal to that portion of the excess as does not exceed the excess of (A) the amount of all previous interest inclusions under the note over (B) the total amount of the U.S. Holders net negative adjustments treated as ordinary loss on the note in prior taxable years. A net negative adjustment is not subject to the 2% floor limitation imposed on miscellaneous deductions under Section 67 of the Code. Any negative adjustment in excess of the amounts described above in (1) and (2) will be carried forward to offset future interest income for the note or to reduce the amount realized on a sale, exchange, or retirement of the note. Where a U.S. Holder purchases a note at a price other than its issue price, the difference between the purchase price and the issue price generally will be treated as a positive or negative adjustment, as the case may be, and allocated to the daily portions of interest or projected payments for the note. If you purchase a note in a transaction after the initial issuance of the notes, you should consult your tax advisors for additional guidance in making these adjustments.
If a contingent payment becomes fixed more than six months prior to maturity, a positive or negative adjustment, as appropriate, is made to reflect the difference between the present value of the amount that is fixed and the present value of the projected amount. A similar adjustment may be appropriate in some circumstances for the notes. For example, it may be possible to determine, based on the decline of the Basket Level in one or more Reference Periods, that the Supplemental Redemption Amount will be no more than the Minimum Supplemental Redemption Amount, regardless of whether the Basket Level increases in subsequent Reference Periods. In that case, assuming more than six months remain prior
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to maturity, a negative adjustment would be made to reflect the difference between the present value of the principal amount of the notes and the present value of the projected amounts. Moreover, on any Reset Date it may be possible to determine that the amount payable at maturity will be less than the projected payment amount, even though the amount payable on the notes will not become fixed prior to the last Reset Date. In that circumstance, the IRS may deem it appropriate to adjust (using the methodology described above or another methodology) the amount of interest income a U.S. Holder would be required to recognize in a particular taxable year for a note. However, until the IRS sets forth rules dealing with that situation, we do not intend to make any of these adjustments.
Hypothetical Tax Accrual Table
The table below sets forth the following information with respect to each $1,000 principal amount of the notes for each of the indicated accrual periods through the maturity date of the notes:
| the adjusted issue price at the beginning of the accrual period; |
| the amount of interest deemed to have accrued during the accrual period; and |
| the total amount of interest deemed to have accrued from the original issue date through the end of the accrual period. |
The table is based upon a hypothetical projected payment schedule (including both a hypothetical Supplemental Redemption Amount and a hypothetical comparable yield equal to 5.00% per annum (compounded annually), which is our current estimate of the comparable yield, based upon market conditions as of the date of this pricing supplement) as determined by us for purposes of illustrating the application of the Code and the Treasury regulations to the notes as if the notes had been issued on June 27, 2008 and were scheduled to mature on June 28, 2013. The following table is for illustrative purposes only. We will determine the actual projected payment schedule and the actual comparable yield on the pricing date. The tax accrual table will be revised accordingly and will be set forth in the final pricing supplement delivered to you in connection with the initial sale of the notes. The tax accrual table will depend upon actual market interest rates (and accordingly, our borrowing costs for debt instruments with comparable maturities) as of the pricing date.
Accrual Period |
Adjusted Issue Price at Beginning of Accrual Period |
Interest Deemed to Accrue on the Notes During Accrual Period(1) |
Total Interest Deemed to Have Accrued from Original Issue Date as of End of Accrual Period | |||
June 27, 2008 through December 31, 2008 |
$1,000.00 | $25.56 | $25.56 | |||
January 1, 2009 through December 31, 2009 |
$1,025.56 | $51.28 | $76.84 | |||
January 1, 2010 through December 31, 2010 |
$1,076.84 | $53.84 | $130.68 | |||
January 1, 2011 through December 31, 2011 |
$1,130.68 | $56.53 | $187.21 | |||
January 1, 2012 through December 27, 2012 |
$1,187.21 | $59.36 | $246.57 | |||
January 1, 2013 through June 28, 2013 |
$1,246.57 | $29.88 | $276.45 |
Final Adjusted Issue Price = $1,276.45 per $1,000 principal amount of notes.
(1) | Represents the adjusted issue price at the beginning of the accrual period multiplied by the hypothetical comparable yield for the accrual period. |
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Sale, Exchange, or Retirement
Upon a sale, exchange, or retirement of a note, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement and that holders tax basis in the note. A U.S. Holders tax basis in a note generally will equal the cost of that note, increased by the amount of interest income previously accrued by the holder for that note (disregarding any positive or negative adjustments). A U.S. Holder generally will treat any gain as interest income, and will treat any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustments previously taken into account as ordinary losses, and the balance as long-term or short-term capital loss (depending upon the U.S. Holders holding period for the note). The deductibility of capital losses by a U.S. Holder is subject to limitations.
Backup Withholding and Reporting
Generally, payments of principal and interest, and the accrual of OID, with respect to the notes will be subject to information reporting and possibly to backup withholding. Information reporting means that the payment is required to be reported to the holder of the notes and the IRS. Backup withholding means that we are required to collect and deposit a portion of the payment with the IRS as a tax payment on your behalf. Backup withholding will be imposed at a rate of 28%. This rate is scheduled to increase to 31% in 2011.
Payments of principal and interest, and the accrual of OID, with respect to notes held by a U.S. Holder, other than certain exempt recipients such as corporations, and proceeds from the sale of notes through the U.S. office of a broker will be subject to backup withholding unless that U.S. Holder supplies us with a taxpayer identification number and certifies that its taxpayer identification number is correct or otherwise establishes an exemption. In addition, backup withholding will be imposed on any payment of principal and interest, and the accrual of OID, with respect to a note held by a U.S. Holder that is informed by the U.S. Secretary of the Treasury that it has not reported all dividend and interest income required to be shown on its U.S. federal income tax return or that fails to certify that it has not underreported its interest and dividend income.
Payments of the proceeds from the sale of the notes to or through a foreign office of a broker, custodian, nominee, or other foreign agent acting on your behalf will not be subject to information reporting or backup withholding. If, however, that nominee, custodian, agent, or broker is, for U.S. federal income tax purposes, (1) a U.S. person, (2) the government of the U.S. or the government of any State or political subdivision of any State (or any agency or instrumentality of any of these governmental units), (3) a controlled foreign corporation, (4) a foreign partnership that is either engaged in a U.S. trade or business or whose U.S. partners in the aggregate hold more than 50% of the income or capital interests in the partnership, (5) a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S., or (6) a U.S. branch of a foreign bank or foreign insurance company, those payments will be subject to information reporting, unless (a) that custodian, nominee, agent, or broker has documentary evidence in its records that the holder is not a U.S. person and certain other conditions are met or (b) the holder otherwise establishes an exemption from information reporting.
A U.S. Holder that does not provide us with its correct taxpayer identification number may be subject to penalties imposed by the IRS. In addition, any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holders U.S. federal income tax liability, provided that certain required information is furnished to the IRS.
Applicable Treasury regulations require taxpayers that participate in reportable transactions to disclose their participation to the IRS by attaching Form 8886 to their tax
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returns and to retain a copy of all documents and records related to the transaction. In addition, material advisors with respect to such a transaction may be required to file returns and maintain records, including lists identifying investors in the transaction, and to furnish those records to the IRS upon demand. A transaction may be a reportable transaction based on any of several criteria, one or more of which may be present with respect to an investment in the notes. Whether an investment in the notes constitutes a reportable transaction for any investor depends on the investors particular circumstances. Investors should consult their own tax advisors concerning any possible disclosure obligation they may have for their investment in the notes and should be aware that, should any material advisor determine that the return filing or investor list maintenance requirements apply to this transaction, they would be required to comply with these requirements.
Non-U.S. Holders Income Tax Considerations
U.S. Federal Income and Withholding Tax
Under present U.S. federal income tax law, and subject to the discussion below concerning backup withholding, any gain realized on the sale, exchange, or retirement of a note, or the payment by us, or any paying agent, of principal or interest, including OID, on a note owned by a Non-U.S. Holder is not subject to U.S. federal income or withholding tax provided that:
1. | the holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock that are entitled to vote; |
2. | the holder is not a controlled foreign corporation that is related to us through stock ownership; |
3. | the holder is not a bank receiving interest on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; |
4. | the payment is not effectively connected with the conduct of a trade or business in the U.S.; and |
5. | either (A) the holder provides us (or any paying agent) with a statement which sets forth its address, and certifies, under penalties of perjury, that it is not a U.S. person, citizen, or resident (which certification may be made on an IRS Form W-8BEN (or successor form)) or (B) a financial institution holding the note on behalf of the holder certifies, under penalties of perjury (which certification may be made on an IRS Form W-8IMY (or successor form)), that it has or will provide us (or the paying agent) with a withholding statement. |
Payments to Non-U.S. Holders not meeting the requirements set forth above are subject to withholding at a rate of 30% unless (a) the holder is engaged in a trade or business in the U.S. and the holder provides us with a properly executed IRS Form W-8ECI (or successor form) certifying that the payments are effectively connected with the conduct of a trade or business in the U.S., or (b) the holder provides us with a properly executed IRS Form W-8BEN (or successor form) claiming an exemption from, or reduction in the rate of, withholding under the benefit of a tax treaty. To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer identification number and certify as to its eligibility under the appropriate treatys limitations on benefits article.
If a Non-U.S. Holder of a note is engaged in the conduct of a trade or business within the U.S. and if interest (including any OID) on the note, or gain realized on the sale, exchange,
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or retirement of the note, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal withholding tax (provided that the certification requirements discussed above are satisfied), generally will be subject to U.S. federal income tax on such interest (including any OID) or gain on a net income basis in the same manner as if it were a U.S. Holder. Non-U.S. Holders should read the material under the heading U.S. HoldersIncome Tax Considerations, for a description of the U.S. federal income tax consequences of acquiring, owning, and disposing of a note. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject to certain adjustments.
Backup Withholding and Reporting
Payments of principal and interest, and the accrual of OID, with respect to the notes and proceeds from the sale of notes held by a Non-U.S. Holder will not be subject to information reporting and backup withholding so long as the holder has certified that it is not a U.S. person and we do not have actual knowledge that the certification is false (or you otherwise establish an exemption). However, if a Non-U.S. Holder has not certified that it is not U.S. person or we have actual knowledge that the certification is false (and it has not otherwise established an exemption) the holder will be subject to backup withholding and information reporting in the manner described above in U.S. HoldersBackup Withholding and Reporting.
A fiduciary of a pension plan or other employee benefit plan (including a governmental plan, an individual retirement account, or a Keogh plan) subject to ERISA should consider fiduciary standards under ERISA in the context of the particular circumstances of the plan before authorizing an investment in the notes. A fiduciary also should consider whether the investment is authorized by, and in accordance with, the documents and instruments governing the plan.
In addition, ERISA and the Code prohibit a number of transactions (referred to as prohibited transactions) involving the assets of a plan subject to ERISA or the assets of an individual retirement account, or plan subject to Section 4975 of the Code (referred to as an ERISA plan), on the one hand, and persons who have specified relationships with the plan (parties in interest within the meaning of ERISA or disqualified persons within the meaning of the Code), on the other. If we (or an affiliate) are considered a party in interest or disqualified person for an ERISA plan, then the investment in the notes by that ERISA plan may give rise to a prohibited transaction. There are several ways by which we or our affiliates may be considered a party in interest or a disqualified person for an ERISA plan. For example, if we provide banking or financial advisory services to an ERISA plan, or act as a trustee or in a similar fiduciary role for ERISA plan assets, we may be considered a party in interest or a disqualified person for that ERISA plan.
A violation of the prohibited transaction rules may result in civil penalties or other liabilities under ERISA and an excise tax under Section 4975 of the Code for those persons, unless exemptive relief is available under an applicable statutory, regulatory, or administrative exemption. In addition, a prohibited transaction may require correction of the transaction. Some types of employee benefit plans and arrangements including those that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), and foreign plans (as described in Section 4(b)(4) of ERISA) (non-ERISA arrangements) are not subject to the requirements of ERISA or Section 4975 of the Code, but
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may be subject to similar provisions under applicable federal, state, local, foreign, or other regulations, rules, or laws (similar laws).
Therefore, an ERISA plan should not invest in the notes unless the plan fiduciary or other person acquiring them on behalf of the ERISA plan determines that neither we nor any of our affiliates is a party in interest or a disqualified person or, alternatively, that an exemption from the prohibited transaction rules is available. The U.S. Department of Labor has issued five prohibited transaction class exemptions, or PTCEs, that may provide exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of the notes. These exemptions include:
(1) PTCE 84-14, an exemption for some transactions determined by independent qualified professional asset managers;
(2) PTCE 90-1, an exemption for some types of transactions involving insurance company pooled separate accounts;
(3) PTCE 91-38, an exemption for some types of transactions involving bank collective investment funds;
(4) PTCE 95-60, an exemption for transactions involving some types of insurance company general accounts; and
(5) PTCE 96-23, an exemption for plan asset transactions managed by in-house asset managers.
There also may be other statutory or administrative exemptions available, depending on the particular circumstances.
Because we may be considered a party in interest or a disqualified person with respect to many plans, the notes may not be purchased, held, or disposed of by any ERISA plan or any person investing plan assets of any ERISA plan, unless the purchase, holding, or disposition is eligible for exemptive relief or that purchase, holding, or disposition is otherwise not prohibited. Therefore, any purchaser, including any fiduciary purchasing on behalf of an ERISA plan, transferee, or holder of the notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding, that either (a) it is not an ERISA plan and is not purchasing the notes on behalf of or with plan assets of any ERISA plan, or with any assets of a non-ERISA arrangement, or (b) its purchase, holding, and disposition are eligible for exemptive relief or the purchase, holding, or disposition are not prohibited by ERISA or Section 4975 of the Code (or, in the case of a non-ERISA arrangement, any similar laws).
The sale of the notes to an ERISA plan or non-ERISA arrangement is not a representation by us to you or any other person associated with the sale that those securities meet any legal requirements for investments by those entities generally or any particular entities.
If you are the fiduciary of a pension plan or non-ERISA arrangement, or an insurance company that is providing investment advice or other features to a pension plan or other ERISA plan, and you propose to invest in the notes with the assets of the ERISA plan or a non-ERISA arrangement, you should consult your own legal counsel for further guidance.
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Medium-Term Notes, Series L
We may offer from time to time our Bank of America Corporation Medium-Term Notes, Series L. The specific terms of any notes that we offer will be determined before each sale and will be described in a separate product supplement and/or pricing supplement. Terms may include:
| Priority: senior or subordinated |
| Interest rate: notes may bear interest at fixed or floating rates, or may not bear any interest |
| Base floating rates of interest: |
¡ | federal funds rate |
¡ | LIBOR |
¡ | EURIBOR |
¡ | prime rate |
¡ | treasury rate |
¡ | any other rate we specify |
| Maturity: three months or more |
| Indexed notes: principal, premium, or interest payments linked to the price or performance, either directly or indirectly, of one or more reference assets, including securities, currencies, commodities, interest rates, stock indices, or other indices or formulae |
| Payments: U.S. dollars or any other currency that we specify in the applicable product supplement or pricing supplement |
We may sell notes to the selling agents as principal for resale at varying or fixed offering prices or through the selling agents as agents using their best efforts on our behalf. We also may sell the notes directly to investors.
We may use this prospectus supplement and the accompanying prospectus in the initial sale of any notes. In addition, Banc of America Securities LLC, or any of our other affiliates, may use this prospectus supplement and the accompanying prospectus in a market-making transaction in any notes after their initial sale. Unless we or one of our selling agents informs you otherwise in the confirmation of sale, this prospectus supplement and the accompanying prospectus are being used in a market-making transaction.
Unless otherwise specified in the applicable product supplement and/or pricing supplement, we do not intend to list the notes on any securities exchange.
Investing in the notes involves risks. See Risk Factors beginning on page S-4.
Our notes are unsecured and are not savings accounts, deposits, or other obligations of a bank. Our notes are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and involve investment risks.
None of the Securities and Exchange Commission, any state securities commission, or any other regulatory body has approved or disapproved of these notes or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
Banc of America Securities LLC | Banc of America Investment Services, Inc. |
Prospectus Supplement to Prospectus dated May 5, 2006
April 10, 2008
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S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
We have registered the notes on a registration statement on Form S-3 with the Securities and Exchange Commission under Registration No. 333-133852.
From time to time, we intend to use this prospectus supplement, the accompanying prospectus, and a related product supplement and/or pricing supplement to offer the notes. You should read each of these documents before investing in the notes.
This prospectus supplement describes additional terms of the notes and supplements the description of our debt securities contained in the accompanying prospectus. If the information in this prospectus supplement is inconsistent with the prospectus, this prospectus supplement will supersede the information in the prospectus.
This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or the solicitation of an offer to buy the notes in any jurisdiction in which that offer or solicitation is unlawful. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes in some jurisdictions may be restricted by law. If you have received this prospectus supplement and the accompanying prospectus, you should find out about and observe these restrictions. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes outside of the United States. See Supplemental Plan of Distribution.
This prospectus supplement and the accompanying prospectus have been prepared on the basis that any offer of notes in any member state of the European Economic Area (each, a Relevant Member State) which has implemented the Prospectus Directive (2003/71/EC) (the Prospectus Directive) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of any notes which are contemplated in this prospectus supplement and the accompanying prospectus may only do so in circumstances in which no obligation arises for us or any of the selling agents to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither we nor the selling agents have authorized, and neither we nor they authorize, the making of any offer of notes in circumstances in which an obligation arises for us or any selling agent to publish or supplement a prospectus for such offer. Neither this prospectus supplement nor the accompanying prospectus constitutes an approved prospectus for the purposes of the Prospective Directive.
For each offering of notes, we will issue a product supplement and/or a pricing supplement which will contain additional terms of the offering and a specific description of the notes being offered. The product supplement and/or pricing supplement also may add, update, or change information in this prospectus supplement or the accompanying prospectus, including provisions describing the calculation of interest and the method of making payments under the terms of a note. We will state in the product supplement and/or pricing supplement the interest rate or interest rate basis or formula, issue price, any relevant index or indices or other reference asset, the maturity date, interest payment dates, redemption or repayment provisions, if any, and other relevant terms and conditions for each note at the time of issuance. The product supplement and/or pricing supplement also may include a discussion of any risk factors or other special additional considerations that apply to a particular type of note. The pricing supplement and any product supplement can be quite detailed and always should be read carefully.
Any term that is used, but not defined, in this prospectus supplement has the meaning set forth in the accompanying prospectus.
S-3
Your investment in the notes involves significant risks. Your decision to purchase the notes should be made only after carefully considering the risks of an investment in the notes, including those discussed below, in the accompanying prospectus beginning on page 8, and in the relevant product supplement and/or pricing supplement for the specific notes, with your advisors in light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the notes or financial matters in general. For information regarding risks that may materially affect our business and results, please refer to the information under the caption Item 1A. Risk Factors in our annual report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference in this prospectus supplement.
The market value of the notes may be less than the principal amount of the notes.
The market for, and market value of, the notes may be affected by a number of factors. These factors include:
| the time remaining to maturity of the notes; |
| the aggregate amount outstanding of the relevant notes; |
| any redemption or exchange features of the notes; |
| the level, direction, and volatility of market interest rates generally; |
| general economic conditions of the capital markets in the United States; |
| geopolitical conditions and other financial, political, regulatory, and judicial events that affect the stock markets generally; and |
| any market-making activities with respect to the notes. |
Often, the only way to liquidate your investment in the notes prior to maturity will be to sell the notes. At that time, there may be a very illiquid market for the notes or no market at all.
For indexed notes that have very specific investment objectives or strategies, the applicable market may be more limited, and the price may be more volatile, than for other notes. The market value of indexed notes may be adversely affected by the complexity of the formula and volatility of the applicable reference asset, including any dividend rates or yields of other securities or financial instruments that relate to the indexed notes. Moreover, the market value of indexed notes could be adversely affected by changes in the amount of outstanding equity or other securities linked to those notes.
Hedging activities may affect your return at maturity and the market value of the notes.
Hedging activities we or one or more of our affiliates, including the selling agents, may engage in contemporaneously with an offering of the notes may increase or decrease the value of the notes. In addition, we or one or more of our affiliates, including the selling agents, may purchase or otherwise acquire a long or short position in the notes from time to time. In the case of indexed notes, we or our affiliates, including the selling agents, may engage in hedging activities related to the indexed notes or to a component of the index or formula applicable to the indexed notes. All or a portion of these positions may be liquidated at or about the time of the maturity date of the notes. The aggregate amount and the composition of these positions are likely to vary over time. Although we have no reason to believe that any of those activities will have a material effect on the notes, we cannot assure you that those activities will not affect the prices at which you may sell your notes or your return at maturity.
Holders of indexed notes are subject to important risks that are not associated with more conventional debt securities.
If you invest in indexed notes, you will be subject to significant risks not associated with conventional fixed-rate or floating-rate debt securities. These risks include the possibility that the particular index or indices or other reference asset may be subject to fluctuations, and the possibility that you will receive a lower, or no, amount of principal, premium, or interest, and at different times than expected. In recent years, many securities, currencies, commodities, interest rates, indices, and other reference assets have experienced volatility, and this volatility may be expected in the future. However, past experience is not necessarily indicative of what may occur in the future. We have no control over a number of factors, including economic, financial, and political events, that are important in determining the existence,
S-4
magnitude, and longevity of market volatility and other risks and their impact on the value of, or payments made on, the indexed notes. Some of the additional risks that you should consider in connection with an investment in indexed notes are as follows:
| You may lose some or all of your principal. The principal amount of an indexed note may or may not be fully principal protected. This means that the principal amount you will receive at maturity may be less than the original purchase price of the indexed note. It also is possible that principal will not be repaid. |
| Your yield may be less than the yield on a conventional debt security of comparable maturity. Any yield on your investment in an indexed note (whether or not the principal amount is indexed) may be less than the overall return that you would earn if you purchased at the same time a conventional fixed-rate or floating-rate debt security that had the same maturity date. Your investment return may not reflect the full opportunity cost to you when you consider factors that affect the time value of money. |
| The existence of a multiplier or leverage factor may result in the loss of your principal and interest. Some indexed notes may have interest and principal payments that increase or decrease at a rate that is greater than the rate of a favorable or unfavorable movement in the reference asset. This is referred to as a multiplier or leverage factor. A multiplier or leverage factor in a principal or interest index will increase the risk that no principal or interest will be paid. |
| Payment on the indexed note prior to maturity may result in a reduced return on your investment. The terms of an indexed note may require that the indexed note be paid prior to its scheduled maturity date. That early payment could reduce your anticipated return. In addition, you may not be able to invest the funds you receive in a new investment that yields a similar return. |
| Historical information about a reference asset may not be indicative of future performance. We will provide you with historical information about the underlying security, currency, commodity, index, or other reference asset for an indexed note. This information may not be indicative of the range of, or trends in, fluctuations in the reference asset that may occur in the future or the impact of those fluctuations on an indexed note. |
| Any reference asset to which an indexed note is linked may change or become unavailable. An underlying security for an indexed note may cease to exist due to events out of our control, such as merger or consolidation. A published index to which an indexed note is linked may become unavailable due to several factors out of our control. Any such events would require an alternative method of valuation for that indexed note. Each of those events could result in a decrease in the value of your return on an indexed note linked to that reference asset. |
| The U.S. federal income tax consequences of the indexed notes may be uncertain. No statutory, judicial, or administrative authority directly addresses the characterization for U.S. federal income tax purposes of many of the indexed notes that we may offer. As a result, significant U.S. federal income tax consequences of an investment in those indexed notes may not be certain. We are not requesting a ruling from the Internal Revenue Service (the IRS) for any of the indexed notes and we give no assurance that the IRS will agree with the statements made in this prospectus supplement or in the product supplement and/or pricing supplement applicable to those notes. |
| Your investment return may be less than a comparable direct investment in the applicable reference asset or in a fund that invests in that reference asset. A direct investment in the applicable reference asset or in a fund that invests in that reference asset would allow you to receive the full benefit of any appreciation in the price of the reference asset, as well as in any dividends or distributions paid on any shares of capital stock that constitute the reference asset. |
Our employees who purchase the notes must comply with policies that limit their ability to trade the notes, and that may affect the value of their notes.
If you are our employee or an employee of one of our affiliates, including one of the selling agents, you may acquire notes for investment purposes only, and you must comply with all of our internal policies and procedures. Because these policies and procedures limit the dates and times that you may effect a transaction in the notes, you may not be able to purchase any of the notes from us, and your ability to trade or sell any of the notes in any secondary market may be limited.
S-5
This section describes the general terms and conditions of the notes, which may be senior or subordinated medium-term notes. This section supplements, and should be read together with, the general description of our debt securities included in Description of Debt Securities in the accompanying prospectus. If there is any inconsistency between the information in this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.
We will describe the particular terms of the notes we sell in a separate product supplement and/or pricing supplement. The terms and conditions stated in this section will apply to each note unless the note, the product supplement, the pricing supplement, or an amendment or supplement to the registration statement indicates otherwise.
The following summary of the terms of the notes and the indentures is not complete and is qualified in its entirety by reference to the actual notes and the specific provisions of the Senior Indenture and the Subordinated Indenture, as applicable.
We will issue the notes as part of a series of debt securities under the Senior Indenture or the Subordinated Indenture, as applicable, which are exhibits to our registration statement and are contracts between us and The Bank of New York Trust Company, N.A., as successor trustee. In this prospectus supplement, we refer to The Bank of New York Trust Company, N.A., as the trustee, and we refer to the Senior Indenture and the Subordinated Indenture individually as the Indenture and together as the Indentures.
The Indentures are subject to, and governed by, the Trust Indenture Act of 1939. We, the selling agents, and the depository, in the ordinary course of our respective businesses, have conducted and may conduct business with the trustee or its affiliates. See Description of Debt SecuritiesThe Indentures beginning on page 13 of the accompanying prospectus for more information about the Indentures and the functions of the trustee.
The notes are our direct unsecured obligations and are not obligations of our subsidiaries. The notes are being offered on a continuous basis. There is no limit under our registration statement on the total initial public offering price or aggregate principal amount of the Senior and Subordinated Medium-Term Notes, Series L, that may be offered using this prospectus supplement. We may issue other debt securities under the Indentures from time to time in one or more series up to the aggregate principal amount of the then-existing grant of authority by our board of directors.
Unless otherwise provided in the applicable product supplement and/or pricing supplement, the minimum denomination of the notes will be $1,000 and any larger amount that is a whole multiple of $1,000 (or the equivalent in other currencies).
Fixed-Rate Notes. We may issue notes that bear interest at a fixed rate described in the applicable pricing supplement, which we refer to as fixed-rate notes. We also may issue fixed-rate notes that combine principal and interest payments in installment payments over the life of the note, which we refer to as amortizing notes. For more information on fixed-rate notes and amortizing notes, see Description of Debt SecuritiesFixed-Rate Notes on page 16 of the accompanying prospectus.
Floating-Rate Notes. We may issue notes that bear interest at a floating rate of interest determined by reference to one or more base interest rates, or by reference to one or more interest rate formulae, described in the applicable product supplement and/or pricing supplement, which we refer to as floating-
S-6
rate notes. In some cases, the interest rate of a floating-rate note also may be adjusted by adding or subtracting a spread or by multiplying the interest rate by a spread multiplier. A floating-rate note also may be subject to a maximum interest rate limit, or ceiling, and/or a minimum interest rate limit, or floor, on the interest that may accrue during any interest period. For more information on floating-rate notes, including a description of the manner in which interest payments will be calculated, see Description of Debt SecuritiesFloating-Rate Notes beginning on page 16 of the accompanying prospectus.
Indexed Notes. We may issue notes that provide that the rate of return, including the principal, premium (if any), interest, or other amounts payable (if any), is determined by reference, either directly or indirectly, to the price or performance of one or more securities, currencies or composite currencies, commodities, interest rates, stock indices, or other indices or formulae, in each case as specified in the applicable product supplement and/or pricing supplement. We refer to these notes as indexed notes.
If you purchase an indexed note, you may receive an amount at maturity that is greater than or less than the face amount of your note, depending upon the formula used to determine the amount payable and the relative value at maturity of the reference asset to which your indexed note is linked. We expect that the value of the applicable reference asset will fluctuate over time.
An indexed note may provide either for cash settlement or for physical settlement by delivery of the reference asset. An indexed note also may provide that the form of settlement may be determined at our option or the holders option. Some indexed notes may be convertible, exercisable, or exchangeable prior to maturity, at our option or the holders option, for the reference asset or the cash value of the reference asset.
We will specify in the applicable product supplement and/or pricing supplement the method for determining the principal, premium (if any), interest, or other amounts payable (if any) in respect of particular indexed notes, as well as certain historical or other information with respect to the specified index or other reference asset, specific risk factors relating to that particular type of indexed note, and tax considerations associated with an investment in the indexed notes.
The product supplement and/or pricing supplement for any particular indexed notes also will identify the calculation agent that will calculate the amounts payable with respect to the indexed note. The calculation agent may be one of our affiliates, including Bank of America, N.A. or Banc of America Securities LLC. We may appoint different calculation agents from time to time after the original issue date of an indexed note without your consent and without notifying you of the change. Absent manifest error, all determinations of the calculation agent will be final and binding on you, the selling agents, and us. Upon request of the holder of an indexed note, the calculation agent will provide, if applicable, information relating to the current principal, premium (if any), rate of interest, interest payable, or other amounts payable (if any) in connection with that indexed note.
For more information about indexed notes, see Description of Debt SecuritiesIndexed Notes beginning on page 23 of the accompanying prospectus.
Original Issue Discount Notes. We may issue notes at a price lower than their principal amount or lower than their minimum guaranteed repayment amount at maturity, which we refer to as original issue discount notes. Original issue discount notes may be fixed-rate, floating-rate, or indexed notes and may bear no interest (zero coupon notes) or may bear interest at a rate that is below market rates at the time of issuance. For more information on original issue discount notes, see Description of Debt SecuritiesOriginal Issue Discount Notes on page 24 of the accompanying prospectus.
S-7
Specific Terms of the Notes. The applicable product supplement and/or pricing supplement for each offering of notes will contain additional terms of the offering and a specific description of those notes, including:
| the specific designation of the notes; |
| the issue price; |
| the principal amount; |
| the issue date; |
| the maturity date, and any terms providing for the extension or postponement of the maturity date; |
| the denominations or minimum denominations, if other than $1,000; |
| the currency or currencies, if not U.S. dollars, in which payments will be made on the notes; |
| whether the note is a fixed-rate note, a floating-rate note, or an indexed note; |
| whether the note is senior or subordinated; |
| the method of determining and paying interest, including any applicable interest rate basis or bases, any initial interest rate, any interest reset dates, any payment dates, any index maturity, and any maximum or minimum rate of interest; |
| any spread or spread multiplier applicable to a floating-rate note or an indexed note; |
| the method for the calculation and payment of principal, premium (if any), interest, and other amounts payable (if any); |
| for exchangeable notes, the securities or other property for which the notes may be exchanged, the rate of exchange, whether the notes are exchangeable at your option or our option, and other terms of the exchangeable notes; |
| if applicable, the circumstances under which the note may be redeemed at our option or repaid at your option prior to the maturity date set forth on the face of the note, including any repayment date, redemption commencement date, redemption price, and redemption period; |
| if applicable, the circumstances under which the maturity date set forth on the face of the note may be extended at our option or renewed at your option, including the extension or renewal periods and the final maturity date; |
| whether the notes will be listed on any stock exchange; and |
| if applicable, any other material terms of the note which are different from those described in this prospectus supplement and the accompanying prospectus. |
Each note will mature on a business day (as defined in the accompanying prospectus) three or more months from the issue date. Unless we specify otherwise in the applicable product supplement and/or pricing supplement, the record dates for any book-entry notes denominated in U.S. dollars will be one business day (in Charlotte, North Carolina and New York City) prior to the applicable payment date, and for any book-entry notes denominated in a currency other than U.S. dollars will be the fifteenth calendar day preceding the applicable payment date.
Unless we specify otherwise in the applicable product supplement and/or pricing supplement, the notes will not be entitled to the benefit of any sinking fund.
Payment of Principal, Interest, and Other Amounts Due
Paying Agents. Unless otherwise provided in the applicable product supplement and/or pricing supplement, the trustee will act as our paying agent, security registrar, and transfer agent with respect to the notes through the trustees corporate trust office. That office is currently located at 101 Barclay Street, New York, New York 10286. If specified in the applicable pricing supplement, with respect to some of our notes, including notes denominated in euro, The Bank of New York will act as the London paying agent (the London paying agent) through its London branch, which is located at the 48th Floor, One Canada Square, London, E14 5AL. At any time, we may rescind the designation of a paying agent, appoint a successor paying agent, or approve a change in the office through which any successor paying agent acts in accordance with the applicable Indenture. In addition, we may decide to act as our own paying agent with respect to some or all of the notes, and the paying agent may resign.
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Calculation Agents. The trustee or the London paying agent also will act as the calculation agent for floating-rate notes, unless otherwise specified in the applicable product supplement and/or pricing supplement. We will identify the calculation agent for any indexed notes in the applicable product supplement and/or pricing supplement. The calculation agent will be responsible for calculating the interest rate, reference rates, principal, premium (if any), interest, or other amounts payable (if any) applicable to the floating-rate notes or indexed notes, as the case may be, and for certain other related matters. The calculation agent, at the request of the holder of any floating-rate note, will provide the interest rate then in effect and, if already determined, the interest rate that is to take effect on the next interest reset date, as described below, for the floating-rate note. At the request of the holder of any floating-rate note that is an indexed note, the calculation agent will provide the reference rate or formula then in effect. We may replace any calculation agent or elect to act as the calculation agent for some or all of the notes, and the calculation agent may resign.
Manner of Payment. Unless otherwise stated in the applicable product supplement and/or pricing supplement, we will pay principal, premium (if any), interest, and other amounts payable (if any) on the notes in book-entry form in accordance with arrangements then in place between the applicable paying agent and the applicable depository. Unless otherwise stated in the applicable product supplement and/or pricing supplement, we will pay any interest on notes in certificated form on each interest payment date other than the maturity date by check mailed to holders of the notes on the applicable record date at the address appearing on our records. Unless otherwise stated in the applicable product supplement and/or pricing supplement, we will pay any principal, premium (if any), interest, and other amounts payable (if any) at the maturity date of a note in certificated form by wire transfer of immediately available funds upon surrender of the note at the corporate trust office of the trustee or the London paying agent, as applicable.
Currency Conversions and Payments on Notes Denominated in Currencies Other Than U.S. Dollars. For any notes denominated in a currency other than U.S. dollars, the initial investors will be required to pay for the notes in that foreign currency. The applicable selling agent may arrange for the conversion of U.S. dollars into the applicable foreign currency to facilitate payment for the notes by U.S. purchasers electing to make the initial payment in U.S. dollars. Any such conversion will be made by that selling agent on the terms and subject to the conditions, limitations, and charges as it may establish from time to time in accordance with its regular foreign exchange procedures, and subject to United States laws and regulations. All costs of any such conversion for the initial purchase of the notes will be borne by the initial investors using those conversion arrangements.
We generally will pay principal, premium (if any), interest, and other amounts payable (if any) on notes denominated in a currency other than U.S. dollars in the applicable foreign currency. Holders of beneficial interests in notes through a participant in The Depository Trust Company, or DTC, will receive payments in U.S. dollars, unless they elect to receive payments on those notes in the applicable foreign currency. If a holder through DTC does not make an election to receive payments in the applicable foreign currency, the trustee will convert payments to that holder into U.S. dollars, and all costs of those conversions will be borne by that holder by deduction from the applicable payments.
For holders not electing payment in the applicable foreign currency, the U.S. dollar amount of any payment will be the amount of the applicable foreign currency otherwise payable, converted into U.S. dollars at the applicable exchange rate prevailing as of 11:00 a.m. (New York City time) on the second business day prior to the relevant payment dates, less any costs incurred by the trustee for that conversion. The costs of those conversions will be shared pro rata among the holders of beneficial interests in the applicable global notes receiving U.S. dollar payments in the proportion of their respective holdings. The trustee will make those conversions in accordance with the terms of the applicable note and with any applicable arrangements between us and the trustee.
If an exchange rate quotation is unavailable from the entity or source ordinarily used by the trustee in the normal course of business, the trustee will obtain a quotation from a leading foreign exchange bank in New York City, which may be an affiliate of the trustee or another entity selected by the trustee for that purpose after consultation with us. If no quotation from a leading foreign exchange bank is available, payment will be made in the applicable foreign currency to the account or accounts specified by DTC to the
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trustee, unless the applicable foreign currency is unavailable due to the imposition of exchange controls or other circumstances beyond our control. If payment on a note is required to be made in a currency other than U.S. dollars and that currency is unavailable due to the imposition of exchange controls or other circumstances beyond our control, or is no longer used by the government of the relevant country or for the settlement of transactions by public institutions of or within the international banking community (and is not replaced by another currency), then all payments on that note will be made in U.S. dollars on the basis of the most recently available market exchange rate for the applicable foreign currency. Any payment on a note so made in U.S. dollars will not constitute an event of default under the applicable notes.
The holder of a beneficial interest in global notes held through a DTC participant may elect to receive payments on those notes in a foreign currency by notifying the DTC participant through which it holds its beneficial interests on or prior to the fifteenth business day prior to the record date for the applicable notes of (1) that holders election to receive all or a portion of the payment in the applicable foreign currency and (2) wire transfer instructions to an account for the applicable foreign currency outside the United States. DTC must be notified of that election and wire transfer instructions (a) on or prior to the fifth business day after the record date for any payment of interest and (b) on or prior to the tenth business day prior to the date for any payment of principal. DTC will notify the trustee of the election and wire transfer instructions (1) on or prior to 5:00 p.m. New York City time on the fifth business day after the record date for any payment of interest and (2) on or prior to 5:00 p.m. New York City time on the tenth business day prior to the date for any payment of principal. If complete instructions are forwarded to and received by DTC through a DTC participant and forwarded by DTC to the trustee and received on or prior to the dates described above, the holder will receive payment in the applicable foreign currency outside DTC; otherwise, only U.S. dollar payments will be made by the trustee to DTC.
For purposes of the above discussion about currency conversions and payments on notes denominated in a foreign currency, the term business day means any weekday that is not a legal holiday in New York, New York or Charlotte, North Carolina and is not a day on which banking institutions in those cities are authorized or required by law or regulation to be closed.
For information regarding risks associated with foreign currencies and exchange rates, see Risk FactorsCurrency Risks beginning on page 8 of the accompanying prospectus.
Payment of Additional Amounts. If we so specify in the applicable pricing supplement, additional amounts will be payable to a beneficial holder of notes that is a non-U.S. person. Our obligation to pay additional amounts to non-U.S. persons is subject to the limitations described under Description of Debt SecuritiesPayment of Additional Amounts beginning on page 32 of the accompanying prospectus. If we so specify in the applicable pricing supplement, we may redeem the notes in whole, but not in part, at any time before maturity if we have or will become obligated to pay additional amounts as a result of a change in, or amendment to, U.S. tax laws or regulations, as described under Description of Debt SecuritiesRedemption for Tax Reasons on page 35 of the accompanying prospectus.
For more information about payment procedures, including payments in a currency other than U.S. dollars, see Description of Debt SecuritiesPayment of Principal, Interest, and Other Amounts Due beginning on page 24 of the accompanying prospectus.
Under United States law, claims of our subsidiaries creditors, including their depositors, would be entitled to priority over the claims of our unsecured general creditors, including holders of our senior or subordinated notes, in the event of our liquidation or other resolution.
Senior Notes. The senior notes will be unsecured and will rank equally with all our other unsecured and unsubordinated obligations from time to time outstanding, except obligations, including deposit liabilities, that are subject to any priorities or preferences by law.
The Senior Indenture and the senior notes do not contain any limitation on the amount of obligations that we may incur in the future.
Subordinated Notes. Our indebtedness evidenced by the subordinated notes, including the principal, premium (if any), interest, and other amounts payable (if any) will be subordinate and junior in right of
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payment to all of our senior indebtedness from time to time outstanding. Payment of principal of our subordinated indebtedness, including any subordinated notes, may not be accelerated if there is a default in the payment of amounts due under, or a default in any of our other covenants applicable to, our subordinated indebtedness.
The Subordinated Indenture and the subordinated notes do not contain any limitation on the amount of obligations ranking senior to the subordinated notes, or the amount of obligations ranking equally with the subordinated notes, that we may incur in the future.
For more information about our subordinated notes, see Description of Debt SecuritiesSubordination on page 29 of the accompanying prospectus.
The applicable product supplement and/or pricing supplement will indicate whether we have the option to redeem notes prior to their maturity date. If we may redeem the notes prior to maturity, the applicable product supplement and/or pricing supplement will indicate the redemption price and method for redemption. See also Description of Debt SecuritiesRedemption on page 27 of the accompanying prospectus.
The applicable product supplement and/or pricing supplement will indicate whether the notes can be repaid at the holders option prior to their maturity date. If the notes may be repaid prior to maturity, the applicable product supplement and/or pricing supplement will indicate the amount at which we will repay the notes and the procedure for repayment.
We have the ability to reopen, or increase after the issuance date, the principal amount of a particular tranche or series of our notes without notice to the holders of existing notes by selling additional notes having the same terms. However, any new notes of this kind may have a different offering price.
We may issue notes for which the maturity date may be extended at our option or renewed at the option of the holder for one or more specified periods, up to but not beyond the final maturity date stated in the note. The specific terms of and any additional considerations relating to extendible or renewable notes will be set forth in the applicable product supplement and/or pricing supplement.
Any provisions with respect to the determination of an interest rate basis, the specification of interest rate basis, the calculation of the applicable interest rate, the amounts payable at maturity, interest payment dates, or any other related matters for a particular tranche of notes, may be modified as described in the applicable product supplement and/or pricing supplement.
We, or our affiliates, may purchase at any time our notes in the open market at prevailing prices or in private transactions at negotiated prices. If we purchase notes in this manner, we have the discretion to either hold, resell, or cancel any repurchased notes.
Form, Exchange, Registration, and Transfer of Notes
We will issue each note in book-entry only form. This means that we will not issue actual notes or certificates to each beneficial owner. Instead, the notes will be in the form of a global note, in fully registered
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form, registered and held in the name of the applicable depository or a nominee of that depository. For notes denominated in a currency other than U.S. dollars, the notes may be issued in the form of two global notes, each in fully registered form, one of which will be deposited with DTC, or its custodian, and one of which will be deposited with a common depository for Euroclear Bank S.A./N.V., as operator of the Euroclear system, or Euroclear, and/or Clearstream Banking, société anonyme, Luxembourg, or Clearstream. Unless we specify otherwise in the applicable pricing supplement, the depository for the notes will be DTC. DTC, Euroclear, and Clearstream, as depositories for global securities, and some of their policies and procedures are described under Registration and SettlementDepositories for Global Securities beginning on page 56 of the accompanying prospectus. For more information about book-entry only notes and the procedures for registration, settlement, exchange, and transfer of book-entry only notes, see Description of Debt SecuritiesForm and Denomination of Debt Securities and Registration and Settlement on pages 14 and 54, respectively, of the accompanying prospectus.
If we ever issue notes in certificated form, unless we specify otherwise in the applicable product supplement or pricing supplement, those notes will be in registered form, and the exchange, registration, or transfer of those notes will be governed by the applicable Indenture and the procedures described under Description of Debt SecuritiesExchange, Registration, and Transfer and Registration and SettlementRegistration, Transfer, and Payment of Certificated Securities beginning on pages 28 and 60, respectively, of the accompanying prospectus.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
For a brief description of the tax effects of an investment in the notes, see U.S. Federal Income Tax Considerations on page 61 of the accompanying prospectus and the subsection Taxation of Debt Securities of that section. Special U.S. federal income tax rules are applicable to certain types of notes we may issue under this prospectus supplement, including indexed notes and notes in bearer form. The material U.S. federal income tax considerations with respect to any notes we issue, the tax treatment of which is not addressed in the accompanying prospectus, will be discussed in the applicable product supplement and/or pricing supplement.
The Tax Increase Prevention and Reconciliation Act of 2005 extended the application of the maximum 15% tax rate on net long-term capital gains recognized by non-corporate taxpayers to taxable years beginning before January 1, 2011. Accordingly, net long-term capital gain recognized by a non-corporate U.S. Holder of notes in taxable years beginning before January 1, 2011 generally will be subject to tax at a maximum rate of 15%.
You should consult with your own tax advisor before investing in the notes.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the notes for sale on a continuing basis through the selling agents. The selling agents may act either on a principal basis or on an agency basis. We may offer the notes at varying prices relating to prevailing market prices at the time of resale, as determined by the selling agents, or, if so specified in the applicable pricing supplement, for resale at a fixed public offering price. The applicable pricing supplement will set forth the initial price for the notes, or whether they will be sold at varying prices.
If we sell notes on an agency basis, we will pay a commission to the selling agent to be negotiated at the time of sale. Unless otherwise agreed and specified in the applicable pricing supplement, the commission for any notes with a maturity of at least 18 months and up to 30 years may range from .200% to .875% of the principal amount of the notes sold, and we may receive from 99.800% to 99.125% of the principal amount of each such note so sold. For any notes with a maturity of less than 18 months or more than 30 years, the commission will be determined at the time of sale and will be specified in the applicable pricing supplement. Each selling agent will use its reasonable best efforts when we request it to solicit purchases of the notes as our agent.
Unless otherwise agreed and specified in the applicable pricing supplement, if notes are sold to a selling agent acting as principal, for its own account, or for resale to one or more investors or other purchasers, including other broker-dealers, then any notes so sold will be purchased by that selling agent at a price equal to 100% of the principal amount of the notes less a commission that will be a percentage of the principal amount determined as described above. Notes sold in this manner may be resold by the selling agent to investors and other purchasers from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale, or the notes may be resold to other dealers for resale to investors. The selling agents may allow any portion of the discount received in connection with the purchase from us to the dealers, but the discount allowed to any dealer will not be in excess of the discount to be received by the selling agent from us. After the initial public offering of notes, the selling agent may change the public offering price or the discount allowed to dealers.
We also may sell notes directly to investors, without the involvement of any selling agent. In this case, we would not be obligated to pay any commission or discount in connection with the sale, and we would receive 100% of the principal amount of the notes so sold, unless otherwise specified in the applicable pricing supplement.
We will name any selling agents or other persons through which we sell any notes, as well as any commissions or discounts payable to those selling agents or other persons, in the applicable pricing supplement. As of the date of this prospectus supplement, the selling agents are Banc of America Securities LLC and Banc of America Investment Services, Inc. These selling agents have entered into a distribution agreement with us that describes the offering of notes by those selling agents as our agents and as principals. We also may accept offers to purchase notes through additional selling agents on substantially the same terms and conditions, including commissions, as would apply to purchases through the selling agents under the distribution agreement. If a selling agent purchases notes as principal, that selling agent usually will be required to enter into a separate purchase agreement for the notes, and may be referred to in that purchase agreement and the applicable pricing supplement, along with any other selling agents, as underwriters.
We have the right to withdraw, cancel, or modify the offer made by this prospectus supplement without notice. We will have the sole right to accept offers to purchase notes, and we, in our absolute discretion, may reject any proposed purchase of notes in whole or in part. Each selling agent will have the right, in its reasonable discretion, to reject in whole or in part any proposed purchase of notes through that selling agent.
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Any selling agent participating in the distribution of the notes may be considered to be an underwriter, as that term is defined in the Securities Act. We have agreed to indemnify each selling agent and certain other persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the selling agents may be required to make. We also have agreed to reimburse the selling agents for certain expenses.
The notes will not have an established trading market when issued, and we do not intend to list the notes on any securities exchange unless otherwise specified in the applicable pricing supplement. Any selling agent may purchase and sell notes in the secondary market from time to time. However, no selling agent is obligated to do so, and any selling agent may discontinue making a market in the notes at any time without notice. There is no assurance that there will be a secondary market for any of the notes.
To facilitate offerings of the notes by a selling agent that purchases notes as principal, and in accordance with industry practice, selling agents may engage in transactions that stabilize, maintain, or otherwise affect the market price of the notes. Those transactions may include overallotment, entering stabilizing bids, effecting syndicate-covering transactions, and imposing penalty bids to reclaim selling concessions allowed to a member of the syndicate or to a dealer, as follows:
| An overallotment in connection with an offering creates a short position in the offered securities for the selling agents own account. |
| A selling agent may place a stabilizing bid to purchase a note for the purpose of pegging, fixing, or maintaining the price of that note. |
| Selling agents may engage in syndicate-covering transactions to cover overallotments or to stabilize the price of the notes by bidding for, and purchasing, the notes or any other securities in the open market in order to reduce a short position created in connection with the offering. |
| The selling agent that serves as syndicate manager may impose a penalty bid on a syndicate member to reclaim a selling concession in connection with an offering when offered securities originally sold by the syndicate member are purchased in syndicate-covering transactions, in stabilization transactions, or otherwise. |
Any of these activities may stabilize or maintain the market price of the securities above independent market levels. The selling agents are not required to engage in these activities, and may end any of these activities at any time.
Banc of America Securities LLC and Banc of America Investment Services, Inc., each a selling agent and one of our affiliates, are broker-dealers and members of the Financial Industry Regulatory Authority, Inc., or FINRA. Each initial offering and any remarketing of notes involving any of our broker-dealer affiliates, including Banc of America Securities LLC and Banc of America Investment Services, Inc., will be conducted in compliance with the requirements of Rule 2720 of the FINRA Conduct Rules regarding the offer and sale of securities of an affiliate. Following the initial distribution of any notes, our affiliates, including Banc of America Securities LLC, may buy and sell the notes in market-making transactions as part of their business as a broker-dealer. Resales of this kind may occur in the open market or may be privately negotiated at prevailing market prices at the time of sale. Notes may be sold in connection with a remarketing after their purchase by one or more firms. Any of our affiliates may act as principal or agent in these transactions.
This prospectus supplement may be used by one or more of our affiliates in connection with offers and sales related to market-making transactions in the notes, including block positioning and block trades, to the extent permitted by applicable law. Any of our affiliates may act as principal or agent in these transactions. None of Banc of America Securities LLC, Banc of America Investment Services, Inc., or any other member of FINRA participating in the distribution of the notes will execute a transaction in the notes in a discretionary account without specific prior written approval of the customer.
Notes sold in market-making transactions include notes issued after the date of this prospectus supplement as well as previously-issued securities. Information about the trade and settlement dates, as
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well as the purchase price, for a market-making transaction will be provided to the purchaser in a separate confirmation of sale. Unless we or one of our selling agents informs you in the confirmation of sale that notes are being purchased in an original offering and sale, you may assume that you are purchasing the notes in a market-making transaction.
Banc of America Securities LLC, Banc of America Investment Services, Inc., and other selling agents that we may name in the future, or their affiliates, have engaged, and may in the future engage, in investment banking, commercial banking, and financial advisory transactions with us and our affiliates. These transactions are in the ordinary course of business for the selling agents and us and our respective affiliates. In these transactions, the selling agents or their affiliates receive customary fees and expenses.
Although we expect that delivery of the notes generally will be made against payment on or about the third business day following the date of any contract for sale, we may specify a shorter or a longer settlement cycle in the applicable pricing supplement. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to a trade expressly agree otherwise. Accordingly, if we have specified a longer settlement cycle in the applicable pricing supplement for an offering of securities, purchasers who wish to trade those securities on the date of the contract for sale, or on one or more of the next succeeding business days as we will specify in the applicable pricing supplement, will be required, by virtue of the fact that those securities will settle in more than T+3, to specify an alternative settlement cycle at the time of the trade to prevent a failed settlement and should consult their own advisors in connection with that election.
General. Each of the selling agents, severally and not jointly, has represented and agreed that it has not and will not offer, sell, or deliver any note, directly or indirectly, or distribute this prospectus supplement or the accompanying prospectus or any other offering material relating to any of the notes, in any jurisdiction except under circumstances that will result in compliance with applicable laws and regulations and that will not impose any obligations on us except as set forth in the distribution agreement.
Argentina. We have not made, and will not make, any application to obtain an authorization from the Comisión Nacional de Valores (the CNV) for the public offering of the notes in Argentina. The CNV has not approved the terms and conditions of the notes, their issuance or offering, this prospectus supplement or the accompanying prospectus, or any other document relating to the offering of the notes. The selling agents have not offered or sold, and will not offer or sell, any of the notes in Argentina, except in transactions that will not constitute a public offering of securities within the meaning of Section 16 of the Argentine Public Offering Law N° 17,811. Argentine pension funds and insurance companies may not purchase the notes.
Brazil. The notes have not been and will not be registered in Brazil. The Comissão de Valores Mobiliários of Brazil has not approved the notes, the offering, this prospectus supplement or the accompanying prospectus, or any other document relating to the offering of the notes. Neither the notes nor the offerings contemplated by this prospectus supplement have been registered with the Comissão de Valores Mobiliários in Brazil. Persons wishing to offer, advertise, market, effect solicitations of, or acquire the notes within Brazil should consult with their own counsel as to the applicability of registration requirements or any exemption therefrom, and such persons are solely responsible for compliance with the requirements of Brazilian law applicable to the remittance of funds outside Brazil in connection with any such transaction, including any applicable tax and exchange control laws. No action should be taken by such persons that would result in any offering or marketing of the notes being deemed a public offering under Brazilian law or an undue solicitation of investors in Brazil. In addition, the resale of the notes must be made in a manner that will not constitute a public offering or an undue solicitation of investors in Brazil. The offerings contemplated by this prospectus supplement are not being made to any Brazilian financial institution, pension fund, insurance company, or capitalization company.
Chile. The notes have not been registered with the Superintendency of Securities and Insurance of Chile, and the notes may not be publicly offered in Chile, within the meaning of Chilean Law.
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The Peoples Republic of China. This prospectus supplement and the accompanying prospectus have not been filed with or approved by the Peoples Republic of China (for such purposes, not including Hong Kong and Macau Special Administrative Regions or Taiwan) authorities, and is not an offer of securities (whether public offering or private placement) within the meaning of the Securities Law or other pertinent laws and regulations of the Peoples Republic of China. This prospectus supplement and the accompanying prospectus, and any other offering material relating to any of the notes, shall not be distributed to the general public if used within the Peoples Republic of China, and the notes so offered cannot be sold to anyone that is not a qualified purchaser of the Peoples Republic of China. Each selling agent has represented, warranted, and agreed that the notes are not being offered or sold and may not be offered or sold, directly or indirectly, in the Peoples Republic of China, except under circumstances that will result in compliance with applicable laws and regulations.
European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each selling agent has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of the notes that are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus, or any other offering material relating to any of the notes, to the public in that Relevant Member State other than:
(a) | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000; and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; |
(c) | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant selling agent or selling agents; or |
(d) | in any other circumstances falling within Article 3(2) of the Prospectus Directive; |
provided that no such offer of the notes referred to in (a) through (d) above shall require us or any selling agent to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an offer of the notes to the public in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
France. Neither this prospectus supplement and the accompanying prospectus nor any other offering material relating to the notes have been prepared in connection with a public offering of financial instruments in France, and no prospectus has been submitted for clearance (visa) to the Autorité des marchés financiers. This prospectus supplement and the accompanying prospectus have been or will be made available in France only to permitted investors consisting of (1) persons licensed to perform the investment service of asset management on behalf of third parties (gestion de portefeuille pour compte de tiers), (2) qualified investors (investisseurs qualifiés) acting for their own account, and/or (3) corporate investors meeting one of the four criteria provided in Article D. 341-1 of the French Code monétaire et financier and belonging to a limited circle of less than 100 investors and acting for their own account, in accordance with Articles D. 411-1, D. 411-2, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code monétaire et financier. The direct or indirect resale of the notes issued acquired by any permitted investors to the public in France may be made only as provided by articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code monétaire et financier and applicable regulations thereunder.
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Hong Kong. Each selling agent has represented and agreed that:
(a) | it has not offered or sold and will not offer or sell in the Hong Kong Special Administrative Region of the Peoples Republic of China (Hong Kong), by means of any document, any notes other than (i) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the SFO) and any rules made under the SFO, or (ii) in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong (the CO) or which do not constitute an offer to the public within the meaning of the CO; and |
(b) | it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation, or document relating to the notes, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the notes that are or are intended to be disposed of (i) only to persons outside Hong Kong or (ii) only to professional investors as defined in the SFO and any rules made under the SFO. |
Japan. Any acquiror of any notes who was solicited to buy the notes in Japan is prohibited from transferring any of the notes to another person in Japan in any way other than to qualified institutional investors, as defined in Article 2, Paragraph 3, Item 1 of the Financial Instruments and Exchange Law of Japan.
Mexico. The notes have not been registered under the Mexican Securities Market Law or recorded in the Mexican National Securities Registry. No action may be taken in Mexico that would render any offering of the notes a public offering or a private offering in Mexico, as regulated under the Mexican Securities Market Law. No Mexican regulatory authority has approved or disapproved of the notes or passed on our solvency. In addition, any resale of the notes must be made in a manner that will not constitute a public offering or a private offering in Mexico.
The Netherlands. We are not a bank licensed by or registered with the Dutch Central Bank (De Nederlandsche Bank N.V.) pursuant to the Dutch Financial Supervision Act (Wet financieel toezicht).
Each selling agent has represented and agreed that it has not made and will not make an offer of the notes to the public in the Netherlands other than to qualified investors (gekwalificeerde beleggers), provided that no such offer of the notes will require us or any selling agent to public a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Singapore. This prospectus supplement and the accompanying prospectus have not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, these documents and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (a) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (b) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the notes are subscribed or purchased under Section 275 by a relevant person, which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, then shares, debentures, and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust may not be transferred within six months after that corporation or that trust has acquired notes under Section 275 except:
(a) | to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms |
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that such shares, debentures, and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; |
(b) | where no consideration is or will be given for the transfer; or |
(c) | where the transfer is by operation of law. |
Switzerland. The notes may not be offered or sold, directly or indirectly, in Switzerland except in circumstances that will not result in the offer of the notes being a public offering in Switzerland within the meaning of the Swiss Code of Obligations (CO). Neither this prospectus supplement and the accompanying prospectus nor any other offering or marketing material relating to the notes constitutes a prospectus as that term is understood pursuant to article 652a or 1156 CO, and neither this prospectus supplement and the accompanying prospectus nor any other offering material relating to the notes may be publicly distributed or otherwise made publicly available in Switzerland. As of the date of this prospectus supplement, we have not applied for a listing of the notes on the SWX Swiss Exchange and, consequently, the information presented in this prospectus supplement and the accompanying prospectus does not necessarily comply with the information standards set out in the listing rules of the SWX Swiss Exchange. We are not authorized by or registered with the Swiss Federal Banking Commission as a foreign collective investment scheme. Therefore, investors do not benefit from protection under the Swiss collective investment schemes law or supervision by the Swiss Federal Banking Commission.
Taiwan. The notes may not be issued, sold, or offered in Taiwan. No subscription or other offer to purchase the notes shall be binding on us until received and accepted by us or any selling agent outside of Taiwan (the Place of Acceptance), and the purchase/sale contract arising therefrom shall be deemed a contract entered into in the Place of Acceptance.
United Kingdom. Each selling agent has represented and agreed that:
(a) | in relation to any notes which have a maturity of less than one year, (i) it is a person whose ordinary activities involve it in acquiring, holding, managing, or disposing of investments (as principal or as agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any of the notes other than to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage, or dispose of investments (as principal or as agent) for the purposes of their businesses where the issue of the notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act of 2000 (the FSMA) by us; |
(b) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and |
(c) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any of the notes in, from, or otherwise involving the United Kingdom. |
Uruguay. The notes have not been registered under the Uruguayan Securities Market Law or recorded in the Uruguayan Central Bank. No action may be taken in Uruguay that would render any offering of the notes a public offering in Uruguay. No Uruguayan regulatory authority has approved the notes or passed on our solvency. In addition, any resale of the notes must be made in a manner that will not constitute a public offering in Uruguay.
Venezuela. The notes have not been registered with the Comision Nacional de Valores de Venezuela and are not being publicly offered in Venezuela. No document related to the offering of the notes, including this prospectus supplement and the accompanying prospectus, shall be interpreted to constitute an offer of securities or an offer or the rendering of any investment advice or securities brokerage services in Venezuela. Investors wishing to acquire the notes may use only funds located outside of Venezuela.
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The legality of the notes will be passed upon for us by McGuireWoods LLP, Charlotte, North Carolina, and for the selling agents by Morrison & Foerster LLP, New York, New York. McGuireWoods LLP regularly performs legal services for us. Some members of McGuireWoods LLP performing those legal services own shares of our common stock.
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PROSPECTUS
Debt Securities, Warrants, Units, Purchase Contracts,
Preferred Stock, Depositary Shares, and Common Stock
We from time to time may offer to sell debt securities, warrants, purchase contracts, preferred stock, depositary shares representing fractional interests in preferred stock, and common stock, as well as units comprised of two or more of these securities or securities of third parties. The debt securities, warrants, purchase contracts, and preferred stock may be convertible into or exercisable or exchangeable for our common or preferred stock or for debt or equity securities of one or more other entities. Our common stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the symbol BAC. In addition, our common stock is listed on the London Stock Exchange, and certain shares are listed on the Tokyo Stock Exchange.
This prospectus describes the general terms of these securities and the general manner in which we will offer the securities. When we sell a particular series of securities, we will prepare a prospectus supplement describing the offering and the specific terms of that series of securities. You should read this prospectus and that prospectus supplement carefully before you invest.
We may use this prospectus in the initial sale of these securities. In addition, Banc of America Securities LLC, or any of our other affiliates, may use this prospectus in a market-making transaction in any of these securities or similar securities after their initial sale. Unless you are informed otherwise in the confirmation of sale, this prospectus is being used in a market-making transaction.
Potential purchasers of our securities should consider the information set forth in the Risk Factors section beginning on page 8.
Our securities are unsecured and are not savings accounts, deposits, or other obligations of a bank, are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and may involve investment risks, including possible loss of principal.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated May 5, 2006
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Enforceability of Rights of Warrantholders; No Trust Indenture Act Protection |
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Non-Prepaid Purchase Contracts; No Trust Indenture Act Protection |
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Registration, Transfer, and Payment of Certificated Securities |
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This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, utilizing a shelf registration process. Under this shelf process, we may, from time to time, sell any combination of the securities described in this prospectus or the registration statement in one or more offerings.
This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide one or more prospectus supplements, pricing supplements, and/or product supplements that describe the particular securities offering and the specific terms of the securities being offered. These documents also may add, update, or change information contained in this prospectus. In this prospectus, when we refer to the applicable prospectus supplement or the accompanying prospectus supplement, we mean the prospectus supplement or supplements, including any applicable pricing or product supplement, that describes the particular securities being offered to you. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement, you should rely on the information in the prospectus supplement.
The information in this prospectus is not complete and may be changed. You should rely only on the information provided in or incorporated by reference in this prospectus, the accompanying prospectus supplement, or documents to which we otherwise refer you. We are not making an offer of these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and the accompanying prospectus supplement or supplements, as well as information we have filed or will file with the SEC and incorporated by reference in this prospectus, is accurate as of the date of the applicable document or other date referred to in that document. Our business, financial condition, and results of operations may have changed since that date.
Unless we indicate otherwise or unless the context requires otherwise, all references in this prospectus to Bank of America, we, us, our, or similar references are to Bank of America Corporation excluding its consolidated subsidiaries.
References in this prospectus to $ and dollars are to the currency of the United States of America; and references in this prospectus to and euro are to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to Article 109g of the Treaty establishing the European Community, as amended by the Treaty on European Union, as amended by the Treaty of Amsterdam.
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This summary section highlights selected information from this prospectus. This summary does not contain all the information that you should consider before investing in the securities we may offer using this prospectus. To fully understand the securities we may offer, you should read carefully:
| this prospectus, which explains the general terms of the securities we may offer; |
| the applicable prospectus supplement, which explains the specific terms of the particular securities we are offering, and which may update or change the information in this prospectus; and |
| the documents we refer to in Where You Can Find More Information below for information about us, including our financial statements. |
Bank of America Corporation
Bank of America Corporation is a Delaware corporation, a bank holding company, and a financial holding company. We provide a diversified range of banking and nonbanking financial services and products both domestically and internationally. Our headquarters is located at Bank of America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255, and our telephone number is 1-866-804-5241.
The Securities We May Offer
We may offer any of the following securities from time to time:
| debt securities; |
| warrants; |
| purchase contracts; |
| preferred stock; |
| depositary shares representing fractional interests in preferred stock; |
| common stock; and |
| units, comprised of two or more of any of the securities referred to above, in any combination. |
When we use the term securities in this prospectus, we mean any of the securities we may offer with this prospectus, unless we specifically state otherwise. This prospectus, including this summary, describes the general terms of the securities we may offer. Each time we sell securities, we will provide you with a prospectus supplement that will describe the offering and the specific terms of the securities being offered. This prospectus supplement may include a discussion of additional U.S. federal income tax consequences and any additional risk factors or other special considerations applicable to those particular securities.
Debt Securities
Our debt securities may be either senior or subordinated obligations in right of payment. Our senior and subordinated debt securities will be issued under separate indentures, or contracts, that we have with The Bank of New York, as trustee. The particular terms of each series of debt securities will be described in the applicable prospectus supplement.
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Warrants
We may offer two types of warrants:
| warrants to purchase our debt securities; and |
| warrants to purchase or sell, or whose cash value is determined by reference to the performance, level, or value of, one or more of the following: |
| securities of one or more issuers, including our common or preferred stock, other securities described in this prospectus, or the debt or equity securities of third parties; |
| one or more currencies, currency units, or composite currencies; |
| one or more commodities; |
| any other financial, economic, or other measure or instrument, including the occurrence or non-occurrence of any event or circumstance; and |
| one or more indices or baskets of the items described above. |
For any warrants we may offer, we will describe in the applicable prospectus supplement the underlying property, the expiration date, the exercise price or the manner of determining the exercise price, the amount and kind, or the manner of determining the amount and kind, of property to be delivered by you or us upon exercise, and any other specific terms of the warrants. We will issue warrants under warrant agreements that we will enter into with one or more warrant agents.
Purchase Contracts
We may offer purchase contracts requiring holders to purchase or sell, or whose cash value is determined by reference to the performance, level, or value of, one or more of the following:
| securities of one or more issuers, including our common or preferred stock, other securities described in this prospectus, or the debt or equity securities of third parties; |
| one or more currencies, currency units, or composite currencies; |
| one or more commodities; |
| any other financial, economic, or other measure or instrument, including the occurrence or non-occurrence of any event or circumstance; and |
| one or more indices or baskets of the items described above. |
For any purchase contracts we may offer, we will describe in the applicable prospectus supplement the underlying property, the settlement date, the purchase price or manner of determining the purchase price and whether it must be paid when the purchase contract is issued or at a later date, the amount and kind, or manner of determining the amount and kind, of property to be delivered at settlement, whether the holder will pledge property to secure the performance of any obligations the holder may have under the purchase contract, and any other specific terms of the purchase contracts.
Units
We may offer units consisting of any combination of two or more debt securities, warrants, purchase contracts, shares of preferred stock, depositary shares, and common stock described in
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this prospectus as well as securities of third parties. For any units we may offer, we will describe in the applicable prospectus supplement the particular securities that comprise each unit, whether or not the particular securities will be separable and, if they will be separable, the terms on which they will be separable, a description of the provisions for the payment, settlement, transfer, or exchange of the units, and any other specific terms of the units. We will issue units under unit agreements that we will enter into with one or more unit agents.
Preferred Stock and Depositary Shares
We may offer our preferred stock in one or more series. For any particular series we may offer, we will describe in the applicable prospectus supplement:
| the specific designation; |
| the aggregate number of shares offered; |
| the dividend rate and periods, or manner of calculating the dividend rate and periods, if any; |
| the stated value and liquidation preference amount, if any; |
| the voting rights, if any; |
| the terms on which the series of preferred stock is convertible into shares of our common stock, preferred stock of another series, or other securities, if any; |
| the redemption terms, if any; and |
| any other specific terms of the series. |
We also may offer depositary shares, each of which will represent a fractional interest in a share or multiple shares of our preferred stock. We will describe in the applicable prospectus supplement any specific terms of the depositary shares. We will issue the depositary shares under deposit agreements that we will enter into with one or more depositories.
Form of Securities
Unless we specify otherwise in the applicable prospectus supplement, we will issue the securities, other than shares of our common stock, in book-entry only form through one or more depositories, such as The Depository Trust Company, Euroclear Bank S.A./N.V., or Clearstream Banking, société anonyme, Luxembourg, as identified in the applicable prospectus supplement. We will issue the securities only in registered form, without coupons, although we may issue the securities in bearer form if we so specify in the applicable prospectus supplement. The securities issued in book-entry only form will be represented by a global security registered in the name of the specified depository, rather than notes or certificates registered in the name of each individual investor. Unless we specify otherwise in the applicable prospectus supplement, each sale of securities in book-entry form will settle in immediately available funds through the specified depository.
A global security may be exchanged for actual notes or certificates registered in the names of the beneficial owners only if:
| the depository notifies us that it is unwilling or unable to continue as depository for the global securities or we become aware that the depository is no longer qualified as a clearing agency, and we fail to appoint a successor to the depository within 60 calendar days; or |
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| we, in our sole discretion, determine that the global securities will be exchangeable for certificated securities. |
Payment Currencies
All amounts payable in respect of the securities, including the purchase price, will be payable in U.S. dollars, unless we specify otherwise in the applicable prospectus supplement.
Listing
We will state in the applicable prospectus supplement whether the particular securities that we are offering will be listed or quoted on a securities exchange or quotation system.
Distribution
We may offer the securities in four ways:
| through underwriters; |
| through dealers; |
| through agents; or |
| directly to purchasers. |
The applicable prospectus supplement will include any required information about the firms we use and the discounts or commissions we may pay them for their services.
Banc of America Securities LLC, or any of our other affiliates, may be an underwriter, dealer, or agent for us.
Market-Making by Our Affiliates
Following the initial distribution of an offering of securities, Banc of America Securities LLC and other affiliates of ours may offer and sell those securities in the course of their businesses as broker-dealers. Banc of America Securities LLC and any such other affiliates may act as a principal or agent in these transactions. This prospectus and the applicable prospectus supplement also will be used in connection with these market-making transactions. Sales in any of these market-making transactions will be made at varying prices related to prevailing market prices and other circumstances at the time of sale.
If you purchase securities in a market-making transaction, you will receive information about the price you pay and your trade and settlement dates in a separate confirmation of sale.
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This section summarizes some specific risks and investment considerations with respect to an investment in our securities. This summary does not describe all of the risks and investment considerations with respect to an investment in our securities, including risks and considerations relating to a prospective investors particular circumstances. For information regarding risks that may materially affect our business and results, please refer to the information under the caption Item 1A. Risk Factors in our annual report on Form 10-K for the year ended December 31, 2005, which is incorporated by reference in this prospectus. Prospective investors should consult their own financial, legal, tax, and other professional advisors as to the risks associated with an investment in our securities and the suitability of the investment for the investor.
We may issue securities denominated in or whose principal and interest is payable in a currency other than U.S. dollars. We refer to these securities as Non-U.S. Dollar-Denominated Securities. If you intend to invest in any Non-U.S. Dollar-Denominated Securities, you should consult your own financial and legal advisors as to the currency risks related to your investment. The Non-U.S. Dollar-Denominated Securities are not an appropriate investment for you if you are not knowledgeable about the significant terms and conditions of the Non-U.S. Dollar-Denominated Securities or financial matters in general. The information in this prospectus is directed primarily to investors who are U.S. residents. Investors who are not U.S. residents should consult their own financial and legal advisors about currency-related risks arising from their investment.
Non-U.S. Dollar-Denominated Securities have significant risks that are not associated with a similar investment in conventional debt securities that are payable solely in U.S. dollars. These risks include possible significant changes in rates of exchange between the U.S. dollar and the specified currency and the imposition or modification of foreign exchange controls or other conditions by either the United States or non-U.S. governments. These risks generally are influenced by factors over which we have no control, such as economic and political events and the supply of and demand for the relevant currencies in the global markets.
Currency exchange rates. Exchange rates between the U.S. dollar and other currencies have been highly volatile. This volatility may continue and could spread to other currencies in the future. Fluctuations in currency exchange rates could affect adversely an investment in the Non-U.S. Dollar-Denominated Securities. Depreciation of the specified currency against the U.S. dollar could result in a decrease in the U.S. dollar-equivalent value of payments on the Non-U.S. Dollar-Denominated Securities. That in turn could cause the market value of the Non-U.S. Dollar-Denominated Securities to fall.
Changes in currency exchange rates. Except as described below, we generally will not make any adjustment in or change to the terms of the Non-U.S. Dollar-Denominated Securities for changes in the exchange rate for the specified currency, including any devaluation, revaluation, or imposition of exchange or other regulatory controls or taxes, or for other developments affecting the specified currency, the U.S. dollar, or any other currency. Consequently, you will bear the risk that your investment may be affected adversely by these types of events.
Government policy. Currency exchange rates either can float or be fixed by sovereign governments. Governments or governmental bodies, including the European Central Bank, may intervene in their economies to alter the exchange rate or exchange characteristics of their
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currencies. For example, a central bank may intervene to devalue or revalue a currency or to replace an existing currency. In addition, a government may impose regulatory controls or taxes to affect the exchange rate of its currency. As a result, the yield or payout of a Non-U.S. Dollar-Denominated Security could be affected significantly and unpredictably by governmental actions. Changes in exchange rates could affect the value of the Non-U.S. Dollar-Denominated Securities as participants in the global currency markets move to buy or sell the specified currency or U.S. dollars in reaction to these developments.
If a governmental authority imposes exchange controls or other conditions, such as taxes on the transfer of the specified currency, there may be limited availability of the specified currency for payment on the Non-U.S. Dollar-Denominated Securities at their maturity or on any other payment date. In addition, the ability of a holder to move currency freely out of the country in which payment in the currency is received or to convert the currency at a freely determined market rate could be limited by governmental actions.
Payments in U.S. dollars. The terms of any Non-U.S. Dollar-Denominated Securities may provide that we may have the right to make a payment in U.S. dollars instead of the specified currency, if at or about the time when the payment on the Non-U.S. Dollar-Denominated Securities comes due, the specified currency is subject to convertibility, transferability, market disruption, or other conditions affecting its availability because of circumstances beyond our control. These circumstances could include the imposition of exchange controls or our inability to obtain the specified currency because of a disruption in the currency markets for the specified currency. The exchange rate used to make payment in U.S. dollars may be based on limited information and would involve significant discretion on the part of our exchange rate agent. As a result, the value of the payment in U.S. dollars may be less than the value of the payment you would have received in the specified currency if the specified currency had been available.
Court judgments. Any Non-U.S. Dollar-Denominated Securities typically will be governed by New York law. Under Section 27 of the New York Judiciary Law, a state court in the State of New York rendering a judgment on the Non-U.S. Dollar-Denominated Debt Securities would be required to render the judgment in the specified currency. In turn, the judgment would be converted into U.S. dollars at the exchange rate prevailing on the date of entry of the judgment. Consequently, in a lawsuit for payment on the Non-U.S. Dollar-Denominated Securities, you would bear currency exchange risk until judgment is entered, which could be a long time.
In courts outside of New York, you may not be able to obtain judgment in a specified currency other than U.S. dollars. For example, a judgment for money in an action based on Non-U.S. Dollar-Denominated Securities in many other U.S. federal or state courts ordinarily would be enforced in the United States only in U.S. dollars. The date used to determine the rate of conversion of the specified currency into U.S. dollars will depend on various factors, including which court renders the judgment.
Possible Illiquidity of the Secondary Market. We may not list our securities on any securities exchange. We cannot predict how these securities will trade in the secondary market or whether that market will be liquid or illiquid. The number of potential buyers of our securities in any secondary market may be limited. Although any underwriters or agents may purchase and sell our securities in the secondary market from time to time, these underwriters or agents will not be obligated to do so and may discontinue making a market for the securities at any time without giving us notice. We cannot assure you that a secondary market for any of our securities will develop, or that if one develops, it will be maintained.
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Redemption. The terms of our securities may permit or require redemption of the securities prior to maturity. That redemption may occur at a time when prevailing interest rates are relatively low. As a result, in the case of debt or similar securities, a holder of the redeemed securities may not be able to invest the redemption proceeds in a new investment that yields a similar return.
Usury Laws. New York law will govern the debt securities offered by this prospectus. New York usury laws limit the amount of interest that can be charged and paid on loans, including the debt securities. Under current New York law, the maximum permissible rate of interest is 25% per year on a simple interest basis. This limit may not apply to debt securities in which $2,500,000 or more has been invested. While we believe that a U.S. federal or state court sitting outside New York may give effect to New York law, many other states also have laws that regulate the amount of interest that may be charged to and paid by a borrower. We do not intend to claim the benefits of any laws concerning usurious rates of interest.
Credit Ratings. Our credit ratings are an assessment of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings may affect the trading value of our securities. However, because the return on our securities generally depends upon factors in addition to our ability to pay our obligations, an improvement in these credit ratings will not reduce the other investment risks, if any, related to our securities.
Holding Company. We are a holding company, and therefore we are a separate and distinct legal entity from our banking and nonbanking subsidiaries. We therefore depend on dividends, distributions, and other payments from our banking and nonbanking subsidiaries to fund dividend payments on our capital stock and to fund all payments on our other obligations, including our debt obligations. Many of our subsidiaries are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to us. Regulatory action of that kind could impede access to funds we need to make payments on our obligations or dividend payments. In addition, because we are a holding company, our right to participate in a distribution of assets upon a subsidiarys liquidation or reorganization is subject to the prior claims of the subsidiarys creditors. Therefore, claims of holders of our securities generally will have a junior position to claims of creditors of our subsidiaries, including, in the case of our banking subsidiaries, their depositors.
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Bank of America Corporation is a Delaware corporation, a bank holding company, and a financial holding company. Bank of America Corporation was incorporated in 1998 as part of the merger of BankAmerica Corporation with NationsBank Corporation.
We provide a diversified range of banking and nonbanking financial services and products in 30 states, the District of Columbia, and 44 foreign countries. We have historically provided these services and products through four business segments: (1) Global Consumer and Small Business Banking, (2) Global Business and Financial Services, (3) Global Capital Markets and Investment Banking, and (4) Global Wealth and Investment Management. During the third quarter of 2005, we announced the future combination of Global Business and Financial Services and Global Capital Markets and Investment Banking that became effective on January 1, 2006. This combined segment is called Global Corporate and Investment Banking.
As a financial holding company and a bank holding company, we are supervised and regulated by The Board of Governors of the Federal Reserve System, or the Federal Reserve Board. In addition, our banking and securities subsidiaries are supervised and regulated by various federal and state banking and securities regulatory authorities, including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the FDIC, and the SEC. For a discussion of the material elements of the extensive regulatory framework applicable to financial holding companies, bank holding companies, and banks, as well as specific information about us and our subsidiaries, please refer to the section Government Supervision and Regulation under the caption Item 1. Business in our annual report on Form 10-K for the fiscal year ended December 31, 2005, and any subsequent reports that we file with the SEC, which are incorporated by reference in this prospectus. See Where You Can Find More Information below for information on how to obtain a copy of our annual report and any subsequent reports. This regulatory framework is intended primarily for the protection of depositors and the federal deposit insurance funds and not for the protection of security holders and creditors.
According to Federal Reserve Board policy, bank holding companies are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank holding company may not be able to provide such support. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDICeither as a result of default of a banking subsidiary or related to FDIC assistance provided to a subsidiary in danger of defaultthe other banking subsidiaries may be assessed for the FDICs loss, subject to certain exceptions.
As part of our operations, we regularly evaluate the potential acquisition of, and hold discussions with, various financial institutions and other businesses of a type eligible for financial holding company ownership or control. In addition, we regularly analyze the values of, and submit bids for, the acquisition of customer-based funds and other liabilities and assets of such financial institutions and other businesses. We also regularly consider the potential disposition of certain of our assets, branches, subsidiaries, or lines of businesses. As a general rule, we publicly announce any material acquisitions or dispositions when a definitive agreement has been reached.
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Unless we describe a different use in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities for general corporate purposes. General corporate purposes include:
| our working capital needs; |
| investments in, or extensions of credit to, our banking and nonbanking subsidiaries; |
| the possible acquisitions of other financial institutions or their assets; |
| the possible acquisitions of, or investments in, other businesses of a type we are permitted to acquire under applicable law; |
| the possible reduction of our outstanding indebtedness; and |
| the possible repurchase of our outstanding equity securities. |
Until we designate the use of these net proceeds, we will invest them temporarily. From time to time, we may engage in additional financings as we determine appropriate based on our needs and prevailing market conditions. These additional financings may include the sale of other securities.
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DESCRIPTION OF DEBT SECURITIES
We may issue senior or subordinated debt securities. Neither the senior debt securities nor the subordinated debt securities will be secured by any of our property or assets. As a result, by owning a debt security, you are one of our unsecured creditors.
The senior debt securities will constitute part of our senior debt, will be issued under our senior debt indenture described below, and will rank on a parity with all of our other unsecured and unsubordinated debt.
The subordinated debt securities will constitute part of our subordinated debt, will be issued under our subordinated debt indenture described below, and will be subordinated in right of payment to all of our senior indebtedness, as defined in the subordinated debt indenture. Neither the senior debt indenture nor the subordinated debt indenture limits our ability to incur additional senior indebtedness.
The senior debt securities and the subordinated debt securities each are governed by a document called an indenture, which is a contract between us and the applicable trustee. Senior debt securities will be issued under the Indenture dated as of January 1, 1995 (as supplemented, the Senior Indenture) between us and The Bank of New York, as successor trustee, and subordinated debt securities will be issued under the Indenture dated as of January 1, 1995 (as supplemented, the Subordinated Indenture) between us and The Bank of New York, as trustee. The indentures are substantially identical, except for:
| the covenant described below under Sale or Issuance of Capital Stock of Banks, which is included only in the Senior Indenture; |
| the provisions relating to subordination described below under Subordination, which are included only in the Subordinated Indenture; and |
| the events of default described below under Defaults and Rights of Acceleration, many of which are not included in the Subordinated Indenture. |
In this prospectus, when we refer to debt securities, we mean both our senior debt securities and our subordinated debt securities, and when we refer to the indenture or the trustee with respect to any debt securities, we mean the indenture under which those debt securities are issued and the trustee under that indenture.
The trustee under each indenture has two principal functions:
| First, the trustee can enforce your rights against us if we default. However, there are limitations on the extent to which the trustee may act on your behalf, which we describe below under Collection of Indebtedness. |
| Second, the trustee performs administrative duties for us, including the delivery of interest payments and notices. |
Neither indenture limits the aggregate amount of debt securities that we may issue or the number of series or the aggregate amount of any particular series. The indentures and the debt securities also do not limit our ability to incur other indebtedness or to issue other securities. This means that we may issue additional debt securities and other securities at any time without your
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consent and without notifying you. In addition, neither indenture contains provisions protecting holders against a decline in our credit quality resulting from takeovers, recapitalizations, the incurrence of additional indebtedness, or restructuring. If our credit quality declines as a result of an event of this type, or otherwise, any ratings of our debt securities then outstanding may be withdrawn or downgraded.
This section is a summary of the indentures and is subject to and qualified in its entirety by reference to all the provisions of the indentures. We have filed the indentures with the SEC as exhibits to our registration statement, and they are incorporated in this prospectus by reference. See Where You Can Find More Information below for information on how to obtain copies of the indentures. Whenever we refer to the defined terms of the indentures in this prospectus or in a prospectus supplement without defining them, the terms have the meanings given to them in the indentures. You must look to the indentures for the most complete description of the information summarized in this prospectus.
Form and Denomination of Debt Securities
Unless we specify otherwise in the applicable prospectus supplement, we will issue each debt security in global, or book-entry, form. Debt securities in book-entry form will be represented by a global security registered in the name of a depository. Accordingly, the depository will be the holder of all the debt securities represented by the global security. Those who own beneficial interests in a global security will do so through participants in the depositorys securities clearance system, and the rights of these indirect owners will be governed solely by the applicable procedures of the depository and its participants. We describe the procedures applicable to book-entry securities below under the heading Registration and Settlement.
Unless we specify otherwise in the applicable prospectus supplement, we will issue our debt securities in fully registered form, without coupons. If we issue a debt security in bearer form, we will describe the special considerations applicable to bearer securities in the applicable prospectus supplement. Some of the features that we describe in this prospectus may not apply to the bearer securities.
Our debt securities may be denominated, and cash payments with respect to the debt securities may be made, in U.S. dollars or in another currency, or in a composite currency, a basket of currencies, or a currency unit or units. Unless we specify otherwise in the applicable prospectus supplement, the debt securities will be denominated, and cash payments with respect to the debt securities will be made, in U.S. dollars, and the debt securities ordinarily will be issued in denominations of $1,000 and multiples of $1,000 in excess of $1,000. If any of the debt securities are denominated, or if principal, any premium, interest, and any other amounts payable on any of the debt securities is payable, in a foreign currency, or in a composite currency, a basket of currencies, or a currency unit or units, the specified currency, as well as any additional investment considerations, risk factors, restrictions, tax consequences, specific terms, and other information relating to that issue of debt securities and the specified currency, composite currency, basket of currencies, or currency unit or units, may be described in the applicable prospectus supplement. We describe some of those investment considerations relating to securities denominated or payable in a currency other than U.S. dollars above under the heading Risk Factors.
Different Series of Debt Securities
We may issue our debt securities from time to time in one or more series with the same or different maturities. We also may reopen a series of our debt securities. This means that we can
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increase the principal amount of a series of our debt securities by selling additional debt securities with the same terms. We may do so without notice to the existing holders of securities of that series. However, any new securities of this kind may begin to bear interest at a different date.
This section of the prospectus summarizes the material terms of the debt securities that are common to all series. We will describe the financial and other specific terms of the series of debt securities being offered in the applicable prospectus supplement. The prospectus supplement also may describe any differences from the material terms described in this prospectus. If there are any differences between the applicable prospectus supplement and this prospectus, the applicable prospectus supplement will control.
The terms of your series of debt securities as described in the applicable prospectus supplement may include the following:
| the title and type of the debt securities; |
| the principal amount of the debt securities; |
| the minimum denominations, if other than $1,000 and multiples of $1,000 in excess of $1,000; |
| the percentage of the stated principal amount at which the debt securities will be sold and, if applicable, the method of determining the price; |
| the person to whom interest is payable, if other than the owner of the debt securities; |
| the maturity date or dates; |
| the interest rate or rates, which may be fixed or variable, and the method used to calculate that interest; |
| any index used to determine the amounts of any payments on the debt securities and the manner in which those amounts will be determined; |
| the interest payment dates, the regular record dates for the interest payment dates, and the date interest will begin to accrue; |
| the place or places where payments on the debt securities may be made and the place or places where the debt securities may be presented for registration of transfer or exchange; |
| any date or dates after which the debt securities may be redeemed, repurchased, or repaid in whole or in part at our option or the option of the holder, and the periods, prices, terms, and conditions of that redemption, repurchase, or repayment; |
| if other than the full principal amount, the portion of the principal amount of the debt securities that will be payable if their maturity is accelerated; |
| the currency of principal, any premium, interest, and any other amounts payable on the debt securities, if other than U.S. dollars; |
| if the debt securities will be issued in other than book-entry form; |
| the identification of or method of selecting any interest rate calculation agents, exchange rate agents, or any other agents for the debt securities; |
| any provisions for the discharge of our obligations relating to the debt securities by the deposit of funds or U.S. government obligations; |
| any provisions relating to the extension or renewal of the maturity date of the debt securities; |
| whether the debt securities will be listed on any securities exchange; and |
| any other terms of the debt securities that are permitted under the applicable indenture. |
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General. We may issue debt securities that bear interest at one or more fixed rates of interest, as specified in the applicable prospectus supplement. We refer to these as fixed-rate notes. Unless we specify otherwise in the applicable prospectus supplement, each fixed-rate note will bear interest from its original issue date or from the most recent date to which interest on the note has been paid or made available for payment. Interest will accrue on the principal of a fixed-rate note at the fixed annual rate stated in the applicable prospectus supplement, until the principal is paid or made available for payment or the note is converted or exchanged.
Unless we specify otherwise in the applicable prospectus supplement, we will pay interest on any fixed-rate note quarterly, semi-annually, or annually, as applicable, in arrears, on the days set forth in the applicable prospectus supplement (each such day being an interest payment date) and at maturity. Each interest payment due on an interest payment date or the maturity date will include interest accrued from and including the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to but excluding the next interest payment date or the maturity date, as the case may be. Unless we specify otherwise in the applicable prospectus supplement, interest on fixed-rate notes will be computed and paid on the basis of a 360-day year consisting of twelve 30-day months. We will make payments on fixed-rate notes as described below under the heading Payment of Principal, Interest, and Other Amounts Due.
Amortizing Notes. We also may issue amortizing notes, which are fixed-rate notes for which combined principal and interest payments are made in installments over the life of the debt security. Payments on amortizing notes are applied first to interest due and then to the reduction of the unpaid principal amount. The prospectus supplement for an amortizing note will include a table setting forth repayment information.
General. We may issue debt securities that will bear interest at a floating rate of interest determined by reference to one or more interest rate bases, or by reference to one or more interest rate formulae, referred to as the base rate. We refer to these debt securities as floating-rate notes. The base rate may be one or more of the following:
| the federal funds rate, in which case the debt security will be a federal funds rate note; |
| the London interbank offered rate, in which case the debt security will be a LIBOR note; |
| the euro interbank offered rate, in which case the debt security will be a EURIBOR note; |
| the prime rate, in which case the debt security will be a prime rate note; |
| the treasury rate, in which case the debt security will be a treasury rate note; or |
| any other interest rate formula as may be specified in the applicable prospectus supplement. |
The interest rate for a floating-rate note will be determined by reference to:
| the specified base rate based on the index maturity; |
| plus or minus the spread, if any; and/or |
| multiplied by the spread multiplier, if any. |
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For any floating-rate note, the index maturity is the period to maturity of the instrument for which the interest rate basis is calculated and will be specified in the applicable prospectus supplement. The spread is the number of basis points we specify on the floating-rate note to be added to or subtracted from the base rate. The spread multiplier is the percentage we may specify on the floating-rate note by which the base rate is multiplied in order to calculate the applicable interest rate.
A floating-rate note also may be subject to:
| a maximum interest rate limit, or ceiling, on the interest that may accrue during any interest period; |
| a minimum interest rate limit, or floor, on the interest that may accrue during any interest period; or |
| both. |
Unless we specify otherwise in the applicable prospectus supplement, each floating-rate note will bear interest from its original issue date or from the most recent date to which interest on the note has been paid or made available for payment. Interest will accrue on the principal of a floating-rate note at the annual rate determined according to the interest rate formula stated in the applicable prospectus supplement, until the principal is paid or made available for payment. Unless we specify otherwise in the applicable prospectus supplement, we will pay interest on any floating-rate note monthly, quarterly, semi-annually, or annually, as applicable, in arrears, on the days set forth in the applicable prospectus supplement. Unless we specify otherwise in the applicable prospectus supplement, each interest payment due on an interest payment date or the maturity date will include interest accrued from and including the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to but excluding the next interest payment date or the maturity date, as the case may be. We will make payments on floating-rate notes as described below under the heading Payment of Principal, Interest, and Other Amounts Due.
How Interest Is Reset. The interest rate in effect from the date of issue to the first interest reset date for a floating-rate note will be the initial interest rate determined as described in the applicable prospectus supplement. The interest rate of each floating-rate note may be reset daily, weekly, monthly, quarterly, semi-annually, or annually, as we specify in the applicable prospectus supplement. We refer to the period during which an interest rate is effective as an interest period, and the first day of each interest period as the interest reset date.
The interest determination date for any interest reset date is the day the calculation agent will refer to when determining the new interest rate at which a floating rate will reset. Unless we specify otherwise in the applicable prospectus supplement, the interest determination date for an interest reset date will be:
| for a federal funds rate note or a prime rate note, the business day immediately preceding the interest reset date; |
| for a LIBOR note, the second London Banking Day (as defined below) preceding the interest reset date unless the index currency is pounds sterling, in which case the interest determination date will be the interest reset date; |
| for a EURIBOR note, the second TARGET Settlement Date (as defined below) preceding the interest reset date; |
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| for a treasury rate note, the day of the week in which the interest reset date falls on which Treasury bills (as described below) of the applicable index maturity would normally be auctioned; and |
| for a floating-rate note with two or more base rates, the interest determination date will be the most recent business day that is at least two business days prior to the applicable interest reset date on which each applicable base rate is determinable. |
Treasury bills usually are sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction usually is held on the following Tuesday, except that the auction may be held on the preceding Friday. If, as a result of a legal holiday, an auction is held on the preceding Friday, that preceding Friday will be the interest determination date pertaining to the interest reset date occurring in the next succeeding week. The treasury rate will be determined as of that date, and the applicable interest rate will take effect on the applicable interest reset date.
We will specify the interest reset dates in the applicable prospectus supplement. If any interest reset date for any floating-rate note falls on a day that is not a business day for the floating-rate note, the interest reset date for the floating-rate note will be postponed to the next day that is a business day for the floating-rate note. However, unless we specify otherwise in the applicable prospectus supplement, in the case of a LIBOR note or a EURIBOR note, if the next business day is in the next succeeding calendar month, the interest reset date will be the immediately preceding business day.
Calculation of Interest. Calculations relating to floating-rate notes will be made by the calculation agent, which will be an institution that we appoint as our agent for this purpose. The calculation agent may be one of our affiliates, including Banc of America Securities LLC or Bank of America, N.A, and may also be The Bank of New York. We will identify in the applicable prospectus supplement the calculation agent we have appointed for a particular series of debt securities as of its original issue date. We may appoint different calculation agents from time to time after the original issue date of a floating-rate note without your consent and without notifying you of the change. Absent manifest error, all determinations of the calculation agent will be final and binding on you, the trustee, and us.
For each floating-rate note, the calculation agent will determine, on the corresponding calculation or interest determination date, the interest rate for the applicable interest period. In addition, the calculation agent will calculate the amount of interest that has accrued during each interest period. Unless we specify otherwise in the applicable prospectus supplement, the calculation date for any interest determination date will be the date by which the calculation agent computes the amount of interest owed on a floating-rate note for the related interest period. Unless we specify otherwise in the applicable prospectus supplement, the calculation date pertaining to an interest determination date will be the earlier of:
| the tenth calendar day after that interest determination date or, if that day is not a business day, the next succeeding business day; or |
| the business day immediately preceding the applicable interest payment date, the maturity date, or the date of redemption or prepayment, as the case may be. |
Accrued interest on a floating-rate note is calculated by multiplying the principal amount of a note by an accrued interest factor. This accrued interest factor is the sum of the interest factors calculated for each day in the period for which accrued interest is being calculated. Unless we
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specify otherwise in the applicable prospectus supplement, the accrued interest factor will be computed and interest will be paid (including payments for partial periods) as follows:
| for federal funds rate notes, LIBOR notes, EURIBOR notes, prime rate notes, or any other floating-rate notes other than treasury rate notes, the daily interest factor will be computed by dividing the interest rate in effect on that day by 360; and |
| for treasury rate notes, the daily interest factor will be computed by dividing the interest rate in effect on that day by 365 or 366, as applicable. |
All amounts used in or resulting from any calculation on floating-rate notes will be rounded to the nearest cent, in the case of U.S. dollars, or to the nearest corresponding hundredth of a unit, in the case of a currency other than U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a unit or more being rounded upward. Unless we specify otherwise in the applicable prospectus supplement, all percentages resulting from any calculation with respect to a floating-rate note will be rounded, if necessary, to the nearest one hundred-thousandth of a percent, with five one-millionths of a percentage point rounded upwards, e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655).
In determining the base rate that applies to a floating-rate note during a particular interest period, the calculation agent may obtain rate quotes from various banks or dealers active in the relevant market, as described in the descriptions of the base rates below and/or in the applicable prospectus supplement. Those reference banks and dealers may include the calculation agent itself and its affiliates, as well as any underwriter, dealer, or agent participating in the distribution of the relevant floating-rate notes and its affiliates, and they may include our affiliates.
At the request of the holder of any floating-rate note, the calculation agent will provide the interest rate then in effect for that floating-rate note and, if already determined, the interest rate that is to take effect on the next interest reset date.
LIBOR Notes. Each LIBOR note will bear interest at the LIBOR base rate, adjusted by any spread or spread multiplier, as specified in the applicable prospectus supplement. The LIBOR base rate will be the London interbank offered rate for deposits in U.S. dollars or any index currency, as specified in the applicable prospectus supplement.
The calculation agent will determine LIBOR on each interest determination date as follows:
| If LIBOR Telerate is specified in the applicable prospectus supplement, LIBOR will be the rate for deposits in the relevant index currency having the index maturity described in the applicable prospectus supplement, commencing on the related interest reset date, as the rate appears on the designated LIBOR page in the applicable prospectus supplement as of 11:00 A.M., London time, on that interest determination date. |
| If LIBOR Reuters is specified in the applicable prospectus supplement, LIBOR will be the arithmetic mean of the offered rates for deposits in the relevant index currency having the index maturity described in the applicable prospectus supplement, commencing on the related interest reset date, as the rates appear on the designated LIBOR page in the applicable prospectus supplement as of 11:00 A.M., London time, on that interest determination date, if at least two offered rates appear on the designated LIBOR page, except that, if the designated LIBOR page only provides for a single rate, that single rate will be used. |
If the applicable prospectus supplement does not specify LIBOR Telerate or LIBOR Reuters, the LIBOR rate will be LIBOR Telerate.
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If LIBOR Telerate applies and the rate described above does not appear on that page, or if LIBOR Reuters applies and fewer than two of the rates described above appears on that page or no rate appears on any page on which only one rate normally appears, then the calculation agent will determine LIBOR as follows:
| The calculation agent will select four major banks in the London interbank market, after consultation with us. On the interest determination date, those four banks will be requested to provide their offered quotations for deposits in the relevant index currency having an index maturity specified in the applicable prospectus supplement commencing on the interest reset date to prime banks in the London interbank market at approximately 11:00 A.M., London time. |
| If at least two quotations are provided, the calculation agent will determine LIBOR as the arithmetic mean of those quotations. |
| If fewer than two quotations are provided, the calculation agent will select, after consultation with us, three major banks in New York City. On the interest determination date, those three banks will be requested to provide their offered quotations for loans in the relevant index currency having an index maturity specified in the applicable prospectus supplement commencing on the interest reset date to leading European banks at approximately 11:00 A.M., New York time. The calculation agent will determine LIBOR as the arithmetic mean of those quotations. |
| If fewer than three New York City banks selected by the calculation agent are quoting rates, LIBOR for that interest period will remain LIBOR then in effect on the interest determination date. |
EURIBOR Notes. Each EURIBOR note will bear interest at the EURIBOR base rate, adjusted by any spread or spread multiplier, as specified in the applicable prospectus supplement.
EURIBOR means, for any interest determination date, the rate for deposits in euro as sponsored, calculated, and published jointly by the European Banking Federation and ACIThe Financial Market Association, or any company established by the joint sponsors for purposes of compiling and publishing those rates, having the index maturity specified in the applicable prospectus supplement, as that rate appears on the display on Moneyline Telerate, or any successor service, on page 248 or any other page as may replace page 248 (Telerate Page 248), as of 11:00 A.M., Brussels time.
The following procedures will be followed if EURIBOR cannot be determined as described above:
| If no offered rate appears on MoneyLine Telerate Page 248 on an interest determination date at approximately 11:00 A.M., Brussels time, then the calculation agent, after consultation with us, will select four major banks in the Euro-zone interbank market to provide a quotation of the rate at which deposits in euro having the index maturity specified in the applicable prospectus supplement are offered to prime banks in the Euro-zone interbank market, and in a principal amount not less than the equivalent of 1,000,000, that is representative of a single transaction in euro in that market at that time. If at least two quotations are provided, EURIBOR will be the arithmetic average of those quotations. |
| If fewer than two quotations are provided, then the calculation agent, after consultation with us, will select four major banks in the Euro-zone interbank market to provide a quotation of the rate offered by them, at approximately 11:00 A.M., Brussels time, on the interest determination date, for loans in euro to prime banks in the Euro-zone interbank |
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market for a period of time equivalent to the index maturity specified in the applicable prospectus supplement commencing on that interest reset date and in a principal amount not less than the equivalent of 1,000,000, that is representative of a single transaction in euro in that market at that time. If at least three quotations are provided, EURIBOR will be the arithmetic average of those quotations. |
| If three quotations are not provided, EURIBOR for that interest determination date will be equal to EURIBOR for the immediately preceding interest period. |
Euro-zone means the region comprising member states of the European Union that have adopted the euro as their single currency.
Treasury Rate Notes. Each treasury rate note will bear interest at the treasury rate, adjusted by any spread or spread multiplier, as specified in the applicable prospectus supplement.
The treasury rate for any interest determination date is the rate set at the auction of direct obligations of the United States (Treasury bills) having the index maturity described in the applicable prospectus supplement, as specified under the caption Investment Rate on the display on Moneyline Telerate, or any successor service, on page 56 or any other page as may replace page 56, or page 57 or any other page as may replace page 57.
The following procedures will be followed if the treasury rate cannot be determined as described above:
| If the rate is not displayed on Moneyline Telerate by 3:00 P.M., New York City time, on the related calculation date, the treasury rate will be the rate of Treasury bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption U.S. Government Securities/Treasury Bills/Auction High. |
| If the alternative rate described in the paragraph immediately above is not published by 3:00 P.M., New York City time, on the related calculation date, the treasury rate will be the bond equivalent yield, as defined below, of the auction rate of the applicable Treasury bills as announced by the U.S. Department of the Treasury. |
| If the alternative rate described in the paragraph immediately above is not announced by the U.S. Department of the Treasury, or if the auction is not held, the treasury rate will be the bond equivalent yield of the rate on the particular interest determination date of the applicable Treasury bills as published in H.15(519) under the caption U.S. Government Securities/Treasury Bills/Secondary Market. |
| If the alternative rate described in the paragraph immediately above is not published by 3:00 P.M., New York City time, on the related calculation date, the treasury rate will be the rate on the particular interest determination date of the applicable Treasury bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption U.S. Government Securities/Treasury Bills/Secondary Market. |
| If the alternative rate described in the paragraph immediately above is not published by 3:00 P.M., New York City time, on the related calculation date, the treasury rate will be the rate on the particular interest determination date calculated by the calculation agent as the bond equivalent yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on that interest determination date, of three primary U.S. government securities dealers, selected by the calculation agent, after consultation with us, for the issue of Treasury bills with a remaining maturity closest to the particular index maturity. |
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| If the dealers selected by the calculation agent are not quoting as described in the paragraph immediately above, the treasury rate will be the treasury rate in effect on the particular interest determination date. |
The bond equivalent yield will be calculated using the following formula:
Bond equivalent yield = |
D x N 360-(D x M) |
x 100
|
where D refers to the applicable annual rate for Treasury bills quoted on a bank discount basis and expressed as a decimal, N refers to 365 or 366, as the case may be, and M refers to the actual number of days in the applicable interest period.
H.15(519) means the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board.
H.15 Daily Update means the daily update of H.15(519), available through the website of the Federal Reserve Board at www.federalreserve.gov/releases/h15/update, or any successor site or publication.
Federal Funds Rate Notes. Each federal funds rate note will bear interest at the federal funds rate, adjusted by any spread or spread multiplier, as specified in the applicable prospectus supplement.
The federal funds rate for any interest determination date is the rate on that date for U.S. dollar federal funds, as published in H.15(519) prior to 3:00 P.M., New York City time, on the related calculation date, under the heading Federal Funds (Effective) and displayed on Moneyline Telerate, or any successor service, on page 120 or any other page as may replace the specified page on that service (Telerate Page 120).
The following procedures will be followed if the federal funds rate cannot be determined as described above:
| If the rate is not published in H.15(519) by 3:00 P.M., New York City time, on the related calculation date or does not appear on Telerate Page 120, the federal funds rate will be the rate on that interest determination date, as published in H.15 Daily Update, or any other recognized electronic source for the purposes of displaying the applicable rate, under the caption Federal Funds (Effective). |
| If the alternative rate described above is not published in H.15 Daily Update, or other recognized electronic source for the purposes of displaying the applicable rate, by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the federal funds rate to be the average of the rates for the last transaction in overnight U.S. dollar federal funds quoted prior to 9:00 A.M., New York City time, on that interest determination date, by each of three leading brokers of U.S. dollar federal funds transactions in New York City, selected by the calculation agent, after consultation with us. |
| If fewer than three brokers selected by the calculation agent are quoting as described above, the federal funds rate will be the federal funds rate then in effect on that interest determination date. |
Prime Rate Notes. Each prime rate note will bear interest at the prime rate, as adjusted by any spread or spread multiplier, as specified in the applicable prospectus supplement.
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The prime rate for any interest determination date is the prime rate or base lending rate on that date, as published in H.15(519) prior to 3:00 P.M., New York City time, on the related calculation date, under the heading Bank Prime Loan.
The following procedures will be followed if the prime rate cannot be determined as described above:
| If the rate is not published in H.15(519) by 3:00 P.M., New York City time, on the related calculation date, then the prime rate will be the rate as published in H.15 Daily Update, or any other recognized electronic source used for the purpose of displaying the applicable rate, under the caption Bank Prime Loan. |
| If the alternative rate described above is not published in H.15 Daily Update or another recognized electronic source by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the prime rate to be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters screen US PRIME 1, as defined below, as that banks prime rate or base lending rate as in effect as of 11:00 A.M., New York City time, on that interest determination date. |
| If fewer than four rates appear on the Reuters screen US PRIME 1 for that interest determination date, by 3:00 P.M., New York City time, then the calculation agent will determine the prime rate to be the average of the prime rates or base lending rates furnished in New York City by three substitute banks or trust companies (all organized under the laws of the United States or any of its states and having total equity capital of at least $500,000,000) selected by the calculation agent, after consultation with us. |
| If the banks selected by the calculation agent are not quoting as described above, the prime rate will remain the prime rate then in effect on the interest determination date. |
Reuters screen US PRIME 1 means the display designated as page US PRIME 1 on the Reuters Monitor Money Rates Service (or any other page as may replace the US PRIME 1 page on that service for the purpose of displaying prime rates or base lending rates of major U.S. banks).
We may issue debt securities that provide that the rate of return, including the principal, premium (if any), interest, or other amounts payable (if any), is determined by reference, either directly or indirectly, to the price or performance of one or more securities, currencies or composite currencies, commodities, interest rates, stock indices, or other indices or formulae, in each case as specified in the applicable prospectus supplement. We refer to these as indexed notes.
Holders of indexed notes may receive an amount at maturity that is greater than or less than the face amount of the notes, depending upon the formula used to determine the amount payable and the relative value at maturity of the reference asset or underlying obligation. The value of the applicable index will fluctuate over time.
An indexed note may provide either for cash settlement or for physical settlement by delivery of the indexed note or securities, or other securities of the types listed above. An indexed note also may provide that the form of settlement may be determined at our option or the holders option. Some indexed notes may be convertible, exercisable, or exchangeable prior to maturity, at our option or the holders option, for the related securities.
We will specify in the applicable prospectus supplement the method for determining the principal, premium (if any), interest, or other amounts payable (if any) in respect of particular
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indexed notes, as well as certain historical information with respect to the specified index or indexed items, specific risk factors relating to that particular type of indexed note, and tax considerations associated with an investment in the indexed notes.
The prospectus supplement for any particular indexed notes also will identify the calculation agent that will calculate the amounts payable with respect to the indexed note. The calculation agent may be one of our affiliates, including Banc of America Securities LLC or Bank of America, N.A. We may appoint different calculation agents from time to time after the original issue date of an indexed note without your consent and without notifying you of the change. Absent manifest error, all determinations of the calculation agent will be final and binding on you, the trustee, and us. Upon request of the holder of an indexed note, the calculation agent will provide, if applicable, information relating to the current principal, premium (if any), rate of interest, interest payable, or other amounts payable (if any) in connection with the indexed note.
We also may offer indexed amortizing notes, the rate of amortization and final maturity of which are subject to periodic adjustment based upon the degree to which an objective base or index rate such as LIBOR, called a reference rate, coincides with a specified target rate. Indexed amortizing notes may provide for adjustment of the amortization rate either on every interest payment date, or only on interest payment dates that occur after a specified lockout date. Each indexed amortizing note will include an amortization table, specifying the rate at which the principal of the note is to be amortized following any applicable interest payment date, based upon the difference between the reference rate and the target rate. The specific terms of, and any additional considerations relating to, indexed amortizing notes will be set forth in the applicable prospectus supplement.
Floating-Rate/Fixed-Rate/Indexed Notes
We may issue a debt security with elements of each of the fixed-rate, floating-rate, and indexed notes described above. For example, a debt security may bear interest at a fixed rate for some periods and at a floating rate in others. Similarly, a debt security may provide for a payment of principal at maturity linked to an index and also may bear interest at a fixed or floating rate. We will describe the determination of interest for any of these debt securities in the applicable prospectus supplement.
A fixed-rate note, a floating-rate note, or an indexed note may be an original issue discount note. Original issue discount notes are debt securities that are issued at a price lower than their stated principal amount or lower than their minimum guaranteed repayment amount at maturity. Original issue discount notes may bear no interest (zero coupon rate notes) or may bear interest at a rate that is below market rates at the time of issuance. Upon an acceleration of the maturity of an original issue discount note, the amount of interest payable will be determined in accordance with the terms of the note, as described in the applicable prospectus supplement. That amount normally is less than the amount payable at the maturity date. A note issued at a discount to its principal may, for U.S. federal income tax purposes, be considered an original issue discount note, regardless of the amount payable upon redemption or acceleration of maturity. See U.S. Federal Income Tax ConsiderationsTaxation of Debt Securities below for a summary of the U.S. federal income tax consequences of owning an original issue discount note.
Payment of Principal, Interest, and Other Amounts Due
Paying Agents. We may appoint one or more financial institutions to act as our paying agents. Unless we specify otherwise in the applicable prospectus supplement, the trustee will act as our
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sole paying agent, security registrar, and transfer agent with respect to the debt securities through the trustees office. That office is currently located at 101 Barclay Street, New York, New York 10286. In addition, in the case of some of our debt securities, such as debt securities denominated in euro, that office is expected to be 48th Floor, One Canada Square, London, E14 5AL. At any time, we may rescind the designation of a paying agent, appoint a successor paying agent, or approve a change in the office through which any successor paying agent acts in accordance with the applicable indenture. In addition, we may decide to act as our own paying agent with respect to some or all of the debt securities, and the paying agent may resign.
Payments to Holders and Record Dates for Interest. We refer to each date on which interest is payable on a debt security as an interest payment date. Unless we specify otherwise in the applicable prospectus supplement, the provisions described in this section will apply to payments on the debt securities.
Interest payments on the debt securities will be made on each interest payment date applicable to, and at the maturity date of, the debt securities. Interest payable at any interest payment date other than the maturity date will be paid to the registered holder of the debt security on the regular record date for that interest payment date, as described below. However, unless we specify otherwise in the applicable prospectus supplement, the initial interest payment on a debt security issued between a regular record date and the interest payment date immediately following the regular record date will be made on the second interest payment date following the original issue date to the holder of record on the regular record date preceding the second interest payment date. The principal and interest payable at maturity will be paid to the holder of the debt security at the close of business on the maturity date.
Unless we specify otherwise in the applicable prospectus supplement, the record date for any interest payment for a debt security in book-entry only form generally will be the business day prior to the payment date. If the debt security is in a form that is other than book-entry only, and unless we specify otherwise in the applicable prospectus supplement, the regular record date for an interest payment date will be the last day of the calendar month preceding the interest payment date or the fifteenth day of the calendar month in which the interest payment date occurs, as specified in the prospectus supplement, whether or not that date is a business day.
Unless we specify otherwise in the applicable prospectus supplement, if any interest payment date or the maturity date of a debt security falls on a day that is not a business day, we will make the required payment on the next business day, and no additional interest will accrue in respect of the payment made on the next business day. However, unless we specify otherwise in the applicable prospectus supplement, for LIBOR notes or EURIBOR notes, if an interest payment date falls on a date that is not a business day, and the next business day is in the next calendar month, the interest payment date will be the immediately preceding business day.
Unless we specify otherwise in the applicable prospectus supplement, the term business day means, for any debt security, a day that meets all the following applicable requirements:
| for all debt securities, is any weekday that is not a legal holiday in New York, New York, Charlotte, North Carolina, or any other place of payment of the debt security, and is not a date on which banking institutions in those cities are authorized or required by law or regulation to be closed; |
| for any LIBOR note, also is a day on which commercial banks are open for business (including dealings in the index currency specified in the applicable prospectus supplement) in London, England (a London Banking Day); |
| for any debt security denominated in euro or any EURIBOR note, also is a day on which the TransEuropean Automated Real-Time Gross Settlement Express Transfer, or TARGET, System or any successor is operating (a TARGET Settlement Date); and |
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| for any debt security that has a specified currency other than U.S. dollars or euro, also is not a day on which banking institutions generally are authorized or obligated by law, regulation, or executive order to close in the principal financial center of the country of the specified currency. |
For purposes of this determination, the principal financial center is:
| the capital city of the country issuing the specified currency, except for U.S. dollars, Australian dollars, Canadian dollars, South African rand, and Swiss francs, for which the principal financial center is New York, Sydney and Melbourne, Toronto, Johannesburg, and Zurich, respectively; or |
| the capital city of the country to which the index currency relates, except for U.S. dollars, Australian dollars, Canadian dollars, South African rand, and Swiss francs, for which the principal financial center is New York, Sydney, Toronto, Johannesburg, and Zurich, respectively. |
Payments Due in U.S. Dollars. Unless we specify otherwise in the applicable prospectus supplement, we will follow the practices described in this subsection when we pay amounts that are due in U.S. dollars.
We will make payments on debt securities in book-entry form in accordance with arrangements then in place between the paying agent and the depository or its nominee, as holder. An indirect owners right to receive those payments will be governed by the rules and practices of the depository and its participants, as described below under the heading Registration and Settlement.
We will pay any interest on debt securities in certificated form on each interest payment date other than the maturity date by check mailed to holders of the debt securities on the applicable record date at the address appearing on our records. We will pay any principal, premium (if any), interest, and other amounts payable (if any) at the maturity date of a debt security in certificated form by wire transfer of immediately available funds upon surrender of the debt security at the corporate trust office of the applicable trustee or paying agent.
Book-entry and other indirect owners should contact their banks or brokers for information on how they will receive payments on their debt securities.
Payments Due in Other Currencies. Unless we specify otherwise in the applicable prospectus supplement, we will follow the practices described in this subsection when we pay amounts that are due in a currency other than U.S. dollars. Unless we specify otherwise in the applicable prospectus supplement, holders are not entitled to receive payments in U.S. dollars of an amount due in another currency, either on a global debt security or a debt security in certificated form.
We will make payments on Non-U.S. Dollar Denominated Debt Securities in book-entry form in the applicable specified currency in accordance with arrangements then in place between the paying agent and the depository or its nominee, as holder. An indirect owners right to receive those payments will be governed by the rules and practices of the depository and its participants, as described below under the heading Registration and Settlement.
We will pay any interest on Non-U.S. Dollar-Denominated Debt Securities in certificated form by check mailed to holders of the debt securities on the applicable record date at the address appearing on our records. We will pay any principal, premium (if any), interest, and other amounts payable (if any) at the maturity date of a Non-U.S. Dollar-Denominated Debt Security in certificated form by wire transfer of immediately available funds upon surrender of the debt security at the corporate trust office of the applicable trustee or paying agent.
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If we issue a debt security in a specified currency other than U.S. dollars, unless we specify otherwise in the applicable prospectus supplement, we will appoint a financial institution to act as the exchange rate agent. The exchange rate agent will determine the applicable rate of exchange that would apply to a payment made in U.S. dollars, if the currency in which we otherwise would be required to make the applicable payment is not available. The exchange rate agent may be one of our affiliates, including Banc of America Securities Limited. We will identify in the applicable prospectus supplement the exchange rate agent that we have appointed for a particular debt security as of its original issue date. We may appoint different exchange rate agents from time to time after the original issue date of the debt security without your consent and without notifying you of the change. All determinations made by the exchange rate agent will be in its sole discretion unless we state in the applicable prospectus supplement that any determination requires our approval. Absent manifest error, those determinations will be final and binding on you and us.
Book-entry and other indirect owners of a debt security with a specified currency other than U.S. dollars should contact their banks or brokers for information about how to receive payments in the specified currency or in U.S. dollars.
Unless we specify otherwise in the applicable prospectus supplement, our debt securities will not be entitled to the benefit of any sinking fund. This means that we will not deposit money on a regular basis into any separate custodial account to repay the debt securities.
The applicable prospectus supplement will indicate whether we may redeem the debt securities prior to their maturity date. If we may redeem the debt securities prior to maturity, the applicable prospectus supplement will indicate the redemption price, the method for redemption, and the date or dates upon which we may redeem the debt securities. Unless we specify otherwise in the applicable prospectus supplement, we may redeem debt securities only on an interest payment date, and the redemption price will be 100% of the principal amount of the debt securities to be redeemed, plus any accrued and unpaid interest.
Unless we specify otherwise in the applicable prospectus supplement, we may exercise our right to redeem debt securities by giving notice to the trustee under the applicable indenture at least 10 business days but not more than 60 calendar days before the specified redemption date. The notice will take the form of a certificate signed by us specifying:
| the date fixed for redemption; |
| the redemption price; |
| the CUSIP number of the debt securities to be redeemed; |
| the amount to be redeemed, if less than all of a series of debt securities is to be redeemed; |
| the place of payment for the debt securities to be redeemed; and |
| that on and after the date fixed for redemption, interest will cease to accrue on the debt securities to be redeemed. |
So long as a depository is the record holder of the applicable debt securities to be redeemed, we will deliver any notice of our election to exercise our redemption right only to that depository.
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The applicable prospectus supplement will indicate whether the debt securities can be repaid at the holders option prior to their maturity date. If the debt securities may be repaid prior to maturity, the applicable prospectus supplement will indicate the applicable repayment price or prices, the procedures for repayment, and the date or dates on or after which the holder can request repayment.
We may purchase at any time and from time to time, through a subsidiary or affiliate of ours, outstanding debt securities by tender, in the open market, or by private agreement. We, or our affiliates, have the discretion to hold or resell any repurchased debt securities. We also have the discretion to cancel any repurchased debt securities.
We may issue debt securities that are convertible into, or exercisable or exchangeable for, at either our option or the holders option, our preferred stock, depositary shares, common stock, or other debt securities, or debt or equity securities of one or more third parties. The applicable prospectus supplement will describe the terms of any conversion, exercise, or exchange features, including:
| the periods during which conversion, exercise, or exchange, as applicable, may be elected; |
| the conversion, exercise, or exchange price payable and the number of shares or amount of our preferred stock, depositary shares, common stock, or other debt securities, or debt or equity securities of a third party, that may be issued upon conversion, exercise, or exchange, and any adjustment provisions; and |
| the procedures for electing conversion, exercise, or exchange, as applicable. |
Exchange, Registration, and Transfer
Subject to the terms of the applicable indenture, debt securities of any series in certificated form may be exchanged at the option of the holder for other debt securities of the same series and of an equal aggregate principal amount and type in any authorized denominations.
Debt securities in certificated form may be presented for registration of transfer at the office of the security registrar or at the office of any transfer agent that we designate and maintain. The security registrar or the transfer agent will make the transfer or registration only if it is satisfied with the documents of title and identity of the person making the request. There will not be a service charge for any exchange or registration of transfer of debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the exchange. Unless we specify otherwise in the applicable prospectus supplement, The Bank of New York, 101 Barclay Street, New York, New York 10286, will be the authenticating agent, registrar, and transfer agent for the debt securities issued under the respective indentures. We may change the security registrar or the transfer agent or approve a change in the location through which any security registrar or transfer agent acts at any time, except that we will be required to maintain a security registrar and transfer agent in each place of payment for each series of debt securities. At any time, we may designate additional transfer agents for any series of debt securities.
We will not be required to (1) issue, exchange, or register the transfer of any debt security of any series to be redeemed for a period of 15 days before those debt securities were selected for
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redemption, or (2) exchange or register the transfer of any debt security that was selected, called, or is being called for redemption, except the unredeemed portion of any debt security being redeemed in part.
For a discussion of restrictions on the exchange, registration, and transfer of book-entry securities, see Registration and Settlement below.
Our subordinated debt securities are subordinated in right of payment to all of our senior indebtedness. The Subordinated Indenture defines senior indebtedness as any indebtedness for money borrowed, including all of our indebtedness for borrowed and purchased money, all of our obligations arising from off-balance sheet guarantees and direct credit substitutes, and our obligations associated with derivative products such as interest and foreign exchange rate contracts and commodity contracts, that was outstanding on the date we executed the Subordinated Indenture, or was created, incurred, or assumed after that date, for which we are responsible or liable as obligor, guarantor, or otherwise, and all deferrals, renewals, extensions, and refundings of that indebtedness or obligations, other than the debt securities issued under the Subordinated Indenture or any other indebtedness that by its terms is subordinate in right of payment to any of our other indebtedness. Each prospectus supplement for a series of subordinated debt securities will indicate the aggregate amount of our senior indebtedness outstanding at that time and any limitation on the issuance of additional senior indebtedness.
If there is a default or event of default under any senior indebtedness that would allow acceleration of maturity of the senior indebtedness and that default or event of default is not remedied, and we and the trustee of the Subordinated Indenture receive notice of this default from the holders of at least 10% in principal amount of any kind or category of any senior indebtedness or if the trustee of the Subordinated Indenture receives notice from us, then we will not be able to make any principal, premium, interest, or other payments on the subordinated debt securities or repurchase our subordinated debt securities.
If any subordinated debt security is declared due and payable before the required date or upon a payment or distribution of our assets to creditors pursuant to a dissolution, winding up, liquidation, or reorganization, we are required to pay all principal, premium, interest, or other payments to holders of senior indebtedness before any holders of subordinated debt are paid. In addition, if any amounts previously were paid to the holders of subordinated debt or the trustee of the Subordinated Indenture, the holders of senior indebtedness will have first rights to the amounts previously paid.
Subject to the payment in full of all our senior indebtedness, the holders of our subordinated debt securities will be subrogated to the rights of the holders of our senior indebtedness to receive payments or distributions of our assets applicable to the senior indebtedness until our subordinated debt securities are paid in full. For purposes of this subrogation, the subordinated debt securities will be subrogated equally and ratably with all our other indebtedness that by its terms ranks on a parity with our subordinated debt securities and is entitled to like rights of subrogation.
Sale or Issuance of Capital Stock of Banks
The Senior Indenture prohibits the issuance, sale, or other disposition of capital stock, or securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank (as defined below) or of any subsidiary which owns shares of capital stock, or
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securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank, with the following exceptions:
| sales of directors qualifying shares; |
| sales or other dispositions for fair market value, if, after giving effect to the disposition and to conversion of any shares or securities convertible into capital stock of a Principal Subsidiary Bank, we would own at least 80% of each class of the capital stock of that Principal Subsidiary Bank; |
| sales or other dispositions made in compliance with an order of a court or regulatory authority of competent jurisdiction; |
| any sale by a Principal Subsidiary Bank of additional shares of its capital stock, securities convertible into shares of its capital stock, or options, warrants, or rights to subscribe for or purchase shares of its capital stock, to its stockholders at any price, so long as before that sale we owned, directly or indirectly, securities of the same class and immediately after the sale, we owned, directly or indirectly, at least as great a percentage of each class of securities of the Principal Subsidiary Bank as we owned before the sale of additional securities; and |
| any issuance of shares of capital stock, or securities convertible into or options, warrants, or rights to subscribe for or purchase shares of capital stock, of a Principal Subsidiary Bank or any subsidiary which owns shares of capital stock, or securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank, to us or our wholly owned subsidiary. |
A Principal Subsidiary Bank is defined in the Senior Indenture as any bank with total assets equal to more than 10% of our total consolidated assets. As of the date of this prospectus, Bank of America, N.A. is our only Principal Subsidiary Bank.
Limitation on Mergers and Sales of Assets
Each indenture generally permits a consolidation or merger between us and another entity. It also permits the sale or transfer by us of all or substantially all of our assets. These transactions are permitted if:
| the resulting or acquiring entity, if other than us, is organized and existing under the laws of the United States or any state or the District of Columbia and expressly assumes all of our obligations under that indenture; and |
| immediately after the transaction, we (or any successor company) are not in default in the performance of any covenant or condition under that indenture. |
Upon any consolidation, merger, sale, or transfer of this kind, the resulting or acquiring entity will be substituted for us in the applicable indenture with the same effect as if it had been an original party to that indenture. As a result, the successor entity may exercise our rights and powers under the indenture.
The holders of a majority in principal amount of the debt securities of all affected series then outstanding under the indenture may waive compliance with some of the covenants or conditions of that indenture.
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Modification of the Indentures
We and the trustee may modify the applicable indenture and the rights of the holders of the debt securities with the consent of the holders of at least 66 2/3% of the aggregate principal amount of all series of debt securities under that indenture affected by the modification. However, no modification may extend the fixed maturity of, reduce the principal amount or redemption premium of, or reduce the rate of, or extend the time of payment of, interest on, any debt security without the consent of each holder affected by the modification. No modification may reduce the percentage of debt securities that is required to consent to modification of an indenture without the consent of all holders of the debt securities outstanding under that indenture.
In addition, we and the trustee may execute supplemental indentures in some circumstances without the consent of any holders of outstanding debt securities.
For purposes of determining the aggregate principal amount of the debt securities outstanding at any time in connection with any request, demand, authorization, direction, notice, consent, or waiver under the applicable indenture, (1) the principal amount of any debt security issued with original issue discount is that amount that would be due and payable at that time upon an event of default, and (2) the principal amount of a debt security denominated in a foreign currency or currency unit is the U.S. dollar equivalent on the date of original issuance of the debt security.
Meetings and Action by Securityholders
The trustee may call a meeting in its discretion, or upon request by us or the holders of at least 10% in principal amount of a series of outstanding debt securities, by giving notice. If a meeting of holders is duly held, any resolution raised or decision taken in accordance with the indenture will be binding on all holders of debt securities of that series.
Defaults and Rights of Acceleration
The Senior Indenture defines an event of default for a series of senior debt securities as any one of the following events:
| our failure to pay principal or any premium when due on any securities of that series; |
| our failure to pay interest on any securities of that series, within 30 calendar days after the interest becomes due; |
| our breach of any of our other covenants contained in the senior debt securities of that series or in the Senior Indenture, that is not cured within 90 calendar days after written notice to us by the trustee of the Senior Indenture, or to us and the trustee of the Senior Indenture by the holders of at least 25% in principal amount of all senior debt securities then outstanding under the Senior Indenture and affected by the breach; and |
| specified events involving our bankruptcy, insolvency, or liquidation. |
The Subordinated Indenture defines an event of default only as our bankruptcy under U.S. federal bankruptcy laws.
If an event of default occurs and is continuing, either the trustee or the holders of 25% in principal amount of the debt securities outstanding under the applicable indenture (or, in the case of an event of default under the Senior Indenture with respect to a series of senior debt securities, the holders of 25% in principal amount of the outstanding debt securities of all series affected) may declare the principal amount, or, if the debt securities are issued with original issue discount,
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a specified portion of the principal amount, of all debt securities (or the debt securities of all series affected, as the case may be) to be due and payable immediately. The holders of a majority in principal amount of the debt securities then outstanding (or of the series affected, as the case may be), in some circumstances, may annul the declaration of acceleration and waive past defaults.
Payment of principal of the subordinated debt securities may not be accelerated in the case of a default in the payment of principal, any premium, interest, or any other amounts or the performance of any of our other covenants.
If we fail to pay the principal of (or, under the Senior Indenture, any premium on) any debt securities, or if we are over 30 calendar days late on an interest payment on the debt securities, the applicable trustee can demand that we pay to it, for the benefit of the holders of those debt securities, the amount which is due and payable on those debt securities, including any interest incurred because of our failure to make that payment. If we fail to pay the required amount on demand, the trustee may take appropriate action, including instituting judicial proceedings against us.
In addition, a holder of a debt security also may file suit to enforce our obligation to make payment of principal, any premium, interest, or other amounts due on that debt security regardless of the actions taken by the trustee.
The holders of a majority in principal amount of each series of the debt securities then outstanding under an indenture may direct the time, method, and place of conducting any proceeding for any remedy available to the trustee under that indenture, but the trustee will be entitled to receive from the holders a reasonable indemnity against expenses and liabilities.
We are required periodically to file with the trustees a certificate stating that we are not in default under any of the terms of the indentures.
If we so specify in the applicable prospectus supplement, and subject to the exceptions and limitations set forth below, we will pay to the beneficial owner of any debt security that is a non-U.S. person additional amounts to ensure that every net payment on that debt security will not be less, due to the payment of U.S. withholding tax, than the amount then otherwise due and payable. For this purpose, a net payment on a debt security means a payment by us or any paying agent, including payment of principal and interest, after deduction for any present or future tax, assessment, or other governmental charge of the United States (other than a territory or possession). These additional amounts will constitute additional interest on the debt security. For this purpose, U.S. withholding tax means a withholding tax of the United States, other than a territory or possession.
However, notwithstanding our obligation, if so specified, to pay additional amounts, we will not be required to pay additional amounts in any of the circumstances described in items (1) through (13) below, unless we specify otherwise in the applicable prospectus supplement.
(1) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security:
| having a relationship with the United States as a citizen, resident, or otherwise; |
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| having had such a relationship in the past; or |
| being considered as having had such a relationship. |
(2) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security:
| being treated as present in or engaged in a trade or business in the United States; |
| being treated as having been present in or engaged in a trade or business in the United States in the past; |
| having or having had a permanent establishment in the United States; or |
| having or having had a qualified business unit which has the U.S. dollar as its functional currency. |
(3) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security being or having been a:
| personal holding company; |
| foreign personal holding company; |
| private foundation or other tax-exempt organization; |
| passive foreign investment company; |
| controlled foreign corporation; or |
| corporation which has accumulated earnings to avoid U.S. federal income tax. |
(4) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security owning or having owned, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote.
(5) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security being a bank extending credit under a loan agreement entered into in the ordinary course of business.
For purposes of items (1) through (5) above, beneficial owner includes, without limitation, a holder and a fiduciary, settlor, partner, member, shareholder, or beneficiary of the holder if the holder is an estate, trust, partnership, limited liability company, corporation, or other entity, or a person holding a power over an estate or trust administered by a fiduciary holder.
(6) Additional amounts will not be payable to any beneficial owner of a debt security that is:
| A fiduciary; |
| A partnership; |
| A limited liability company; |
| Another fiscally transparent entity; or |
| Not the sole beneficial owner of the debt security, or any portion of the debt security. |
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However, this exception to the obligation to pay additional amounts will apply only to the extent that a beneficiary or settlor in relation to the fiduciary, or a beneficial owner, partner, or member of the partnership, limited liability company, or other fiscally transparent entity, would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner, partner, or member received directly its beneficial or distributive share of the payment.
(7) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the failure of the beneficial owner of the debt security or any other person to comply with applicable certification, identification, documentation, or other information reporting requirements. This exception to the obligation to pay additional amounts will apply only if compliance with such requirements is required as a precondition to exemption from such tax, assessment, or other governmental charge by statute or regulation of the United States or by an applicable income tax treaty to which the United States is a party.
(8) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is collected or imposed by any method other than by withholding from a payment on a debt security by us or any paying agent.
(9) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld by reason of a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later.
(10) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld by reason of the presentation by the beneficial owner of a debt security for payment more than 30 days after the date on which such payment becomes due or is duly provided for, whichever occurs later.
(11) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any:
| estate tax; |
| inheritance tax; |
| gift tax; |
| sales tax; |
| excise tax; |
| transfer tax; |
| wealth tax; |
| personal property tax; or |
| any similar tax, assessment, or other governmental charge. |
(12) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge required to be withheld by any paying agent from a payment of principal or interest on the applicable security if such payment can be made without such withholding by any other paying agent.
(13) Additional amounts will not be payable if a payment on a debt security is reduced as a result of any combination of items (1) through (12) above.
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Except as specifically provided in this section, we will not be required to make any payment of any tax, assessment, or other governmental charge imposed by any government, political subdivision, or taxing authority of that government.
For purposes of determining whether the payment of additional amounts is required, the term U.S. person means any individual who is a citizen or resident of the United States; any corporation, partnership, or other entity created or organized in or under the laws of the United States; any estate if the income of such estate falls within the federal income tax jurisdiction of the United States regardless of the source of that income; and any trust if a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of the trust. Additionally, for this purpose, non-U.S. person means a person who is not a U.S. person, and United States means the United States of America, including each state of the United States and the District of Columbia, its territories, its possessions, and other areas within its jurisdiction.
If we so specify in the applicable prospectus supplement, we may redeem the debt securities in whole, but not in part, at any time before maturity, after giving not less than 30 nor more than 60 calendar days notice to the trustee under the applicable indenture and to the holders of the debt securities, if we have or will become obligated to pay additional amounts, as described above under Payment of Additional Amounts, as a result of any change in, or amendment to, the laws or regulations of the United States or any political subdivision or any authority of the United States having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date of the applicable prospectus supplement for the issuance of those debt securities.
Before we publish any notice of redemption for tax reasons, we will deliver to the trustee under the indenture a certificate signed by our chief financial officer or a senior vice president stating that we are entitled to redeem the debt securities and that the conditions precedent to redemption have occurred.
Unless we specify otherwise in the applicable prospectus supplement, any debt securities redeemed for tax reasons will be redeemed at 100% of their principal amount together with interest accrued up to, but excluding, the redemption date.
Defeasance and Covenant Defeasance
If we so specify in the applicable prospectus supplement, the provisions for full defeasance and covenant defeasance described below will apply to the debt securities if certain conditions are satisfied.
Full Defeasance. If there is a change in the U.S. federal tax law, as described below, we can legally release ourselves from all payment and other obligations on any debt securities. This is called full defeasance. For us to do so, each of the following must occur:
| We must deposit in trust for the benefit of the holders of those debt securities a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal, and any other payments on those debt securities at their due dates; |
| There must be a change in current U.S. federal tax law or an Internal Revenue Service ruling that lets us make the above deposit without causing the holders to be taxed on the |
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debt securities any differently than if we did not make the deposit and repaid the debt securities ourselves. Under current U.S. federal tax law, the deposit and our legal release from your debt security would be treated as though we took back your debt security and gave you your share of the cash and notes or bonds deposited in trust. In that event, you could recognize gain or loss on your debt security; and |
| We must deliver to the trustee under the indenture a legal opinion of our counsel confirming the tax law treatment described above. |
If we ever fully defeased your debt security, you would have to rely solely on the trust deposit for payments on your debt security. You would not be able to look to us for payment in the event of any shortfall.
Covenant Defeasance. Under current U.S. federal tax law, we can make the same type of deposit described above and be released from any restrictive covenants relating to your debt security. This is called covenant defeasance. In that event, you would lose the protection of those restrictive covenants. In order to achieve covenant defeasance for the debt securities, we must do both of the following:
| We must deposit in trust for the benefit of the holders of those debt securities a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal, and any other payments on those debt securities on their due dates; and |
| We must deliver to the trustee under the indenture a legal opinion of our counsel confirming that under current U.S. federal income tax law we may make the above deposit without causing the holders to be taxed on the debt securities any differently than if we did not make the deposit and repaid the debt securities ourselves. |
If we achieve covenant defeasance with respect to your debt security, you can still look to us for repayment of your debt security in the event of any shortfall in the trust deposit. You should note, however, that if one of the remaining events of default occurred, such as our bankruptcy, and your debt security became immediately due and payable, there may be a shortfall. Depending on the event causing the default, you may not be able to obtain payment of the shortfall.
We will provide the holders with any required notices by first-class mail to the addresses of the holders as they appear in the security register. So long as a depository is the record holder of a series of debt securities with respect to which a notice is given, we will deliver the notice only to that depository.
We and certain of our affiliates have from time to time maintained deposit accounts and conducted other banking transactions with The Bank of New York and its affiliates in the ordinary course of business. We expect to continue these business transactions. The Bank of New York also serves as trustee for a number of series of our outstanding indebtedness under other indentures.
The indentures and the debt securities will be governed by New York law.
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We may issue warrants that are either debt warrants or universal warrants. We may offer warrants separately or as part of a unit, as described below under the heading Description of Units.
We may issue warrants in any amounts or in as many distinct series as we determine. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent to be designated in the applicable prospectus supplement. When we refer to a series of warrants, we mean all warrants issued as part of the same series under the applicable warrant agreement.
This section describes some of the general terms and provisions of the warrants. We will describe the specific terms of a series of warrants and the applicable warrant agreement in the applicable prospectus supplement. The following description and any description of the warrants in the applicable prospectus supplement may not be complete and is subject to and qualified in its entirety by reference to the terms and provisions of the applicable warrant agreement. A form of the warrant agreement reflecting the particular terms and provisions of a series of offered warrants will be filed with the SEC in connection with the offering and incorporated by reference in the registration statement and this prospectus. See Where You Can Find More Information below for information on how to obtain copies of any warrant agreements.
Debt warrants are rights for the purchase of debt securities. If debt warrants are offered, the prospectus supplement will describe the terms of the debt warrants and the warrant agreement relating to the debt warrants, including the following:
| the offering price; |
| the designation, aggregate stated principal amount, and terms of the debt securities purchasable upon exercise of the debt warrants; |
| the currency, currency unit, or composite currency in which the price for the debt warrants is payable; |
| if applicable, the designation and terms of the debt securities with which the debt warrants are issued, and the number of debt warrants issued with each security; |
| if applicable, the date on and after which the debt warrants and the related debt securities will be separately transferable; |
| the principal amount of debt securities purchasable upon exercise of a debt warrant and the price at which, and the currency, currency units, or composite currency based on or relating to currencies in which, the principal amount of debt securities may be purchased upon exercise; |
| the dates the right to exercise the debt warrants will commence and expire and, if the debt warrants are not continuously exercisable, any dates on which the debt warrants are not exercisable; |
| any circumstances that will cause the debt warrants to be deemed to be automatically exercised; |
| if applicable, a discussion of the U.S. federal income tax consequences; |
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| whether the debt warrants or related securities will be listed on any securities exchange; |
| whether the debt warrants will be issued in global or certificated form; |
| the name of the warrant agent; |
| a description of the terms of any warrant agreement to be entered into between us and a bank or trust company, as warrant agent, governing the debt warrants; and |
| any other terms of the debt warrants which are permitted under the warrant agreement. |
Description of Universal Warrants
Universal warrants are rights for the purchase or sale of, or whose cash value is determined by reference to the performance, level, or value of, one or more of the following:
| securities of one or more issuers, including our common or preferred stock or other securities described in this prospectus, or the debt or equity securities of third parties; |
| one or more currencies, currency units, or composite currencies; |
| one or more commodities; |
| any other financial, economic, or other measure or instrument, including the occurrence or non-occurrence of any event or circumstance; and |
| one or more indices or baskets of the items described above. |
We refer to each type of property described above as warrant property.
We may satisfy our obligations, if any, and the holder of a universal warrant may satisfy its obligations, if any, with respect to any universal warrants by delivering:
| the warrant property; |
| the cash value of the warrant property; or |
| the cash value of the warrants determined by reference to the performance, level, or value of the warrant property. |
The applicable prospectus supplement will describe what we may deliver to satisfy our obligations, if any, and what the holder of a universal warrant may deliver to satisfy its obligations, if any, with respect to any universal warrants.
If universal warrants are offered, the applicable prospectus supplement will describe the terms of the universal warrants and the warrant agreement, including the following:
| the offering price; |
| the title and aggregate number of the universal warrants; |
| the nature and amount of the warrant property that the universal warrants represent the right to buy or sell; |
| whether the universal warrants are put warrants or call warrants, including in either case whether the warrants may be settled by means of net cash settlement or cashless exercise; |
| the price at which the warrant property may be purchased or sold, the currency, and the procedures and conditions relating to exercise; |
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| whether the exercise price of the universal warrant may be paid in cash or by exchange of the warrant property or both, the method of exercising the universal warrants, and whether settlement will occur on a net basis or a gross basis; |
| the dates on which the right to exercise the universal warrants will commence and expire; |
| if applicable, a discussion of the U.S. federal income tax consequences; |
| whether the universal warrants or underlying securities will be listed on any securities exchange; |
| whether the universal warrants will be issued in global or certificated form; |
| the name of the warrant agent; |