Term sheet |
Term Sheet |
Structured |
$ |
General
Key Terms
Reference Stock: |
The common stock, par value $0.01 per share, of Valero Energy Corporation (New York Stock Exchange symbol VLO). We refer to Valero Energy Corporation as Valero. |
Interest Rate: |
in each case equivalent to 11.60% per annum, paid quarterly and calculated on a 90/360 basis. The actual interest rate will be determined on the pricing date and will not be less than 11.60% per annum. |
Automatic Call: |
If on any of the four (4) Call Dates, the closing price of the Reference Stock is greater than the Initial Share Price, the notes will be automatically called on that Call Date. |
Payment if Called: |
If the notes are automatically called, on the applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest to but excluding that Call Settlement Date. |
Protection Amount: |
An amount that represents at least 30.00% of the Initial Share Price, subject to adjustments. |
Pricing Date: |
On or about August 18, 2009 |
Settlement Date: |
On or about August 21, 2009 |
Call Dates*: |
November 18, 2009 (first Call Date), February 18, 2010 (second Call Date), May 18, 2010 (third Call Date) and August 18, 2010 (final Call Date, which is also the Observation Date) |
Call Settlement Dates*: |
November 23, 2009 (first Call Settlement Date), February 23, 2010 (second Call Settlement Date), May 21, 2010 (third Call Settlement Date) and August 23, 2010 (final Call Settlement Date, which is also the Maturity Date), each of which is the third business day after the applicable Call Date specified above. |
Observation Date: |
August 18, 2010* |
Maturity Date: |
August 23, 2010* |
CUSIP: |
48123L4X9 |
Interest Payment Date: |
Interest on the notes will be payable quarterly in arrears on November 23, 2009, February 23, 2010, May 21, 2010 and August 23, 2010 (which is also the Maturity Date) (each such date, an Interest Payment Date), unless the notes are automatically called. If the notes are automatically called, interest will accrue to but excluding the applicable Call Settlement Date, and will be payable on each Interest Payment Date occurring before the applicable Call Settlement Date and on the applicable Call Settlement Date. See Selected Purchase Considerations Quarterly Interest Payments in this term sheet for more information. |
Payment at Maturity: |
If the notes are not automatically called, the payment at maturity, in excess of any accrued and unpaid interest, will be based on the performance of the Reference Stock. If the notes are not automatically called, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest at maturity, unless the Final Share Price has declined from the Initial Share Price by more than the Protection Amount. If the notes are not automatically called and the Final Share Price has declined from the Initial Share Price by more than the Protection Amount, at maturity you will receive, in addition to any accrued and unpaid interest, instead of the principal amount of your notes, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof). Fractional shares will be paid in cash. The market value of the Physical Delivery Amount or the Cash Value thereof will most likely be substantially less than the principal amount of your notes, and may be zero. |
Physical Delivery Amount: |
The number of shares of the Reference Stock, per $1,000 principal amount note, equal to $1,000 divided by the Initial Share Price, subject to adjustments. |
Cash Value: |
The amount in cash equal to the product of (1) $1,000 divided by the Initial Share Price and (2) the Final Share Price, subject to adjustments. |
Initial Share Price: |
The closing price of the Reference Stock on the Pricing Date. The Initial Share Price is subject to adjustments in certain circumstances. See Description of Notes Payment at Maturity and General Terms of Notes Anti-Dilution Adjustments in the accompanying product supplement no. 108-A-II for further information about these adjustments. |
Final Share Price: |
The closing price of the Reference Stock on the Observation Date. |
* |
Subject to postponement in the event of a market disruption event and as described under Description of Notes Automatic Call or Description of Notes Payment at Maturity, as applicable, in the accompanying product supplement no. 108-A-II. |
Investing in the Upside Auto Callable Single Observation Reverse Exchangeable Notes involves a number of risks. See Risk Factors beginning on page PS-7 of the accompanying product supplement no. 108-A-II and Selected Risk Considerations beginning on page TS-2 of this term sheet.
Neither the SEC nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(1) |
The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
(2) |
If the notes priced today, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $37.50 per $1,000 principal amount note and would use a portion of that commission to pay selling concessions to other dealers of approximately $30.00 per $1,000 principal amount note. This commission includes the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes. The concessions of approximately $30.00 include concessions to be allowed to selling dealers and concessions to be allowed to any arranging dealer. The actual commission received by JPMSI may be more or less than $37.50 and will depend on market conditions on the pricing date. In no event will the commission received by JPMSI, which includes concessions to be paid to other dealers, exceed $45.00 per $1,000 principal amount note. See Plan of Distribution beginning on page PS-37 of the accompanying product supplement no. 108-A-II. |
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The total aggregate principal amount of notes being offered by this term sheet may not be purchased by investors in the offering. Under these circumstances, JPMSI will retain the unsold portion of the offering and has agreed to hold such notes for investment for a period of at least 30 days. The unsold portion of notes will not exceed 15% of the aggregate principal amount of notes. Any unsold portion may affect the supply of the notes available for secondary trading and, therefore, could adversely affect the price of the notes in the secondary market. Circumstances may occur in which our interests or those of our affiliates could be in conflict with your interests. |
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The notes are not guaranteed under the Federal Deposit Insurance Corporations Temporary Liquidity Guarantee Program.
August 10, 2009
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. 108-A-II and this term sheet if you so request by calling toll-free 866-535-9248.
You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
You should read this term sheet together with the prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 108-A-II dated December 2, 2008. This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in Risk Factors in the accompanying product supplement no. 108-A-II, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement no. 108-A-II dated December
2, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005840/e33746_424b2.pdf
Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
Supplemental Terms of the Notes
For purposes of this offering, the concept of a Monitoring Period, as described in the accompanying product supplement no. 108-A-II, is not applicable. Instead, if the notes are not automatically called, whether you will receive at maturity the principal amount of your notes or a number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof) will depend on the closing price of the Reference Stock on a single day (the Observation Date) only, which we also refer to as the Final Share Price, as more fully described under Key Terms Payment at Maturity in this term sheet. Accordingly, you should disregard the definition for the Monitoring Period in the accompanying product supplement no. 108-A-II, and you should deem references in the accompanying product supplement no. 108-A-II to (a) the Monitoring Period to be the Observation Date, and (b) on any day during the Monitoring Period or during the Monitoring Period to be on the Observation Date.
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-1 |
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Reference Stock. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 108-A-II dated December 2, 2008.
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JPMorgan
Structured Investments |
TS-2 |
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JPMorgan
Structured Investments |
TS-3 |
The Reference Stock
Public Information
All information contained herein on the Reference Stock and on Valero is derived from publicly available sources and is provided for informational purposes only. According to its publicly available filings with the SEC, Valero owns and operates refineries located in the United States, Canada, and Aruba that produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants and other refined products, as well as a slate of premium products. The common stock of Valero, par value $0.01 per share, is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Valero in the accompanying product supplement no. 108-A-II. Information provided to or filed with the SEC by Valero pursuant to the Exchange Act can be located by reference to SEC file number 001-13175, and can be accessed through www.sec.gov. We do not make any representation that these publicly available documents are accurate or complete.
Historical Information of the Reference Stock
The following graph sets forth the historical performance of the Reference Stock based on the weekly closing price (in U.S. dollars) of the Reference Stock from January 2, 2004 through August 7, 2009. The closing price of the Reference Stock on August 7, 2009 was $18.52. We obtained the closing prices and other information below from Bloomberg Financial Markets, without independent verification. The closing prices and this other information may be adjusted by Bloomberg Financial Markets for corporate actions such as public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.
Since its inception, the Reference Stock has experienced significant fluctuations. The historical performance of the Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of the Reference Stock on the Call Dates or the Observation Date. We cannot give you assurance that the performance of the Reference Stock will result in the return of any of your initial investment. We make no representation as to the amount of dividends, if any, that Valero will pay in the future. In any event, as an investor in the notes, you will not be entitled to receive dividends, if any, that may be payable on the Reference Stock.
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JPMorgan
Structured Investments |
TS-4 |
Examples of Hypothetical Payment at Maturity for Each $1,000 Principal Amount Note
The following table illustrates hypothetical payments at maturity or upon an automatic call on a $1,000 investment in the notes, based on a range of hypothetical Final Share Prices and closing prices on any of the Call Dates. The numbers appearing in the following table and examples have been rounded for ease of analysis. For this table of hypothetical payments at maturity, we have also assumed the following:
the Initial Share Price: |
$18.60 |
the Protection Amount (in U.S. dollars): $5.58 |
the Interest Rate: |
11.60% per annum if the note is held to maturity |
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2.90% (equivalent to 11.60% per annum) if the note is automatically called on the first Call Date |
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5.80% (equivalent to 11.60% per annum) if the note is automatically called on the second Call Date |
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8.70% (equivalent to 11.60% per annum) if the note is automatically called on the third Call Date |
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11.60% (equivalent to 11.60% per annum) if the note is automatically called on the final Call Date |
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Hypothetical Highest |
Hypothetical Final |
Hypothetical Final Share |
Payment at |
Payment on |
Total Value of Payment |
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$37.20 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
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$27.90 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
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$23.25 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
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$19.53 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
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$18.60 |
$18.60 |
100.00% |
$1,000.00 |
N/A |
$1,000.00 |
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$18.60 |
$17.67 |
95.00% |
$1,000.00 |
N/A |
$1,000.00 |
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$16.74 |
$14.88 |
80.00% |
$1,000.00 |
N/A |
$1,000.00 |
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$15.81 |
$13.02 |
70.00% |
$1,000.00 |
N/A |
$1,000.00 |
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$12.09 |
$9.30 |
50.00% |
53 shares of the |
N/A |
$500.00 |
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$9.30 |
$4.65 |
25.00% |
53 shares of the |
N/A |
$250.00 |
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$5.58 |
$0.00 |
0.00% |
53 shares of the |
N/A |
$0.00 |
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* |
Note that you will receive at maturity or on the applicable Call Settlement Date, as applicable, accrued and unpaid interest in cash, in addition to (1) at maturity, either shares of the Reference Stock (or, at our election, the Cash Value thereof) or the principal amount of your note in cash or (2) on the applicable Call Settlement Date, $1,000 in cash. Also note that if you receive the Physical Delivery Amount at maturity, the total value of payment received at maturity shown in the table above includes the value of any fractional shares, which will be paid in cash. |
The following examples illustrate how the total value of payments received at maturity or on the applicable Call Settlement Date, as applicable, set forth in the table above are calculated.
Example 1: The closing price of the Reference Stock on the first Call Date is $19.53. Because the closing price of the Reference Stock of $19.53 on the first Call Date is greater than the Initial Share Price of $18.60, the notes are automatically called and you will receive a payment on the first Call Settlement Date of $1,000 per $1,000 principal amount note.
Example 2: The highest closing price of the Reference Stock on any of the Call Dates was $18.60, and the Final Share Price is $17.67. Because the highest closing price of the Reference Stock of $18.60 on any of the Call Dates was equal to the Initial Share Price of $18.60, the notes are not automatically called. Because the Final Share Price of $17.67 is less than the Initial Share Price of $18.60 by not more than the Protection Amount, you will receive at maturity a payment of $1,000 per $1,000 principal amount note.
Example 3: The highest closing price of the Reference Stock on any of the Call Dates was $12.09, and the Final Share Price is $9.30, a decline of more than the Protection Amount. Because the highest closing price of the Reference Stock of $12.09 on any of the Call Dates was less than the Initial Share Price of $18.60, the notes are not automatically called. Because the Final Share Price of $9.30 is less than the Initial Share Price of $18.60 by more than the Protection Amount, you will receive the Physical Delivery Amount, or at our election, the Cash Value thereof, at maturity. Because the Final Share Price of the Reference Stock is $9.30, the total value of your final payment at maturity, whether in cash or shares of the Reference Stock, is $500.00.
Regardless of the performance of the Reference Stock, you will receive interest payments, for each $1,000 principal amount note, in the aggregate amount of (1), if the notes are held to maturity, at least $116.00 over the term of the notes or (2) if the notes are automatically called: (i) at least $29.00 if called on the first Call Date from the issue date to but excluding the first Call Settlement Date, (ii) at least $58.00 if called on the second Call Date from the issue date to but excluding the second Call Settlement Date; (iii) at least $87.00 if called on the third Call Date from the issue date to but excluding the final Call Settlement Date or (iv) at least $116.00 if called on the final Call Date from the issue date to but excluding the final Call Settlement Date. The actual interest rate will be determined on the pricing date and will not be less than 11.60% per annum. If the notes are held to maturity, the actual number of shares of the Reference Stock, or the Cash Value thereof, you may receive at maturity and the actual Protection Amount applicable to your notes may be more or less than the amounts displayed in this hypothetical and will depend in part on the Initial Share Price.
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JPMorgan
Structured Investments |
TS-5 |